“I called just last week about one of my clients ”” they had an adjustable rate that went up to 9 percent….They could afford if it they lowered (payments) by about $200, and the bank wouldn’t even talk to us.”
—Real estate agent Lindsay Dukes from a front page article in the local paper (well worth reading in its entirety)
“One of my clients…had an adjustable rate that went up to 9 percent….They could afford if it they lowered (payments) by about $200, and the bank wouldn’t even talk to us.”
Stupid bank, taking a stance not only harsh but self-defeating.
Though perhaps it is in keeping with this saying:
“If you owe the bank $100,000 and can’t pay, you have a problem.
If you owe the bank $100,000,000 and can’t pay, the bank has a problem.”
“Stupid bank, taking a stance not only harsh but self-defeating”
This point bears elaboration. For this purpose, I’ll assume that the bank’s refusal to discuss a modified payment plan reflects its considered position, not just an unreadiness to negotiate this week.
The refusal is self-defeating because this is a rotten time to try to sell foreclosed property.
The refusal is also reprehensible. The current financial crisis is, in its way, as serious as most natural disasters. It is not as acute and locally intense as a tornade, hurricane, or earthquake. But it is an extraordinary event and will cause considerable suffering.
If the borrower really could (as asserted here) handle modestly lower payments, then the lender would be wrong under the circumstances to spurn them and foreclose.
We don’t know anything about this relationship but what this realtor has told us, I. If this couple was foolish enough to take out an ARM when 30-year fixed rates were available at historic lows, that tells us something of their fiscal acumen. That they are $200 a month from insolvency also tells us they most likely bought way more house than they could afford with that ARM. And since they cannot pay the $200 a month more at the present, it’s likely they have precisely zero liquid reserves to draw on. IOW, what we have here is a couple who have, as the Bard might have put it, gone as far as their coin would stretch, and where it would not, they have used their credit.
No equity, no savings, insufficient income. Couple that with a flailing, out-of-control Treasury Secretary promising to buy whatever mortgages he can lay his hands on, and why wouldn’t a bank want them out so they can sell it to Uncle Sap?
So why won’t the bank stretch the loan to a 40 year?
I agree with Jeffersonian #3. The bank is figuring on a better deal from Uncle Sam than the couple can give.