Pay No Attention to that Man Behind the Curtain!
Joe Nocera, a financial columnist for the New York Times, two weeks ago busted JP Morgan Chase by revealing that the bank intended to use the $25 billion given to it by the U.S. government not for lending to customers but rather for acquisitions and other stuff. Nocera listened-in to a Chase conference call reported here:
</a http://www.nytimes.com/2008/10/25/business/25nocera.html>
Tough news for Chase, eh? Generally speaking the big banks that accepted $125 billion over the last 10 days don’t intend to lend ANY of it — or didn’t until Nocera’s column hit. His may have been the most valuable — and expensive — piece of financial journalism in history. And as a result Chase is now coming up with a plan to rework 80,000 primarily alt-a mortgages by lowering interest rates, possibly converting some mortgages to fixed rates, or even forgiving some principal. Yeah, right. It’s all described here:
</a http://www.nytimes.com/2008/10/25/business/25nocera.html>
Now we come to the good part. The loans Chase is adjusting are coming primarily from two recent and troubled acquisitions — WAMU (that’s where my mortgage lives) and EMC Mortgage, which was part of Bear Stearns (and is where my mother-in-law’s mortgage lives). To get the spectre of Nocera off its curmudgeonly shoulders, Chase had to announce the workout program this week even though the details aren’t supposed to be ready for another 2-4 weeks. This puts the bank in a very difficult position that it is handling through the simple expedient of….. more lying.
The idea of this program, like the IndyMac and CountryWide programs that preceded it, is to change the terms of troubled loans in order to help homeowners stay in those homes — the idea being in part that foreclosures are more expensive and should be avoided if possible. So these are troubled loans — loans where homeowners have had to have been, at least for awhile, in default. But with only half a program announced, how can we expect mortgage holders to respond? They’ll stop paying, if course, which is exactly what Chase DOESN’T want them to do.
Listen, to be considered for this program, we’re led to expect, homeowners need to be in default. Yet as part of the announcement the bank has strongly suggested homeowners not continue to be in default because that might make them ineligible.
Huh?
You have to have gotten behind on your payments to qualify, but if you get any further behind on those payments, you might then become suddenly UNqualified. It’s as though there is a sweet spot of just enough — but not too much — financial default.
This is hooey and an insult to all involved. If you want to be included it is clear that the best move is to stop paying your mortgage or you’ll never get a chance to participate. And saying that homeowners who haven’t paid their mortgages for 2-3 months are now supposed to somehow find the money just as the economy get WORSE, not better, well that’s crazy and the bank has to know it.
The truth is they intended not to announce anything yet except Nocera interceded (bless him) so now Chase will spread some horse manure on the story in hopes of minimizing the damage. All of which leaves me with the question of where this falls under the Truth in Lending statute?
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