November 26, 2007

Subprime mortgages, Citigroup, Acorn, NACA

Citigroup Feels Heat To Modify Mortgages – WSJ.com
In Granada Hills, Calif., Natalie Brandon is fighting to keep the three-bedroom ranch house she bought in 1985 for $105,000. Mrs. Brandon, 51, does medical billing for doctors; her husband is a dispatcher for a local gas utility. Last year, she got a $625,500 mortgage from Argent, now owned by Citigroup. Her 7.99% interest rate isn’t set to rise until next June, but she already is behind on payments.

Over the past five years, she has refinanced her home five times, each time taking out cash and paying prepayment penalties. Last year, all she had to do to refinance was state that she and her husband earned a combined $100,000. She says she used the proceeds to pay off $30,000 owed on her white Lexus.

This year, she says, their income fell after she suffered a short-term disability. Mrs. Brandon figures if she sold her home today, she wouldn’t get more than $450,000 — what a nearby home sold for in foreclosure.

She has tried for months to get her loan modified, and missed her June and September payments. Last month, Damien Gutierrez, a Citi Residential home-retention manager, offered to fix her interest rate at 6% for 40 years, she says. One week later, she says, he said he was authorized only to offer her a five-year fixed rate. Earlier this month, Citigroup offered her a six-month trial at 6%, saying it would extend the modification to three years if she keeps up with her payments, she says. Mr. Gutierrez didn’t return calls seeking comment.

[snip]

Ana Cecillia Marin, a 36-year-old single mother of three, owns a 20-year-old ranch house on a dusty, garbage-strewn acre in Palmdale, Calif. She says she earns $34,000 a year managing flower sales at a Los Angeles food store and selling clothes on the side. She bought her house in 2005 for $385,000. By taking out a first and second mortgage, she was able to buy it for no money down.

At first, her ex-boyfriend helped make mortgage payments, she says, but his construction jobs dried up. She hasn’t paid anything for months on the $76,426 second mortgage serviced by Citigroup, and she has also fallen behind on her $308,000 first mortgage, serviced by a unit of Bear Stearns Cos.

Ms. Marin says she got a foreclosure notice on her first mortgage. Judging from recent sales of similar homes in the area, it’s unlikely that Citi Residential will be able to recoup money owed on the second mortgage in the event of a foreclosure sale, because the first-mortgage lender gets its money first.

“I’m afraid I’m going to lose it,” Ms. Marin said recently of the house. Already, she had moved most of her belongings into a wooden crate in the yard. All that remained inside were the mattresses on which she and her children sleep.

[snip]

For years, groups such as Acorn and NACA have pressed Citigroup and other lenders to step up mortgage lending to lower-income customers. When subprime mortgages began going bad, these groups began pushing banks not to lower the boom on borrowers. They have leverage. The Community Reinvestment Act requires banks to help meet the credit needs of communities in which they operate, and regulators often seek feedback from the groups when deciding whether to permit financial institutions to open new branches. The groups sometimes organize boycotts.

None of this has anything to do with the Bay Area, but I thought I’d just post it for fun so you can learn more about what’s going on in subprime land.

Comments (9) -- Posted by: burbed @ 12:36 am

9 Responses to “Subprime mortgages, Citigroup, Acorn, NACA”

  1. 3rd Generation Says:

    Perfect financial examples of people who should have never been granted loans to buy houses.. Find out who received comissions and Jail them all. Too bad the new house is a ‘crate-in-the-yard” -Oh well, they’ll have something to tell their kids about someday, if they survive the winter? – The Depression of 2008 -2009. I think I’ll go take a long shower and turn the heat up, I feel a chill…
    Thank you Burbed for the stories – Keep ‘em coming!

  2. waiting_for_the_fall Says:

    The lady buys a lexus with equity, one of the more expensive high end cars, and complains that she can’t afford her mortgage payment?
    I have no sympathy for these money hungry fools.

  3. ex-sunnyvale-renter Says:

    Same kind of thing going on here. Places for sale all over, people moving out to try to move in with family who will maybe take them in, etc.

    It may be the Depression on 08-’12 or so.

  4. Pralay Says:

    And govt is thinking about giving my tax-dollars to pay for Natalie Brandon’s “white Lexus”!!! I am still driving my 2003 Honda Accord and I still have to pay $2000+ for that loan. I can re-paint my black Honda to make it “white Honda”, if govt is willing to pay Natalie Brandon’s tax-dollars to pay for my car.

  5. ex-sunnyvale-renter Says:

    Yes the big problems with any bailouts is, they’re out of tax dollars (I’m taking tax dollars vie food stamps but it’s only $150 a month) and, the bailouts won’t save anyone’s “american dreams”

    the thing to do is scale back, way back, as soon as possible. Get your spoiled kids out of their bedrooms with bigscreens and find a decent rental. Sell off all the assets you can and apply to debt. Maybe you can cut back enough and raise enough through selling the Lexus etc to dig your way out. If you can’t do it that way, and by adopting a FRUGAL lifestyle, then go ahead and do your Chapter 7 BK.

  6. MLS-2.com Says:

    One Bay Area example was given in the article, in Redwood City. Don’t worry, we have our share!

  7. et_tu_alt_a? Says:

    This type of thing couldn’t possibly be relevant to the Bay Area as noone round here would be so fiscally irresponsible as to extract over $500k in equity from their house to fund their Lexus etc leaving themselves upside down to the tune of $150k… right?

  8. MLS-2.com Says:

    “Over the past five years, she has refinanced her home five times, each time taking out cash and paying prepayment penalties.”

    Her prepays totaled enough for a new Porsche!

  9. burbatoga Says:

    re 5. and only $150/mo: food stamp program accounted for ~$33bn of tax money in 2006.


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