2nd UPDATE: Citi, Fannie Provide Relief For Some Gulf Homeowners

16th Jun 2010 22:17

(Adds comment from Bank of America) By Matthias Rieker Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Troubled homeowners in coastal areas affected by the oil spill are getting some relief from Citigroup Inc. (C) and Fannie Mae (FNM). Citi announced a three-month suspension, effective Thursday through Sept. 17, of foreclosure sales and notifications, and evictions on possessed properties for qualifying borrowers in the Gulf region with first mortgages held by CitiMortgage. Fannie said it may suspend or reduce mortgage payments for borrowers whose properties or income suffer. Citi expects about 1,000 borrowers to participate initially, but that number might climb. The economic impact of the environmental disaster on the region is still unknown, but it is becoming clear that some borrowers are hurting and banks need to respond, said Sanjiv Das, chief executive of CitiMortgage. His unit will also cooperate with CitiFinancial, the bank's consumer-finance unit that refinances mortgages mainly for customers with low credit scores and that has branches in the Gulf area, to help customers. Das said he expects other banks to follow with programs such as Citi's. "There is a lot of anxiety" and several customers contacted Citi about the distress affecting their jobs or businesses, Das said. Such concerns prompted Citi to initiate the program to give customers more time to work out their finances. Bank of America Corp. (BAC) will apply relief measures for mortgages it services for Fannie, but a spokesman said the bank is not "experiencing a groundswell of customer inquiries regarding hardships resulting from the Gulf oil spill, although we anticipate that this will create significant hardship for many homeowners in the coming weeks and months as the impact on a variety of businesses and employment in the region take further hold and extend over a longer term." The nation's largest bank by assets and deposits is working to develop programs it can put in place when the impact of the oil spill on borrowers becomes evident, the spokesman said. In the aftermath of Hurricane Katrina, banks implemented broad payment-suspension plans for the Gulf region in response to the destruction of homes and the distress borrowers faced. While Hurricane "Katrina hit with great force" at once, the current disaster caused by the April 20 explosion of a BP PLC (BP, BP.LN) oil rig "is gradually evolving into a crisis for our customers," Das said in an interview with Dow Jones Newswires. "We cannot grasp the impact just yet." Citi CEO Vikram Pandit said in a press release, "We aim to ease the burden on residents of the Gulf states. In the midst of this crisis, we will continue to explore ways to help people avoid foreclosure so they and their families can remain in their homes and have one less thing to worry about." Michael J. Williams, Fannie's CEO, said in his company's release, "We want to give homeowners every opportunity to weather this unprecedented disaster, including relief from their mortgage payment if that will help them get back on their feet and stay in their homes." Under its "Special Relief Measures" policy, mortgage servicers may suspend or reduce a borrower's payments for up to 90 days, Fannie said. Citi has been looking at other potential programs that might help delinquent borrowers, but nothing has been designed yet, Das said. "Many small businesses put their homes as collateral to get working capital," and the oil spill will affect the mortgage payments through the businesses, Das said. Citi is already in contact with the U.S. Small Business Administration about potential programs to help distressed small-business owners and "will accelerate those discussions" in the context of the oil spill, he said. The SBA in May said it is making low-interest loans available to small businesses in Louisiana, Alabama, Florida and Mississippi that suffer financial losses from the oil spill. A Citi spokesman said small-business or credit-card borrowers "experiencing difficulties as a result of conditions in the Gulf coast region should contact us immediately. We will work with them to find a solution to help them through this challenging time." For now, only mortgages within about 25 miles of affected coastal areas that the bank holds on its balance sheet qualify, rather than all mortgages CitiMortgage services. Many loans that Citi services were sold to investors. Das said he gave the owners of such mortgages a heads-up about the suspension program, but hasn't yet approached them about expanding it to include mortgages Citi doesn't own. -By Matthias Rieker, Dow Jones Newswires; 212-416-2471; [email protected] (END) Dow Jones Newswires June 16, 2010 17:17 ET (21:17 GMT)