Citigroup Inc. on Thursday became the latest lender to commit to the government's program to modify second mortgages.
The program is part of the Obama administration's $75 billion loan modification program that is aimed at reducing monthly payments to help customers stay in their homes.
A collapse in the housing market late in 2007 helped push the economy into recession as home prices fell and defaults skyrocketed. A recovery in the sector has been slow and uneven as customers continue to struggle paying off their loans.
The second-mortgage modification program offers lenders who made "piggyback" loans — second mortgages that allowed consumers to make a small or no down payment during the housing boom — incentives to lower payments or eliminate the loans entirely. During the market's peak, even customers with spotty credit history were extended second mortgages.
The piggyback mortgage modification program could help relieve some drag in the housing market because lenders who extended second mortgages — fearing they won't be repaid — can veto a borrower's efforts to modify their primary mortgage.
The government has launched multiple programs to try and alleviate problems in the housing market, including incentives for first-time home buyers and the mortgage modification program, known as the Home Affordable Mortgage Program. Citi already participates in the primary mortgage program.
Banks can offer mortgage modifications, which help reduce payments for customers to more manageable levels, through HAMP. There are separate parts of the program for borrowers to modify primary mortgages and second mortgages, such as home equity loans or lines of credit.
Citi said it has worked with more than 825,000 borrowers to modify all types of mortgages since 2007 in an effort to avoid foreclosure.
Citigroup follows other big banks like Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. in signing up to participate in the program.
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