Here is some more information. Yes, it simply was a letter and it is stated their loan’s interest would be reduced from 5.7x to 4.xx. All other parts of their original contract remains the same. It is simply an interest rate cut.
They did not call the number provided on the letter, but called the number they had for their bank and couldn’t get much information. Yesterday, they went down to a branch office and spoke to someone at the bank who told them that yes, this is legit, their interest rate is being cut and it will be in effect not this next payment, but the following. Nothing to sign! When asked why this is happening, he stated the bank received loans from the government and they have to use some of the monies for this purpose.
The person really didn’t have much else to offer after an hour of discussions and my friends are still confused. They said that they didn’t want this reduction as they are fearful of recourse (they also subscribe to the ‘no free lunch’ mentality mentioned above) and want things to ‘stay the way they are’. The bank gentleman didn’t know what to do and referred them to the number on the letter.
They are seeing a RE lawyer this week for advice.
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I agree this whole thing makes no logical sense, but on the other hand, nothing in this industry over the last 3 months DOES make logical sense. For all I know, perhaps receiving the loans from the government has conditions that banks ‘help homeowners stay in their homes’, but didn’t specify any criteria. Perhaps reducing a loan 1% or so on a good standing customer meets that requirement and will keep that revenue stream open, whereas reducing it on someone who is underwater on two loans who will lose the place regardless only gives the bank the useless asset they’ll get anyway.
Or perhaps the banks are rewarding those who took out fixed loans they could afford.
