Citigroup Inc., which has the world's largest financial services network, agreed to support the legislation that allows bankruptcy judges to cut mortgage rates for at-risk borrowers.

However, the move drew harsh criticism. Bank industry lobbyists argued that the move was a compromise Citigroup made with Senate Democrats and that it was flawed. The major financial services company’s move would help "millions of families save their homes,” as the lawmakers who proposed the measure put it.

Meanwhile, many industry players and analysts argued that the measure would only lead to an increased cost for future homeowners. Last year, a similar measure failed to get an approval because the Republicans, some Democrats and housing industry lobbyists were against it.

“Citi shares this legislation’s goal to help distressed borrowers stay in their homes,” wrote Vikram S. Pandit, the chief executive of Citigroup, The New York Times reported. 

Citigroup, which is receiving more than $300 billion in bailout assistance, agreed to back the bill after Senate Banking Committee Chairman Christopher Dodd, and Senators Charles Schumer of New York and Richard Durbin of Illinois, made clear their intention of limiting the legislation only to existing mortgages.

Under the U.S, legislation, most forms as personal debt can be restructured in bankruptcy, but a mortgage on somebody's main residence cannot. Under this measure, only mortgages entered into prior to the date of enactment of the bill would be eligible for the treatment.

Currently, the National Association of Realtors is trying to reach a decision whether to support the reform or not. The National Association of Home Builders has already decided not to oppose it.