Homeowner Unemployment Assist Program – Is It Fair or a Moral Hazard?
Posted on | March 3, 2009 | 7 Comments
Today CitiMortgage announced a plan to assist unemployed borrowers who are behind on their mortgage payments. The Homeowner Unemployment Assist Program is expected to help “thousands” avoid foreclosure in the next two years. The plan will allow those who are unemployed to pay reduced mortgage payments for three months while they seek employment. The average required payments for these mortgages is approximately $500 a month. Is this going to cause a moral hazard for those who are unemployed? Will those who have worked hard have to pay for this three months of laziness?
Borrowers who have mortgages with CitiMortgage and meet certain criteria will be eligible for the Homeowner Unemployment Assist Program. If the borrower finds employment during the three month period, they have the opportunity to resume their normal payments or apply, and likely get approved, for a mortgage modification.
If the borrower is not employed within three months, Citi plans to work with each client on a case by case basis in an attempt to help them avoid foreclosure. Citi is also working on a plan to assist those who are in the early stages of deliquency.
The program is designed to keep the unemployed in their homes and assist them in avoiding foreclosure. There is no doubt that this is a problem in America, but there may be a larger moral hazard issue at hand. If an individual is unemployed and has a $1500 a month mortgage payment, they will save $1000 by NOT getting a job. While many of you think this would “never happen;” think again! We all know people who will work the system for three months and just happen to find a job when their mortgage payment returns to normal.
Another issue at hand is who is going to fund this process? We know that the government owns a large stake in Citigroup so who are the lucky ones that get to pay for the financially irresponsible. You got it! Us! If you have paid your mortgage on time and been smart with your money, you will help pay your irresponsible neighbor’s mortgage. The current administration continues to punish those who have been fiscally responsible. Anyone with a financial background at all knows how this will end up. Good luck with that Washington!
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7 Responses to “Homeowner Unemployment Assist Program – Is It Fair or a Moral Hazard?”
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March 3rd, 2009 @ 6:33 pm
I wouldn’t be worried about folks trying to abuse this too much. For starters, $3000 amortized over the life of a mortgage works out to the homeowner paying a LOT more over the long term.
If someone is paying $1500/month for their home right now, I suspect they have a lot of other expenses to maintain that would keep them looking for more employment, rather than just sitting and enjoying their $1000 per month of “savings” with this program.
March 4th, 2009 @ 1:25 pm
It is disappointing to read terms such as ‘laziness’ used to describe people who are unemployed or to suggest that people in this situation are in it as a result of poor planning. That is an irresponsible, niave, and downright ignorant perspective.
After a period of prolonged unemployment and jobs drying up, even the most dilligent person who HAS saved, and HAS been responsible may fall on difficult financial times even with all the ‘right’ steps taken.
There are so many workers who would be more than happy to work, but there simply aren’t the jobs out there.
Savings have been depleted in efforts to meet bills, emergency funds have dried up, stocks, investments, 401-Ks – POOF – gone!
Ignorant.
March 4th, 2009 @ 1:40 pm
I am glad there is something out there. I have been looking for a job for 4 months and I truly believe because of my age (60) they are not hiring me. I have all that I need for the jobs I am applying for. I am not one that has a big mortgage. I am not one that borrowed against
my house. This will help greatly. I am not lazy and I just want a job.
March 4th, 2009 @ 5:41 pm
The “moral hazard” and the “slippery slope” are luxuries of contemplation that those supposed “lazy” workers can ill afford. They are perhaps too busy trying to find a job in an economy where nearly every business in every field is contracting or standing still. The waters are high and people are drowning, and whether it violates ones delicate moral sensibilities, or not-we must move in anyway possible to throw people a lifeline.
Furthermore, this is an endeavor by Citi-Bank, not the Federal Government, and perhaps Citi is unconcerned about moralistic foibles, and more focused on the fact that a slight temporary reduction in the value of a mortgage payment makes a great deal more sense then allowing a house to slip into default when it comes to their bottom line. The Hoover-esque, “Let them eat cake” brigade rarely takes time to contemplate the much higher cost of inaction, not to mention the tepid security of living a life on a wobbly pedestal when the winds of recession are blowing.
March 4th, 2009 @ 6:19 pm
Like Susan, I am having a difficult time finding a job because of my age (61). After 32 years of loyal and dedicated HARD work, I was laid off from my job. I applaus this company for being pro active in assisting these people in staying in their homes. Not every borrower purchased a creative interest loan but many are losing their jobs and people IT AIN’T GETTING ANY BETTER. Hold your stones as you may be a paycheck away from walking in their shoes. Three months of lower payments isn’t worth not finding a job for IF it is even possible to find a job in three months. Any job that can be found will be at a lower rate of pay..you all know supply and demand and if there is a surplus of qualified workers companies will offer less for the position. It is already happening. You try going from 42K a year to 28K and stretch your budget.
March 10th, 2009 @ 7:28 am
Am after a loan but am very sceptical these days, there are a lot of sharks out there, can you point me to an article that explains all the different types of loans please? Thank you
May 25th, 2009 @ 11:26 pm
Subprime Blogger / Homeowner Unemployment Assist Program – Is It Fair or a Moral Hazard?…
Today CitiMortgage announced a plan to assist unemployed borrowers who are behind on their mortgage payments. The Homeowner Unemployment Assist Program is expected to help “thousands” avoid foreclosure in the next two years. The plan will allow t…