Citi Leads Talks to Modify Mortgages: Report

Citigroup(C Quote) is leading other lenders in talks with key senators on legislation that would allow judges to set new repayment terms for mortgage holders who wind up in bankruptcy court, the Wall Street Journal reports.

A person close to Citigroup said the bank is still negotiating details of an agreement with lawmakers, and it hasn't made a final decision to embrace the "cramdown" legislation. Banks have fought such legislation, saying that cramdowns, when bankruptcy judges force lenders to modify mortgages, would raise borrowing costs for all home buyers, the Journal reports.

Citigroup faces scrutiny by the new Congress, where Democratic leaders have questioned the bank's efforts to help struggling homeowners. The negotiations on the cramdown issue, the Journal reports, reflect the bank's desire to "get out in front" of the growing foreclosure problem and show Democrats its willingness to be constructive on an important issue.

Legislation allowing bankruptcy restructuring of individual mortgages was introduced in the House and Senate on Tuesday, the opening day of the new Congress.

A measure allowing court-ordered mortgage workouts could be passed separately, or as part of Congress's coming economic-stimulus package, according to the newspaper.