What are they thinking? So suppose that I am struggling to make my Citi mortgage payment and C just announces that if I stop paying them, they will have a nice customer service representative call me to ask how they can help. That’s a lot different than serving me with foreclosure notice and threatening to put all my stuff on the curb. I might not struggle as hard to pay my mortgage. It’s good to try workouts and refi’s. It’s a really bad idea to announce to the world that you are imposing a moratorium on the biggest incentive you have to get people to pay their mortgages. I think this makes the whole mortgage crisis worse.
I think they suspect that regulators are going to do this anyway and are trying to do an end run or pick up public relations points. Or they may have concluded that they lose much more money on foreclosures than they are likely to gain by proceeding with one or by working out some other deal. Remember that “foreclosure moratorium” does not mean they give up the right to try to work out some other penalty for non payment. It does seem strange though; I agree, since the usual incentive for taking another deal is that you won’t be foreclosed on.
Seems to me that the US needs to make lending “with recourse” again, price interest rate calls appropriately and wind down Fannie and Freddie. But not just yet!
totally agree. why shouldn’t I start defaulting on my mortgage? maybe I can get a better rate. my mortgage payment just went to the bottom of the list. I think BAC did the same thing. would be interesting to see what actually happened if one missed a payment. the open question is what happens to ones credit ratiing? is this considered a default / workout…? slippery slope because the spread between prime and sub-prime is going to continue to widen (future borrowing costs could be quite high for an impaired fico). that might just become the most expensive 5% mortgage ever…
JoeyDVivre Wrote: ------------------------------------------------------- > What are they thinking? > > So suppose that I am struggling to make my Citi > mortgage payment and C just announces that if I > stop paying them, they will have a nice customer > service representative call me to ask how they can > help. That’s a lot different than serving me with > foreclosure notice and threatening to put all my > stuff on the curb. I might not struggle as hard > to pay my mortgage. > > It’s good to try workouts and refi’s. It’s a > really bad idea to announce to the world that you > are imposing a moratorium on the biggest incentive > you have to get people to pay their mortgages. I > think this makes the whole mortgage crisis worse. This is exactly the same thing i told my wife today in the morninng. I am usually calm when talking about these issues but today i just exploded. What they really need to do is to negotiate refis so prices would finally come down to their intrinsic levels, not prop up their their colleteral with tax payers money. ARRRRHAGHAHGAHG
In the doomsday scenario of ‘everyone refusing to pay their mortgage because now they don’t have too’, we are forgetting about pride in ownership. It seems like a strange thing nowadays but some people (maybe most) really like the home they live in, and would like to stay there. So people (non-AF’ers) don’t really see the ‘whole meltdown’. They simply see a mild bump in the system, and lots of big headlines, so these people are ‘waiting this one out’. And no, they don’t want to leave there home, even if it means they get to skip a few payments, and they definetly don’t want the credit score impact. I think that scares people more than anything…
The US has gone soft.
Maybe Citibank thinks that by putting a moratorium on foreclosures, people are more likely to pay their credit cards? There’s clearly going to be some government action to mitigate housing problems, and it will involve trying to keep people in their homes… it’s a bigger question how the credit card situation will work itself out.
Worst idea ever… Now the people who are paying WILL STOP PAYING!
Jhunt12280 Wrote: ------------------------------------------------------- > In the doomsday scenario of ‘everyone refusing to > pay their mortgage because now they don’t have > too’, we are forgetting about pride in ownership. > It seems like a strange thing nowadays but some > people (maybe most) really like the home they live > in, and would like to stay there. So people > (non-AF’ers) don’t really see the ‘whole > meltdown’. They simply see a mild bump in the > system, and lots of big headlines, so these people > are ‘waiting this one out’. And no, they don’t > want to leave there home, even if it means they > get to skip a few payments, and they definetly > don’t want the credit score impact. I think that > scares people more than anything… Oh no…maybe this is it. We have bank policy based on US pride of ownership. “Well, George, we completely fell out of bed on that ‘real estate prices always go up’ thing, s&^t the bed on that ‘CDOs distribute risk to people who can take it’ thing, but now we have the key - ‘pride of ownership’. If we tell people that we won’t do anything to them like not even hurt their feelings if they don’t pay their mortgages, they will pay anyway because of ‘pride of ownership’”. I think the owner ship is sinking fast.
bchadwick, Interesting point about the Credit Cards. Has anyone here every looked the line item in a 10k about potential credit lines extended. The amount that people could charge if they wanted to max out there cards is Ridiculous. Hundreds of Billions for GECS alone Whats the impact if this happens? Maxed out cards, receivables assets for companies, but they have to ‘pay’ the retailers long before the consumer pays the cards right?
bchadwick Wrote: ------------------------------------------------------- > Maybe Citibank thinks that by putting a moratorium > on foreclosures, people are more likely to pay > their credit cards? There’s clearly going to be > some government action to mitigate housing > problems, and it will involve trying to keep > people in their homes… it’s a bigger question > how the credit card situation will work itself > out. Oh no…So C has decided that the gov’t will bail out the mortgage situation but they are going bust on the credit cards so if we drop the security on the mortgage, people will pay off their credit cards instead.
Jhunt12280 Wrote: ------------------------------------------------------- > bchadwick, > > Interesting point about the Credit Cards. Has > anyone here every looked the line item in a 10k > about potential credit lines extended. The amount > that people could charge if they wanted to max out > there cards is Ridiculous. > > Hundreds of Billions for GECS alone > > Whats the impact if this happens? Maxed out > cards, receivables assets for companies, but they > have to ‘pay’ the retailers long before the > consumer pays the cards right? You’re right that this could be a problem, but we have to create lots of moral hazard first. Anyway, the banks are working on this by arbitrarily cutting credit lines. I think we have never had a really serious economic contraction with all these open credit lines hanging around. If people start maxing out credit cards to pay bills when they are laid off from work and then don’t get a job in time, we have a really serious problem.
I agree, even if only 10% of homeowners fall of the ‘owner ship’ there are big problems, I’m just saying that that is still one piece to the puzzle. Here’s another thought. - - Gov’s getting ready to buy some assets of these banks right? Maybe C wants to keep the values high in the short term until they get bought off, if they were in the foreclosures stage than value drops quickly, if C puts there on special ‘limbo’ label on them, then they can justifiably sell them at higher prices to the bailout.
Jhunt12280 Wrote: ------------------------------------------------------- > I agree, even if only 10% of homeowners fall of > the ‘owner ship’ there are big problems, I’m just > saying that that is still one piece to the puzzle. > > > Here’s another thought. - - Gov’s getting ready to > buy some assets of these banks right? Maybe C > wants to keep the values high in the short term > until they get bought off, if they were in the > foreclosures stage than value drops quickly, if C > puts there on special ‘limbo’ label on them, then > they can justifiably sell them at higher prices to > the bailout. That’s an interesting thought and I hope it’s not true…
Gecco Wrote: ------------------------------------------------------- the open question is what > happens to ones credit ratiing? is this > considered a default / workout…? slippery > slope because the spread between prime and > sub-prime is going to continue to widen (future > borrowing costs could be quite high for an > impaired fico). that might just become the most > expensive 5% mortgage ever… I don’t think its that big a concern considering that on average a home mortgage is by far the largest proportion of a person’s credit needs. Since a default only stays on FICO for 7 yrs (I believe) Some less scrupulous ppl may take the hit to save on their mortgage. Eg I have 600k principal on my home and barely making payments while the property value has fallen 15%- so why not put some cash under the mattress and stop sending in the pmts… get it written down by 75k and deal with not getting to buy LCD tv’s on credit anymore (already got a house right?). SO I don’t get to move for 7 years- but a 75k credit for me, whose making 50k a year is great! I think the way of getting around this issue, at least to an extent, is to ensure that the bank gets to recoup the credit @ the sale of the home in the case that there is capital appreciation above the writedown. Or we can just let the market re-adjust to where ppl can actually afford homes.
I’m sure Citi has put a lot more thought behind this concept then the people on AF who just read the headlines and jump to conclusions.
Yeah, right. The problem isn’t the amount of thought they have put behind it (usually). It’s motivations, intentions, group-think, etc. In any case, have you been following the news for the last year or so? Some highly paid people in charge of some pretty big places have made some really unbelievably brain-dead calls many of which were questioned appropriately on AF.
Fremantle Wrote: ------------------------------------------------------- > I’m sure Citi has put a lot more thought behind > this concept then the people on AF who just read > the headlines and jump to conclusions. Although I have the sneaking suspicion you work for C, you’re definitely correct. As usual, the person who is the most wrong is PTrainer. http://online.wsj.com/article/SB122636776229916053.html?mod=testMod The first paragraph: “In an aggressive move targeting the root cause of the global financial crisis, Citigroup Inc. announced Tuesday that it is offering to modify the terms of as much as $20 billion in mortgages for borrowers who are current on their loan payments but at risk of falling behind.”
NakedPuts Wrote: ------------------------------------------------------- > Fremantle Wrote: > -------------------------------------------------- > ----- > > I’m sure Citi has put a lot more thought behind > > this concept then the people on AF who just > read > > the headlines and jump to conclusions. > > Although I have the sneaking suspicion you work > for C, you’re definitely correct. As usual, the > person who is the most wrong is PTrainer. > > http://online.wsj.com/article/SB122636776229916053 > .html?mod=testMod > > The first paragraph: > > “In an aggressive move targeting the root cause of > the global financial crisis, Citigroup Inc. > announced Tuesday that it is offering to modify > the terms of as much as $20 billion in mortgages > for borrowers who are current on their loan > payments but at risk of falling behind.” So, let me get this straight i earn 200k and i bought 1.5m house, i am at risk of falling behind so now i will pay only 38% of my income instead of 60%? GRRRREEEAT NEWS