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Much so Citi has an innovative fix the housing crisis the lender is launching a program which distressed homeowners are able to -- -- their homes.
If they signed over the deed to the banks Sonji DOS is that the CEO Citi mortgage and he joins us now.
To explain this really interesting solution -- right out of the gate I can see a lot of pros and -- there's obviously some moral hazards involved.
But this tiny -- people in their homes side on the price per month it must be significantly below what the payment was have been yet cents.
Yes it is.
And so what they do is we actually.
Take those -- -- -- there we would have normally foreclosed on.
It's basically shows that -- -- really have no ability to pay.
But their mortgage and stay in their home so the only alternative -- stupid as to foreclose on them if you went about it that traditional way.
By or renting it to them what we do is to figure out what the comparable rents are just -- for obvious gap the final of the comfortable -- -- -- because you avoid paying.
Insurance to avoid paying taxes -- would paying.
The mortgages it substantially Miller.
Than what a mortgage payment would be and it keeps people in the same homes families in this in neighborhoods and keeps prices than that -- Now how do you vet the ideal struggling.
Mortgage holder in this situation because it's easy to -- point to game the system.
Hello vote every system is.
Can begin and this in a sense of that test.
And you know what we thought was we would do everything possible to give consumers another choice.
To be able to keep their homes.
But -- -- -- in -- -- is nice people because right it's so easy to note these programs are out there.
My -- -- even bother paying my mortgage anyway because you're right I just get off the hook for the principal at this point.
And that's a fair point the moral hazard has been an issue in this crisis -- from the very beginning including if you remember when they started modifying people's payments how would you know that people wouldn't.
That would knock knock -- so they could get it lower settlement rate but actually I think what has it is over -- -- -- that the extent of moral hazard is not quite as bad as imagined.
And their kids the kids -- you look for.
Real situations of hardships imagine people being in foreclosure it's not a pleasant situation for anyone to get -- -- notice this and -- banks.
And -- -- -- talking -- people who.
Don't make -- -- it'll -- people who can't make twelve -- Why isn't better better deal for you -- -- for your shareholders because why would you want to own house fact -- that I'm gonna -- -- -- -- you have the mortgage bank and why why is this a better deal for you and your shareholders financially.
Well -- -- is non.
It's not a call a financially good situation either for the border or for us it's had for Russia -- -- to -- -- people I think most people don't understand that.
Aren't banks though just making a ton of money selling mortgages right now if you look at the interest -- on mortgages.
-- the spread on what you're getting to sell those loans as they become bundled as part of the mortgage backed securities.
From what I understand that spreads pretty close to historic -- so you're making quite a profit quite a nice to talk that -- why couldn't she just like lower the initial mortgage rate.
And save -- words at the onset.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- The rates are at an all time -- spreads are high.
But the cost of originating alone is also very very high -- mean literally doubling the number of people that we have.
Providing loans to people and I think that's healthy.
So could it -- -- Not making any more money on mortgages because of these higher restrictions because of demands on having to buy back these mortgages if they -- go bad.
Million and not know enough and I think that -- you think about the amount it in the way.
It allows us to subsidize what you're doing by keeping people in their homes.
And I think we -- able to get get by.
And and do stuff -- -- It varied interest to follow this program and see how works out I know Bank of America is doing something similar and this is this is a solution a lot of above looked at to begin sings -- spurts out I hope you'll come back -- give us an update the forward to adding -- your business -- Think that's in his --
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