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Citigroup agrees to allow judges to help modify some mortgages

The move is viewed as a step toward easing foreclosures. More banks are expected to sign on.

The Associated Press - Idaho Statesman

Published: 01/09/09

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ADDITIONAL INFORMATION

Rates fall; Boise bank sees more interest in refinancing

Rates on 30-year mortgages fell to a record level for a fourth straight week, dropping to the lowest mark since Freddie Mac started tracking the data nearly 28 years ago.

Freddie Mac reported Thursday that average rates on 30-year fixed mortgages dropped to 5.01 percent this week. For a borrower taking out a $200,000 loan, that means a savings of more than $184 in monthly payments.

The average rate on a 15-year fixed-rate mortgage dropped to 4.62 percent, the lowest point since June 2003.

Syringa Bank in Boise has seen a 50 percent jump in applications to refinance mortgages, said Jerry Aldape, president and chief executive officer.

He said now is a good time to consider refinancing. "This is as low as I've seen 30-year mortgage rates in my lifetime," Aldape said.

Home buyers haven't been tempted, though. Aldape said the number of new local mortgage applications has remained stagnant as potential buyers continue to sit on the sidelines, waiting for the real estate market to hit bottom.

Statesman staff and wire reports

WASHINGTON - Democratic lawmakers have reached a deal with Citigroup Inc. on a plan to let bankruptcy judges alter home loans in an effort to prevent foreclosures and have urged other lenders to follow suit.

The lawmakers aim to attach the plan to President-elect Barack Obama's economic stimulus legislation, and said Thursday the change in bankruptcy law could ease the foreclosure crisis that has dragged the economy into the worst recession in decades.

The compromise between Citigroup and Sens. Richard Durbin of Illinois, Charles Schumer and Christopher Dodd of Connecticut, would be limited to loans made before the bill is signed. Obama says he backs the idea.

Schumer said he received calls Thursday from several banks - which he did not name - indicating their potential interest in supporting the idea.

"This is a breakthrough day," the senior senator from New York said in a news conference on Capitol Hill.

The so-called "cramdown" proposal has been backed by Democrats over the past year as a potential solution to the foreclosure crisis. Consumer advocates and Democrats say it would prod the lending industry to be more aggressive about modifying loans because of the looming threat of having a bankruptcy judge involved.

But the lending industry has battled fiercely against the idea, arguing it would force lenders to hike mortgage rates because they would have to charge more for loans that could be altered later by a judge.

To qualify, borrowers would need to demonstrate that they have asked their lender for a loan modification before filing for bankruptcy.

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