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!
you gotta love Chase! they charged me 51% APR on a cash advance in the Philippines seven years ago and 225% APR on a cash advance in Dubai last year!
i dumped my policies with Farmers Insurance after 20 years when they sent out a notice saying i was not getting their best rates because i didn’t have the best FICO scores (high 700s wasn’t good enough). so i ask the Farmers broker who gets their best rates? he says “don’t feel bad the car dealer in town worth $10 million doesn’t get the best rates either. it’s kids right out of college”!!!!!!!!
Get their cash reserves up to required levels from the 30-1 or worse leverage they were using.
Get cash flow from somewhere--anywhere--to replace the easy money (no longer available) of issuing liar's loans on (overpriced, but appreciating on paper) real estate, and selling the loans to institutional suckers.
Get some liquidity so that they will trust one another enough to resume interbank lending.
Desperately find new ways of getting credit card income now that Congress has approved the rules which will forbid them from unilaterally changing rates on existing customers (universal default and the like). They are going after the high-FICO users because "that's where the money is."
I am pissed off because I relocated back to Minneapolis for a new company (they paid for the move). But the housing bubble meant I paid for an ordinary house in a decent neighborhood what would have got me a certified McMansion when I had left Minneapolis before the housing bubble; or well over 25% down on the house I did buy. Instead, I am gunwales awash on equity, despite crimping for years to get ahead of the credit card waving crowd. And now *they're* getting bailouts...
Banks are necessary, but they have become infested with verminous parasites, of a totally different kind than the Obama supporters who say "Now I won't have to pay my mortgage or pay for my gas."
And yes, the outsourcing boom, coupled with wage stagnation, has not helped either.
The only hope is melanin implants and going into the construction business. /sarc>
Are you effin crazy? If Chase really misrepresented this loan to you then you should be complaining to your state Attorney General office of consumer affairs. To your congressman. To your Senator. No way would I pay what you are paying
You are not complaining to the right people
Are you effin crazy? If Chase really misrepresented this loan to you then you should be complaining to your state Attorney General office of consumer affairs. To your congressman. To your Senator. No way would I pay what you are paying
You are not complaining to the right people
Cheers!
Call up Barney Franks office.... I am serious
When you subsidize stupidity you get more of it. Why not default if the will be carried by some other moron (ie you & me).
Here's the other thing - some high FICO's see their homes upside down and know if they default now it won't be seen in the same light as if they had done it a few years ago.
Also those of us left paying our mortgages will be stuck paying all the property taxes as the "base" keeps shrinking due to foreclosures. Might be a good time to rent.
One problem is that I can't produce the original marketing material. It's been shredded.
I did contact a law firm. They already knew all about what happened. Their trouble is getting copies of the original marketing material.
I suspect that this will drag on for years and years.
Still, what they did was probably legal. At some point in the past, they modified their agreement with me to allow them to change certain terms at will. To avoid the modified agreement allowing them the unilateral power to change certain terms, I would have had to write a letter to them opting-out.
I don't remember ever getting the notice in the mail. I only used the card to carry the %2.99 balance. I never used it for anything else.
Bottom line is that, technically, when they sent me the check, we were operating under a new agreement that may have given them the power to do exactly what they did.
The problem, of course, is how does one interpret the promise of a %3.99 for life of the loan offer? Does the new $10/month finance charge for use of the card conflict with the promise of the low rate? And the change in allocation of payments increases the effective overall rate, too.
It seems to me that the promise of a fixed %3.99 rate should trump previous agreements. Any change in terms after the use of the check that affect the effective rate of the loan should be prohibited.
We'll see. I suspect there will be a settlement -- in 2016 or so.
But even if what they did was technically legal, it really was deceptive, IMO.
5% of a $4000 balance monthly payment is $700?
Oh, no. The total balance went to about $14000 after accepting their %3.99 offer. There was a previous balance at %2.99.
My payment on the new balance was about $260 before the changes came in January. After the changes, it jumped to nearly $700.
Thing is, I never would have taken the offer if the coming changes in terms had been made know to me. But in this environment, 3.99% at a 2% payback seemed great.
I guess if something is too good to be true, it probably is.
But the thing is, I've had the 2.99% balance for years and no changes. I think my expectation that the new offer would function like the old offer was reasonable.
Forget law firms and what was shredded
I would contact your state’s department of consumer affairs. Usually it’s in the Attorney General’s office. Call any Rep in your state that is on a banking committee. Call yr Senator
Folks who go for sight-seeing tours of red-light districts eventually end up inside the establishments, pants down and pockets picked.
We have excellent credit, and as of today, job stability with excellent income to ratio. We have never been late with a payment, and in fact because of the way my husband is paid we make weekly payments. We were told that because of our decrease in home value, we would be required, by federal law, to pay PMI to the tune of $90.00 a month.
In principle I refused, even though the drop in interest rate would probably work out about the same.
The only "loan product" we could get that did not include the PMI was a in house mortgage (they don't have the Federal government PMI mandate) that would require us to take out $10,000 in "new money". We don't want more money!
It is counter intuitive that the Federal government would penalize the people with excellent credit, yet apparently bend over backwards to bail out those that stop making their payments on time, or paying them at all.
Again, for us, this is not a do or die situation, but it is the principle of the whole government take over!
If people who made bad business decisions are going to be bailed out with _my money_ because of corrupt deals with government officials, why should I play by the rules? Why should I keep paying my debts or bother to pay my taxes? Why not cheat like heck?
Wait until after April 15th when the government finds out tax revenues are down billions, millions haven't filed and refunds are up billions and billions.
IT's bad alright. You called it early RSmith
Check out my new tagline...
Soon your word may be the only thinkg you have left. (Not saying you particular but you as in all of us).
When that stage hits, people who honor their word will be in a better position than those that don't and the two will be known, at least on a local level.
Point taken. You and I and others who “play by the rules” seem to be the ones who are being punished. The only thing I take issue with is your statement about bailing out the homeowners. Let me be clear; I am totally against any form of bailout for the homeowners or the banks. But, since we now have the bailout, my limited experience with people who are being foreclosed on is they don’t get any help. The banks are simply hoarding the money.Why am I not surprised? We have people calling the shots that don’t have a clue. Or maybe they do, and that is even more scary. JMHO
ping
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