AP is reporting that Citicorp will be doing a moratorium on foreclosure and will be working with homeowners at risk of losing their homes. According to the story, Citi said it won't initiate a foreclosure or complete a foreclosure sale on any eligible borrower who seeks to stay in a home if it is the borrower's principal residence, the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments. They also said that they are working to expand that program to loans that they service but do not own. In additon, over the next six months they say they will be reaching out to homeowners who are not currently behind but who potentially could need assistance.
"Typically the lender loses the most money when a house goes into foreclosure," said Barry Zigas, director of housing policy at the Consumer Federation of America. "(The lender) takes some kind of loss that's usually much greater than what they sacrificed through some kind of workout."
The story also says that a number of other lenders are moving to do the same thing. You can read the entire story here.
I have two questions here...
1) If foreclosing actually loses the bank more money than working something out, why haven't they been doing this all along in hopes of avoiding a situation that I have to believe they saw on the horizon if they were paying attention.
2) Is anyone from the government (specifically the Obama folks) paying attention here? It looks like people may be working this out without the government getting involved (more than they are) perhaps we could see if these people can work it out without the government.
The Bad...
The big three automakers are currently in talks to get the government to delcare them too big to fail. I'm really not behind this for a couple of reasons.
First is that slippery slope argument. We've decided that all these banks are too big to fail. Now we're looking at the auto industry. What's next?
Second is that the Democrats are making noise that if the government does the bailout they want to start dictating the cars that they can build and how they can be built. If you look around the world, the US automakers are doing quite well in other countries, and that would be because we have more regulations on cars than they do. If the government wants to put even more restrictions out there, they'll just make more problems and at that point, we might as well just take a big pile of money and set it on fire.
Third is the conditions that brought about the problems that the big three are having. They've spent decades making cars that weren't fuel efficient in spite of the fact that fuel was going up and up in price. They should have been looking and planning. Add to it the combination of management and unions. For decades the auto industry has been run by management that was willing to give away the store and unions that were willing to kill the host. The unions didn't care about the automakers' ability to do business, they were just bleeding them for all they could; and the management was willing to give everything away. At this point I say, "You made your bed..."
The Ugly...
Albert Einstein (or Ben Franklin if you believe some arguments) is attributed with saying that insanity is doing the same thing over and over and expecting a different result. I think the executives at AIG could learn from this. After receiving not one but two big bailout payments and being caught on a retreat that cost hundreds of thousands of dollars, they have once again been caught on tape at another resort retreat that people are saying once again cost a few hundred thousand. What amazes me is that AIG managed to become "too big to fail" with these idiots in charge. According to Fox News this morning, staff at the hotel were told not to talk about these people being from AIG and to keep it a secret. Honestly, in the era of Youtube and cell phones that shoot video, how could these morons think that this was going to stay a secret? As one of the people who is paying for this company to be bailed out, I have to say, I want my money back. I think the government needs to stop payment on those bailout checks until these idiots are put out and new leadership who gets the gravity of the situation is put in. They had their chance and now it's time for them to go.
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