Citigroup Makes Proposal for Mortgage Modification Program

Citigroup (one of the largest mortgage lenders in the United States), has been working with certain members of the U.S. Senate to come up with a new mortgage modification plan that would save homeowners from future foreclosure.

The latest program would allow bankruptcy judges in the U.S. to modify the existing mortgage loans of certain homeowners -- particularly those who are declaring bankruptcy. Current laws prevent judges from altering home loans in this way, but the new plan would change the bankruptcy laws to allow the courts to modify mortgages in this way. The end goal of all this is to make the loans more affordable for the homeowners, so that they could keep their homes even while declaring bankruptcy on other assets.

The plan was originally put forth by Senators Richard Durbin and Charles Schumer, and it is now being supported by Citigroup (who initially opposed such a plan).

But the mortgage modification proposal is encountering new opposition from a key industry group. The American Bankers Association (ABA) has said it opposes the idea because: "it will leave in place overly broad mortgage cram-down authority and other provisions that will harm thousands of banks across the country that have made, and continue to make, good loans," (this according to Floyd Stoner, the executive director for public policy at ABA.