Ally Financial has finally decided that in the current financial crisis, making a quick buck is less important than doing right by its customers, its investors, and the country as a whole. I’m referring of course to their newest announcement – they’re willing to lower the principal on mortgages deemed “likely to default” to 85% of the home’s value.
Now, this in itself isn’t any big deal. The terms of the national mortgage settlement state that lenders must shoot for a 120% loan to value ratio for any principal reductions, but Ally and Bank of America have decided to go a little further and go as low as 85%.
They’re happy with themselves for a few interesting reasons:
– they’ve got the lowest penalties in the settlement (about $100 million)
– they’ve modified a lot of loans already
– they’re still hoping to ride the storm
Well, that last one wasn’t in the press release but many of the biggest banks have decided they’d better at least appear like concerned citizens at this point. There are definitely still deals going on behind closed doors but it’s in most banks’ best interests to stick to the straight and narrow.
I’m sure we’ll see some more announcements like this in the coming weeks as everyone tries to look like they’ve learned the error of their ways. But it’s sadly just a matter of time till the next scandal hits.