Fascinating development as the United States Senate reaches a compromise with the second house of the legislature known as Citigroup:
Democratic lawmakers have reached a deal with Citigroup Inc. on a plan to let bankruptcy judges alter home loans in an effort to prevent foreclosures and urged other lenders to follow suit.
The lawmakers aim to attach the plan to President-elect Barack Obama’s economic stimulus legislation, and said Thursday the change in bankruptcy law could ease the foreclosure crisis that has dragged the economy into the worst recession in decades.
The compromise between Citigroup and Sens. Richard Durbin of Illinois, Charles Schumer and Christopher Dodd of Connecticut, would be limited to loans made before the bill is signed. Obama has said he backs the concept.
1911:
JP Morgan steers and drives the ship of state. Uncle Sam is just along for the ride. (pic via)
What a unique and unprecedented time we live in!
At least Citi is trying something.
The problem I have is: Why wait until bankruptcy to alter home loans for those in trouble?
And do such programs have to be limited to home loans that are recognized to be bad from the start?
In other words, I have a good loan — I believe my 30-year is 5.8 percent — and took it on a ranch home that would be considered modest by any standard.
But I am sweating out the $1,040 monthy payment each month, along with the $400 second-mortgage payment.
From everything I have read, I do not fit under any of the modification programs.
I called Wells Fargo a few weeks back and the answer I received was that I’d have to go bad on a payment before they could offer anything for me — to call them once I was 15 days late, make at least a $500 payment, and then I’d get an extension on the late payment.
I can see where this would be a vicious cycle once you fall behind.
For instance: I am OK for February but counting on my tax refund to pay March. Let’s say I can’t come up with the $1,040 for April. I wait until April 16, per the Wells Fargo rep’s instructions. I pay $500 and get an extension to May 15 to pay the rest; meanwhile, the regular May 1 payment is due.
I can see the urgency in helping someone who is defaulting. I can understand how lowering my already-good 5.8 rate doesn’t make sense. But would it not benefit Wells Fargo (and me) to extend my loan to lower the (main) payment to $700 or $800 in order to keep a good-paying customer in their house and in good standing?
I think the reason this recession is as painful as it is — and is projected to last significantly longer — is the housing crisis goes beyond bad loans, beyond subprime mortgages. The sagging economy has affected folks with good loans, folks whose financial focus becomes how to scrape together the extra $2-3-400 in order to pay on time and not become part of that vicious cycle. So they/we don’t even consider buying a new dishwasher or hiring a repairman to fix the one we have, so they/we no longer eat out once a month, already down from the once-a-week indulgence of 2007. Some of this is good: Did we really need to eat out once a week? But a lot of it trickles down to the rest of the economy — the repairman may be late on his mortgage, durable goods orders are down — and makes it stagnant.
have you tried a re-fi ?
we have a wells fargo mortgage, @ 6.0%. a couple of weeks ago we applied on-line for a re-fi, and got it @ 5.25%. that’s going to save us over $400/mo.
I should have mentioned that in my posting but it was getting long as it was.
I should have pursued a refi agressively back in September or October, although I hesitated because the rates were not as low as they are now.
The rates now would probably create that $400 cushion that I we need, as you note. But my once A-1 credit — I was as high as 772 — has taken a huge and sudden drop since November that would make a refi prohibitive.
Or I should just get to the point: I am in the middle of a bankruptcy — Chapter 7, so our home and car are safe. The whole idea is to give you a clean slate.
The attorney has everything she needs and wanted to go to court the first week of February. But I pushed things back to mid-March because — again relying on my tax refund — I do not have the $1,700 I must pay her when we got to court (it only took $200 to get things started). And basically, your financial life is frozen while you are doing a BK.
When I was a 772 and had some semblance of cash flow, I could do whatever I wanted and never felt poor. Then the economy went south — and with it, so did car sales. Obviously, in retrospect, I was overextended. But I am amazed at how quickly things took a turn for the worse. Now the trick is to make sure it is not irreversible.
ah. very sorry to hear that. sounds like a tough situation – best of luck. whew.
and i certainly don’t envy car dealers these days.
Thanks, cleek.
The hope is that things will get better and I will learn from this situation.
If the BK works, and my lawyer indicates it should, my credit card debt will be erased, and that got out of hand before the downturn in the economy.
It was simply to easy a fix to buy this or that, much of which was reasonably necessary — much of which wasn’t. (When Hamilton, our then 12-year-old Beagle, needed life-saving surgery in June, I did not hesitate to charge the $4,000 cost; now he’s better than ever. Reasonably necessary?)
Before I got married, my finances seemed simple. It wasn’t until marriage, moving into a home that required more maintenance, wanting to make things easy for my wife and son, that I even carried over a balance on a credit card.
We’ve simplified things a lot. The concern is that things either need to pick up or, as I said, the mortgage needs to be lightened, which doesn’t seem likely.
I look at my situation and see how the economy is where it is, knowing so many folks must be so worse us.