Household HSBC Watch

Adjustable rates will reset this summer and fall. The timing reflects the height of subprime lending in the summers of 2005 and 2006, when many borrowers secured loans scheduled to adjust in two or three years. For many, an adjustment means their interest rate will go up two to three percentage points. HSBC and others slammed on the brakes - although a little too late - in early 2007. Many of these bad loans will reset soon, and resulting foreclosures will hit the market in early 2009. The tragic part of the story is that most of the loans in questions were not loans to buy new homes. In fact they were refinances, claiming to unlock untold wealth and riches. The loans unlocked Pandora’s Box instead.

Are these cash strapped borrwers happy? Obviously not, and they are facing record high gasoline prices, high food prices, extremely high energy prices this winter, and they cannot find part-time jobs. After high school graduation the United States typically sees addtional employment for graduates and students hiring into summer jobs. This year the US saw over 130,000 job losses during May and June.

There is a little glimmer for those with HSBC loans. Unsecured loans and those HFC and Beneficial Finance home equity loans that are still active seem to have their problems too. Changing due dates, daily interest, late application of payments — these all add up to a “pay for performance” company that does not have your best interests in mind. We shall see how well HSBC Finance does in the Hope Now program. Early reports from mortgage holders do not look good. In one case HSBC lost $30,000 more than they could have if they had approved a short sale. In another case HSBC lost the customer’s contracts. In yet another, HSBC got testy and argued with a HUD representative, and never helped the customer. My point is this — don’t take it personally if HSBC will not help with your ARM reset, since they don’t seem to help other customers either.