Citigroup Inc, the US bank forced to curb executive pay and slash stock dividends as a condition of its $346 billion bailout, now has to expand the use of a government mortgage-relief programme to meet regulators’ demands.
Citigroup will use the Federal Deposit Insurance Corp’s “mod-in-a-box” loan-modification formula any time it makes long-term changes to a mortgage, the New York-based bank said yesterday in 43-page report. Previously, such efforts were mostly limited to borrowers 60 days past due. The FDIC’s formula seeks to prevent foreclosures by reducing mortgage payments.
FDIC Chairman Sheila Bair insisted on Citigroup’s cooperation last November, when the bank sought $20 billion of bailout funds and $301 billion of asset guarantees on top of an earlier $25 billion infusion. President Barack Obama wants more- aggressive efforts to stem foreclosures, and may force banks to increase lending when they take government money.
“They seem to just try to coerce the industry into” the loan-modification programme, said David Watts, a strategist at analysis firm CreditSights Inc. “They’re saying, ‘We want you to do this programme, and we’re going to make sure you do it by helping you, possibly with money and possibly with a big fat stick.’”
