Citi Will Support Bill to Rework Bad Loans

Banks have fought so-called "cram-down" legislation, saying that when bankruptcy judges force lenders to modify mortgages, it would raise borrowing costs for all home buyers, said the Wall Street Journal, which was the first to report that a deal with Citi was near earlier Thursday.

Citi 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.

Shares of Citi closed trading Thursday flat.

In a letter to lawmakers, Citigroup CEO Vikram Pandit said the change to bankruptcy law "will serve as an additional tool to the extensive home-retention programs already in place to help at-risk borrowers," according to the Associated Press.