http://www.nytimes.com/2011/07/03/business/03loans.html?_r=1 Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk. Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount... [more]
http://www.nytimes.com/2011/07/03/business/03loans.html?_r=1
Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.
Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.
Ms. Giosmas, who lives in Miami, was not in default on her $300,000 loan. She did not understand why she would receive this gift — although she wasted no time in taking it.
Ms. Giosmas bought her two-bedroom, two-bath apartment north of downtown Miami for $359,000 in early 2006, according to real estate records. She made a large down payment, but because each month she paid less than was necessary to pay off the loan, her debt swelled to about $300,000.
Meanwhile, the value of the apartment nosedived. By the time Ms. Giosmas got the letter from Chase, the condominium was worth less than half what she paid. “I would not have defaulted,” she said. “But they don’t know that.”
A few months ago, Ms. Giosmas sold the place for $170,000, making a small profit. Having a loan that her lender considered toxic, she said, “turned out to be a blessing in disguise.”
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Adam J. Levitin, a Georgetown University law professor, said these little-publicized programs were more evidence that the banks were behaving in contradictory and often maddening ways.
“Loan modifications that should be happening aren’t, while loan modifications that shouldn’t be happening are,” he said. “Homeowners of any sort, whether current or in default, would rightly be confused and angry by this.”
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Response by pulaski
about 15 years ago
Posts: 824
Member since: Mar 2009
“Why would I want to pay a lot more every month? I’d rather have it in my pocket.”
"Not surprisingly, this will be the same rhetorical question posed next by everyone who still has a mortgage, and not only by those, roughly 28% of all, who are underwater on their mortgage. Which means that wholesale mortgage reduction for everyone in America is next on the docket. Which also means that the "rent" component of personal income is about to surge from the current $50 billion annualized to well into the triple-digits, or about 1-2% of GDP, just enough to offset recession yet again.
And that's how you create wealth in the modern, centrally-planned USSA."
It shows that not only were the banks/lenders terrible judges of loans that were money good vs money bad back when they were under-written, they are just as bad today at deciding which ones are likely to default. Since under-writing loans is basically banking 101 words can't describe how the lenders got this so wrong.
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Response by sjtmd
about 15 years ago
Posts: 670
Member since: May 2009
A "large down payment" - according to my math - $59,000 on a $359,000 condo - 16.4 %. Large???
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Response by urbandigs
about 15 years ago
Posts: 3629
Member since: Jan 2006
more silliness, more moral hazard
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Response by Riversider
about 15 years ago
Posts: 13573
Member since: Apr 2009
16.4% sounds small and not very large at all considering this was a POA mortgage the down payment should have been bigger to adjust for the negative amortization which probably allowed for the balance to increase by 10-15 if not more.
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Response by financeguy
about 15 years ago
Posts: 711
Member since: May 2009
So, the "profit" she made is that she put down $59k, and cleared $20k, before brokers fees and taxes on $150k of phantom gain. If she keeps making profit like that, soon she'll be richer than the bank!
And why are we supposed to regret the "moral hazard" in banks actually taking losses when they make bad loans? "Moral hazard" is the problem of increased risk when people are allowed to take risks with other people's money. Here, we see the opposite. The bank -- unusually -- is actually taking responsibility for the risks it created and was paid to accept.
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Response by Riversider
about 15 years ago
Posts: 13573
Member since: Apr 2009
I wonder who took the hit here. The loan may have been securitized. Banks are famous for writing down loans they dont' own.
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Response by pulaski
about 15 years ago
Posts: 824
Member since: Mar 2009
"Obama Administration To Extend Mortgage-Free Living For America's Unemployed To One Year"
"Last week it was discovered that the means by which various big banks are dealing with the Option ARM cliff is by enforcing outright mortgage debt forgiveness, in some cases as large as 50% of the total principal. Which is why it should come as no surprise that the administration, in dealing with the lack of an unemployment cliff, has decided to extend foreclosure-free living for unemployed homeowners from a few months to a year. "
"And some wonder why retail sales in June came as blistering as they did. Simple: when the US consumer no longer has to spend any money on the biggest traditional use of capital, housing, the alternative is everything else."
pulaski you seriously need to question this zerohedge guy...to make a claim that retail sales are up becuase people arent paying mortgages is a spurious correlation at best. I appreciate the fact that he doesnt like the road the current administration is on, but his conclusions are very weak and clearly based on little or no empirical evidence.
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Response by Riversider
about 15 years ago
Posts: 13573
Member since: Apr 2009
Zero hedge is one of those sites that produces some good information, some interesting possibilities and some clear non-sense. It requires a great deal of filtering by any reader.
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Response by marco_m
about 15 years ago
Posts: 2481
Member since: Dec 2008
seriously..ny post costs 75c now that must be why cigarette sales are down
“Why would I want to pay a lot more every month? I’d rather have it in my pocket.”
"Not surprisingly, this will be the same rhetorical question posed next by everyone who still has a mortgage, and not only by those, roughly 28% of all, who are underwater on their mortgage. Which means that wholesale mortgage reduction for everyone in America is next on the docket. Which also means that the "rent" component of personal income is about to surge from the current $50 billion annualized to well into the triple-digits, or about 1-2% of GDP, just enough to offset recession yet again.
And that's how you create wealth in the modern, centrally-planned USSA."
http://www.zerohedge.com/article/banks-commence-wholesale-unsolicited-mortgage-forgiveness
It shows that not only were the banks/lenders terrible judges of loans that were money good vs money bad back when they were under-written, they are just as bad today at deciding which ones are likely to default. Since under-writing loans is basically banking 101 words can't describe how the lenders got this so wrong.
A "large down payment" - according to my math - $59,000 on a $359,000 condo - 16.4 %. Large???
more silliness, more moral hazard
16.4% sounds small and not very large at all considering this was a POA mortgage the down payment should have been bigger to adjust for the negative amortization which probably allowed for the balance to increase by 10-15 if not more.
So, the "profit" she made is that she put down $59k, and cleared $20k, before brokers fees and taxes on $150k of phantom gain. If she keeps making profit like that, soon she'll be richer than the bank!
And why are we supposed to regret the "moral hazard" in banks actually taking losses when they make bad loans? "Moral hazard" is the problem of increased risk when people are allowed to take risks with other people's money. Here, we see the opposite. The bank -- unusually -- is actually taking responsibility for the risks it created and was paid to accept.
I wonder who took the hit here. The loan may have been securitized. Banks are famous for writing down loans they dont' own.
"Obama Administration To Extend Mortgage-Free Living For America's Unemployed To One Year"
"Last week it was discovered that the means by which various big banks are dealing with the Option ARM cliff is by enforcing outright mortgage debt forgiveness, in some cases as large as 50% of the total principal. Which is why it should come as no surprise that the administration, in dealing with the lack of an unemployment cliff, has decided to extend foreclosure-free living for unemployed homeowners from a few months to a year. "
"And some wonder why retail sales in June came as blistering as they did. Simple: when the US consumer no longer has to spend any money on the biggest traditional use of capital, housing, the alternative is everything else."
http://www.zerohedge.com/article/obama-administration-extend-mortgage-free-living-americas-unemployed-one-year
:/
pulaski you seriously need to question this zerohedge guy...to make a claim that retail sales are up becuase people arent paying mortgages is a spurious correlation at best. I appreciate the fact that he doesnt like the road the current administration is on, but his conclusions are very weak and clearly based on little or no empirical evidence.
Zero hedge is one of those sites that produces some good information, some interesting possibilities and some clear non-sense. It requires a great deal of filtering by any reader.
seriously..ny post costs 75c now that must be why cigarette sales are down