Posted on 01/22/2009 10:27:05 PM PST by TigerLikesRooster
Thursday, January 22, 2009
COF: "Strikingly high FICO customers" Defaulting
by CalculatedRisk on 1/22/2009 08:27:00 PM
From the Capital One conference call, on Closed End Unsecured Loans (hat tip Brian):
Analyst: When you look at the closed in loans that are clearly under performing at this stage, what is it about either the underwriting or the characteristics of that group of loans which makes that different than say a normal revolving credit card or what would you suppose is maybe leading to the worse than expected performance at this point?
COF CEO: There are several factors involving the closed in loans. From a credit point of view, closed end loans tend to attract, just sort of by the nature of who the customer base that pursues an installment loan, tends to attract a customer base that is a little more credit intense if you will relative to the broad swath of our credit card base because a credit card of course is also a transactional product as well as a borrowing product. These closed in loans in fact were to pretty darn strikingly high FICO customers, basically super prime customers by profile, but they certainly have a degraded a lot more quickly than the overall super prime sort of equivalent super prime credit card customer. You know, they tend to be -- a couple of things about the boom and bust market that we have seen both they tend to perform -- they are performing worse in the boom and bust market we can see that than the credit cards, and they have a higher concentration in boom and bust markets as well. ... emphasis added
Those darn strikingly high FICO super prime borrowers!
Ping!
super subprime?
I’m sure there are a few responsible people out there that have always done the right thing by making their payments, that are seeing all of the bailouts of the irresponsible, and in their own way they are saying “screw it”.
Im in the mortgage business.
Your statement is very accurate. There are a lot of people who can afford their mortgage payments, but are just giving up paying because they are sick and tired of all the bailouts.
This is the problem the government created by continuosly helping some people who shouldnt be helped.
The small business owners are giving up too in big numbers, because they are tired of working hard to support “low income” people who sit on their duffs and mooch.
That’s us in a nutshell. We have no other debt besides our mortgage and we’re upside down about 170k..ugly. Talked to a lawyer and pretty much the only way to get the bank to talk to you about a loan modification is to stop paying.
To be honest, that thought has crossed my mind. But I’m to old fashioned, I guess, because I still believe you should honor your agreements. My honor doesn’t have a price tag attached to it. Sadly, in todays world I feel like a relic, but when I lay my head down at night my conscience is clean.
That's absurd. No one is curtailing mortgage payments because they are sick of the bailouts. They are quitting because their house is worth far less than what they owe.
If you short sale it will effect your credit for about 3 years.
If you foreclose, seven years.
It's one thing to be upside down, another to not be able to make the payment.
Don't take the lawyer's word for it. Call the bank and ask to talk to a mediator or someone in lss mitigation. It only costs you a phone call and you might get a surprise. Every lender is different.
Don't pay someone to talk to the bank for you.
Compare your payment to what rent would cost. If it's close, then maybe you want to keep the house.
loss mitigation
One problem is "surprise" change of terms on various cards. I got tricked by Chase into a deal that put a big crimp in my budgeting.
I had about $4,000 on my Chase CC at 2.99% fixed for the life of the loan, a minimum payment of 2% of the balance and no other charges. Great deal, eh? I had this deal for about 3 years.
Okay. So Chase sends me offer after offer year after year and I refuse -- until last October when the offer another fixed rate life-of-the-loan deal at 3.99%. So I bite.
What I didn't know was that use of the fixed rate offer triggered an immediate change of terms the very next month. Nothing in the promotional material mentioned these changes.
The new terms? Well, min payment is now 5% of balance, up from 2%, there's a $10/month service charge, and they refuse to apply any of my payments to paying finance charges. They simply add the finance charges back into the previous balances including the $10/month which accumulates and is at $19.97%. That's right. I'm not allowed to pay the finance charges unless I pay the entire account off. Now I'm stuck paying almost $700/month when I should be paying about $280/month. There are about 700,000 other customers this happened to.
Okay. So it sounds like whining, but I would never had taken the offer if the coming change of terms had been disclosed.
I've never missed a payment or have been late. And the other 700,000 people affected by this have similarly good credit. Ours is about 760. That's not perfect, but it's certainly not sub-prime.
The problem for Chase was that, as a group, we were too reliable -- they couldn't make any money off of us. They were stuck lending at 2.99% and had to find some way to get us off the books. So they created promotional material that in all ways resembled the previous offers. But with no mention of the coming change of terms. It was a trick -- legal, but a trick.
Now I'm grudgingly paying the $700/month instead of the expected $280 or so. I'm sure some people are going to struggle.
It's all legal, of course. Chase is claiming that use of the special offer implied acceptance of new terms -- even though nothing in the offer itself mentioned the new terms.
They can do this because apparently a previous change in terms about 1 year ago basically gave them permission to unilaterally alter some terms in the future on the condition that the card was used in the future.
Use their special offer and, wham, they immediately change the terms.
Damn, I hate them. I've always paid on time. I have good credit. I especially hate being a sucker.
And they just got $25 billion in TARP money, so I'm going to pay them twice!
Dang it! Went through all that trouble and now I realize that this is about mortgages!
Well, maybe the same thing is coming to credit cards.
I have financed two cars, a boat, a Heloc loan (currently at 3.25%) and have a money market savings account in addition to my checking. May be worth looking at. Get them to pay off the balance on your current card by moving balance to new card.
It’s all about LTV and debt service coverage. Credit history provides little more useful credit information than a magic eight ball, except insofar as such information provides insight into current debt service coverage.
It’s not the borrowers (and really not so much the loans that were made), it’s housing prices and the job market.
Houses were priced way above historic norms. A good percentage of people (regardless of FICO score) who bought homes the last 15 years were pretty much maxing themselves out financially to afford the payments. An illness, a pay-cut, or a layoff and the house goes into foreclosure.
Add that to a job market that’s been soft since the outsourcing boom started, and now growing unemployment. Hard to make the mortgage when you’re not pulling a paycheck.
Things are going to continue getting worse until the job market gains some stability and/or real-estate prices come down to fall more in line with wages. Bank losses are going to be in the trillions.
My payment was $230 two months ago and now it's $500. I only have a balance on this card and this was because of the low rate and payment.
I'm thinking of giving them the finger then after 90 days they will take 20% on the dollar and I'll pay it off with a letter from them stating they will erase this from my credit.
They're creating a monster that they won't be able to kill and people with good credit know this so good credit won't really matter much for the next few years ?
I know someone who owes $40,000 on some cards and stopped paying back in Oct 08 and the banks offered to lower his payments to $100 per month. The only problem with this is your credit gets trashed in the process.
They will take the $100 per month because they don't have to charge it off which lowers their ability to make new loans. Your $100 per month is actually an asset and counts on the books as receivables.
In a nutshell they (the FReepers) lay out the gist of the entire scenario we are seeing unravel a once sound economy. Anyone remember Hydro-shock> Both he and I saw this coming in mid 2005.
I wish all of them good luck in the coming future in regards to the crap we are trying advert.
The goobermint backed lawyer infested global Ponzi scheme for the funding (theft) of taxpayers' monies with social smokescreens with that of ACORN, Fannie/Freedie, the CRA, blind eyes to illegal immigration to hand out liar loans, etc. have now come to full light if one is honest and keen enough to the the elitist thiefs' bet. I honestly feel terrible for the sheer numbers of good honest hard working Americans now upside down with their mortgages who traded up, bought for the first time or moved due job relocation, etc., in the recent goobermint created housing bubble.
What is even more amazing is the LSM and politiicans' silence of exactly how all this is directly tied into the globally unregulated derivatives market meltdown, commodities (oil) futures price manipulation from last summer (18 mo before that too), and hedge funds melting down, many of which had goobermint employees retirement monies invested. What is even more amazing is the nod given to borrow (leverage) further investments at 30 to 80 to 1 on the collateral called liar loans.
Pretty slick how the elites put all this into place so the cream ('investment') money could be skimmed right off the top.
What is even more amazing is that the Fed Chairman and Sec. of the Treasury came from institutions that were smack dab in the middle of this con.
Dims in NC just raised taxes yesterday starting with their favorite: Sin Taxes. Still no acknowledgment of what is actually going to have to be down to stabilize the economy from the rip off and that is slash goobermint spending.
Economically speaking, things shot up quickly from 2004-1st qtr 2007, then the bubble burst. Trouble is no one thought of bring a parachute as the rocket quit working at the outer bounds of the ionosphere and we've got a long ways to fall now.
They are a necessary evil, but I have a real problem with bank executives getting paid millions of dollars in salary per year not having to face the consequences of their actions.
All of the profits they made refinancing and selling off mortgages are conveniently hidden away and now they plead poverty and receive taxpayer funds while continuing to coerce and manipulate people into high interest CC at usurious interest rates that make the mafia look good by comparison.
(confused)
5% of a $4000 balance monthly payment is $700?
Here’s another fun story. Was talking to someone about his attempts to refinance his house. Wells Fargo ( who he has his mortgage with ) kept asking him if he wanted to do everything else but that. He got to the bottom of it when they told him that their office only handles subprime loans. That was this week.
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