Fannie Mae and Freddie Mac will reduce principal or interest rates on some loans and extend the terms of others, people briefed on the matter said. The Federal Housing Finance Agency, which seized control of Fannie and Freddie in September, scheduled a press conference at 2 p.m. in Washington to announce the plan.
Congress has been urging financial-services companies to work with borrowers after foreclosures rose to the highest on record in the third quarter. JPMorgan Chase & Co., the biggest U.S. bank, said last month it would stop foreclosures on some loans as it works to make payments easier on $110 billion of problem mortgages, while Bank of America Corp. said it has modified 226,000 loans this year.
"If housing doesn't get stabilized, it's really going to continue to bleed the economy,'' said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, Bloomberg's most accurate economic forecaster for 2008.
Citigroup, the fourth-largest U.S. bank by market value, will contact about 500,000 homeowners with $20 billion in mortgages during the next six months, the New York-based company said in a statement today.
Citigroup said it's helped about 370,000 people with $35 billion in mortgages avoid foreclosure since 2007. The bank is trying to help customers stay in their homes, Sanjiv Das, chief executive officer of the mortgage unit, said in the statement.
Citigroup has lost money on its mortgage holdings for six straight quarters, the company said on an Oct. 16 conference call. It restructured more than 120,000 loans, including granting extensions, during the first half of 2008, Chief Financial Officer Gary Crittenden said on the call.
A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on during the third quarter, the most since records began in January 2005, data compiled by RealtyTrac Inc. in Irvine, California, show.
Citigroup said it's "focusing particularly on borrowers in areas that are likely to face extreme economic distress.''