(Reuters) - Citigroup Inc is leading other lenders in advanced talks with key U.S. senators on legislation that would allow judges to set new repayment terms for millions of mortgage holders who wind up in bankruptcy court, the Wall Street Journal said, citing people involved in the talks.
A person close to Citigroup told the paper that it was still discussing details of the plan with lawmakers, and that it has not made a final decision on whether to embrace the so-called “cramdown” legislation.
The negotiations reflect Citigroup’s desire to “get out in front” of the growing U.S. mortgage foreclosure problem and show Democrats it was willing to be constructive on an important issue, the paper said.
Citigroup could not be immediately reached for comment by Reuters.
Legislation designed to stem foreclosures by allowing bankruptcy judges to erase some mortgage debt was introduced by Congressional Democrats on Tuesday.
A measure allowing court-ordered mortgage workouts could be passed separately, or as part of a coming economic stimulus package, the Journal said.
Senate negotiators told the paper that Citigroup’s endorsement of the measure was important for bringing other big lenders on board quickly, improving the measure’s chance of passing with the stimulus bill.
“We think it would be great to put this on the stimulus, and the bank support will make it all the easier to accomplish that,” Sen. Charles Schumer told the paper.
Schumer, a Democrat from New York who is a key player on the Senate Banking Committee, is brokering the talks, the paper said.
Plans to lower mortgage rates are seen as one of the most promising federal efforts to stabilize the housing market, which is in its worst downturn since the 1930s. However, because banks have tightened lending standards, many borrowers may not be helped no matter how low the rate.
Soaring foreclosures are also fueling a downward trajectory in home prices, encouraging buyers to delay entering the market and putting more pressure on the slumping economy.
An index of pending home sales this week dropped to its lowest level since the data series began in 2001, according to the National Association of Realtors.
Reporting by Ajay Kamalakaran in Bangalore; Editing by Kim Coghill