Citibank mortgage chief Sanjiv Das says rising unemployment means more borrowers need forgiveness on the principal of their mortgages instead of restructured loans, The Wall Street Journal reports.
"The solution" of the mortgage crisis "has to move into the next gear," Das said, because the government's Home Affordability Mortgage Program has "not quite addressed the issue of unemployment."
A bank spokesman said that Citi already includes principal reductions in some of the mortgage modifications it does, and that the bank would want lenders to “share the benefits if the property rose in value."
The bank’s third-quarter foreclosure-prevention report said it had helped 130,000 homeowners with some $20 billion in mortgages avoid potential foreclosure last quarter.
Redefault rates on loans that had already been modified in the quarter were nearly 39 percent, up 10 percent from the second quarter.
Citi’s foreclosures initiated in the third quarter rose about 10 percent from the second quarter but were about 11 percent lower than a year ago, while completed foreclosures dropped less than 1 percent from the second quarter and about 48 percent from a year earlier.
Citi also said that 3 percent of the $751 billion of mortgages it services were in loss-mitigation programs or in foreclosure, a one-percentage-point increase from the second quarter, and that it had mitigated or modified 82 percent more mortgages in the third quarter than in the second quarter, and 85 percent more than a year earlier.
Mitigation includes all efforts to avoid foreclosure, including non-modification solutions such as "short sales" of homes for less than the mortgage balance.
The modest recovery in house prices over the past four months caught almost everyone by surprise, including those who are now explaining it away as an obvious byproduct of artificially low interest rates and the home-buyer tax credit, The Business Insider reports.
However, the recovery's momentum is slowing, and it seems likely that house prices will now resume their fall and drop another 10 percent to 15 percent.
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