$1 billion to bail out homeowners

By Reuters

Citigroup and Bank of America will provide $1 billion of mortgage financing to help about 7,000 victims of abusive lending practices avoid losing their homes.

The largest U.S. banks confirmed Wednesday they are working with the Neighborhood Assistance Corporation of America, which said it is trying to help subprime borrowers who face possible foreclosure because rates are rising on their loans.

NACA, of Boston, said the banks will help people refinance through fixed-rate mortgages with rates about 1 percentage point below the market. The funding will be part of previous commitments by the banks to provide affordable home financing.

According to its Web site, NACA now offers 30-year loans at 5.5%.

• Video: Foreclosing on foreclosures

"We demand that others commit the dollars needed to modify people's loans," said Bruce Marks, NACA's chief executive, in an interview. "If other lenders intend to foreclose, we will go after their decision makers."

Rising tide of late payments

Last month, the Mortgage Bankers Association said late payments on subprime loans, or loans made to people with weaker credit histories, rose to 13.33% in the fourth quarter, and foreclosures on all home loans set a record.

Bank of America said it would offer financing under its 20-year agreement with NACA to provide $6 billion of affordable home loans through 2015.

"We maintain strong relationships with key organizations to extend our reach to borrowers to provide educational information and access to affordable mortgage products," spokeswoman Tara Burke said.

Citigroup made a 10-year commitment to offer $3 billion of financing to NACA clients who attend the group's financial education and training program, spokesman Mark Rodgers said.

The new program is "a good thing and will help people experiencing problems with their mortgages or (who) are distressed borrowers," Rodgers said.

According to its Web site, NACA helps arrange financing for people including low-income and moderate-income borrowers exploited by other lenders, or who live in neighborhoods with large minority populations and have been unfairly denied credit.

This article was reported and written by Jonathan Stempel for Reuters.