San Diego Housing Bubble News and Analysis

Hi folks,

I was bored and wrote this tongue and cheek "Loan Modification Request for the Quality Borrower". I hope you enjoy the light reading. Perhaps, some of you can help me edit it to make it sound more professional, and I'll actually send it to a bank like Citibank :)

Enjoy.

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10/31/2008

Dear Citibank,

Due to the unprecedented events surrounding the global financial markets, I am writing to express my
sympathy for fine institutions, such as Citibank, which are struggling to meet ends meet.

Who would have predicted that both sub-prime and ALT-A borrowers would not be capable of paying back 100% financed mortgages, option-arm mortgages, or 1st, 2nd, Heloced loans taken out on the same property?

Who would have had the insight 4 years ago the home values in the United states were overly inflated,
and appreciation of home prices in the United States would not continue indefinitely?

As you have brought to my attention, through numerous press releases, disappointing earnings announcements, and your participation in Congressional
testimonies begging the Federal Reserve for additional funds, I understand the tremendous financial strain you are going though to make end's meet.

*Citibank is in the mist of dealing with a very low quality loan portfolio, which is considerably draining citibank's assets.

*The unprecedented amount credit card defaults and late payments and personal bankruptcy filings is adding considerably more pressure to your profitability (or lack thereof) and affecting your solvency.

* This problem appears it will only get worse, as the economy heads into a recession... where countless americans, who have already lost millions in their 401k retirement net worth, begin losing their jobs.
Getting "junk" borrowers (who had difficulty paying loans in a good economic climate) to pay for loans during difficult economic times will be nearly impossible.

*Obtaining new high quality/credit worthy borrowers (such as myself), from which you need to turnaround to profitability and/or maintain solvency, is becoming increasingly more difficult.. Simply put, "high quality" borrowers are sitting on the sideline, postponing all unnecessary home/auto/discretionary purchases...These prudent people see the economic storm over the next decade, and realize that there is no hurry to make unnecessary purchases right now.

I understand the tremendous pressure Citibank is undergoing to meet ends meet... And I want to help you out, so you are not a "victim" of this unprecedented financial events that have claimed the existence of other fine institutions such as Washingtion Mutual, Indy Mac,etc.

I represent the few select high quality/top tier/"responsible" borrowers
that Citibank needs on your loan portfolio to shore up your business and maintain solvency.

Unlike most of your current loan portfolio borrower(s) (whom I'll collectively refer to as "junk borrowers"), I am well capitalized and fiscally conservative (I don't spend more than I make).
I have no outstanding unsecured (credit card) debt. All my vehicles are purchased in full. And despite having an outstanding 30 year fixed loan on a primary home I purchased in 2004, I have more than sufficient funds to pay off the outstanding balance of that loan from XXX.

You need people like me in your loan portfolio, so your overall portfolio looks "decent". You need "quality borrowers" like me to offset additional losses you will most definitely incur from your "junk borrowers", as the health of the U.S.
economy will steadily deteriorate over the next decade.

This is where we can mutually benefit each other... As it currently stands, I have no motivation to "refinance" my 30 year fixed loan through traditional means that while yield an existing market rate for the 30 year fixed loan. My refinanced loan interest rate would be considerably higher than my current 30year fixed loan: 5.5%. Furthermore, as I previously stated, I have no need to refinance. Unlike most of your "junk borrowers", I can actually make the loan payments or pay off the outstanding loan balance completely. Frankly, I am pretty happy to remain
a XXX "quality" borrower, as they have thrown in ample perks to keep my business.

However, i would particularly be interested if Citibank would offer a 4.5% 30 year fixed rate loan with no pre-payment penalty on my outstanding mortgage balance. Obviously, this would benefit me, since over the life of the loan, I would be able to save more, and invest more, earn more, and ultimately, borrow more from Citibank. It also mutually benefits Citibank, as having me as one of your "quality borrowers", it will strengthen your loan portfolio, both in the short term, and in the long term...You can count on my ability pay you for the money I borrow, offsetting some of the losses you are expected to incur from your existing "junk" borrowers.

I understand you might be hesitant with such an unprecedented arrangement. You might be thinking, "what would prevent you from defaulting on my obligation"?

Some key differences between your "junk borrowers" and me is
1) Currently, my outstanding loan to assessed value ratio is approximately 60%, and the property is in Carmel Valley (San Diego, CA 92130), versus heavily depreciated areas such as Temecula, Murrieta, Riverside, Modesto, Sacramento,etc.

2) There are no second or third or HELOCs on this property.

3) My annual household income is XXX (to be filled in)

4) My outstanding loan balance is payable in full from assets in short term cash equivalent instruments.

My ability to meet my financial obligation to Citibank is exponentially greater than any "junk" borrowers you are planning to extend loan modifications to. You may be tempted to make a loan modification on one of your existing "junk" borrowers, but consider the following. If a "junk" borrower was already having financial difficultly in meeting existing financial obligations when the U.S. economy was good, how are "junk" borrowers going to be meet their obligations to Citibank when confronted with additional financial strains now occuring (401k retirement account dessimation, unemployment, etc)? Why would you want to throw additional good money provided by the Federal Reserve at "junk" borrowers only to have to revisit the same problem again 1-2 year later, when the same "poor-quality" borrower will ask for your assistance again? Isn't it much more intuitive to throw the same good money provided by the Federal Reserve to "high quality borrowers" like me, so you can shore up your loan portfolio and balance sheet?

I'm glad you share with me the most prudent choice of action! As you can see, my proposed arrangement between Citibank and I is a "win-win" situation for both of us. I hope you can see the superiority of my proposed arrangement between us.

Please consider my proposal. While I am not in a hurry for your decision, I must inform you that I am also working with your peer institutions, and I don't expect such a good "win-win" deal to last.

Thank you for your consideration.

Sincerely,
FLU...