1812: Founded in New York City . 1914: Opened first international branch in Argentina 2008: Lost $27.7 billion; Took funds from government during financial crisis 2010: First annual profit since 2007 Citigroup Inc, Citi provides various hanking, lending, insurance, and investment services to individual and corporate customers worldwide. It operates more than 7200 branches and 70XXO ATMs. Chi had more than ISO billion in credit card is atstanding in 2010 in addition to huge volumes of home loans and business luns The financial crisis of 2008-10 created very serious problems for Citigroup. To illustrate the mature of some of the problems, we use the example of one Family: Tom and Marie Duston purchased their first bome in 2008 when h e has were still very easy to get. They bought a beautiful 4-bedroom, 2-bath home with a down payment of only $8500 1. They financed the loan balance of S306,500 using an adjustable rate motage (ARM). The monthly payment of ST 100 did not include taxes and insurance. In fact, the monthly pyment was all interest meaning that nothing was applied against the debt each month Find the monthly payment given taxes of S6400 per year and insurance of 5980 per year. 2. At the time of the purchase in 2008, the Devians were told that the interest on their ARM loan would reset in 2011. so they know the payments might increase. However, they were not worried since they assumed that their incomes and also the value of the house would be higher by then. But home prices fell across much of the country as did the value of their home. By 2011, an appraiser estimated that it was worth only 75% of the c anal loan balance of 16,50), which they still cwed. They were underwater on their home! Find out what the house was worth in 2011 and the amount by which they were underwater 3. 3. The Dustons were shocked to find out that they would have to come up with 576,625 to pay of the bank kan o sell their home. They were further shocked to find out they would also need to come up with additional S o y Yus expenses, such as the real estate commission related to the sale of their home. Estimate the total amount they would have to pay to sell their home. Tunded to the neuesthousand 4. 4. The Dustos did not have the funds needed. so they asked whout refinancing the loan bal ance of $30.500. At first, the bank wanted them to pay off the loan, but it finally agreed to try to work to refinance it. The Dustions folt trapped! It was difficult to understand that they were underwerby so much given that they had made every payment on time for 3 years With the help of a government program designed to help underwater homeowners current on their mortgage payments, the bankared to refinance $285. I on the home on a 10- year fised mortage 5%. The difference between the debt of 5.306.500 and $285.OKI was essentially forgiven due to the government program. Find the new home payment met including taxes and insurance CHAPTER 12 Case 3. So the Dustos' monthly payment, not including taxes and insurance, increased from SI 100 per month up to the figure found for 4 abwe. Find the increase in the monthly payment. 1812: Founded in New York City . 1914: Opened first international branch in Argentina 2008: Lost $27.7 billion; Took funds from government during financial crisis 2010: First annual profit since 2007 Citigroup Inc, Citi provides various hanking, lending, insurance, and investment services to individual and corporate customers worldwide. It operates more than 7200 branches and 70XXO ATMs. Chi had more than ISO billion in credit card is atstanding in 2010 in addition to huge volumes of home loans and business luns The financial crisis of 2008-10 created very serious problems for Citigroup. To illustrate the mature of some of the problems, we use the example of one Family: Tom and Marie Duston purchased their first bome in 2008 when h e has were still very easy to get. They bought a beautiful 4-bedroom, 2-bath home with a down payment of only $8500 1. They financed the loan balance of S306,500 using an adjustable rate motage (ARM). The monthly payment of ST 100 did not include taxes and insurance. In fact, the monthly pyment was all interest meaning that nothing was applied against the debt each month Find the monthly payment given taxes of S6400 per year and insurance of 5980 per year. 2. At the time of the purchase in 2008, the Devians were told that the interest on their ARM loan would reset in 2011. so they know the payments might increase. However, they were not worried since they assumed that their incomes and also the value of the house would be higher by then. But home prices fell across much of the country as did the value of their home. By 2011, an appraiser estimated that it was worth only 75% of the c anal loan balance of 16,50), which they still cwed. They were underwater on their home! Find out what the house was worth in 2011 and the amount by which they were underwater 3. 3. The Dustons were shocked to find out that they would have to come up with 576,625 to pay of the bank kan o sell their home. They were further shocked to find out they would also need to come up with additional S o y Yus expenses, such as the real estate commission related to the sale of their home. Estimate the total amount they would have to pay to sell their home. Tunded to the neuesthousand 4. 4. The Dustos did not have the funds needed. so they asked whout refinancing the loan bal ance of $30.500. At first, the bank wanted them to pay off the loan, but it finally agreed to try to work to refinance it. The Dustions folt trapped! It was difficult to understand that they were underwerby so much given that they had made every payment on time for 3 years With the help of a government program designed to help underwater homeowners current on their mortgage payments, the bankared to refinance $285. I on the home on a 10- year fised mortage 5%. The difference between the debt of 5.306.500 and $285.OKI was essentially forgiven due to the government program. Find the new home payment met including taxes and insurance CHAPTER 12 Case 3. So the Dustos' monthly payment, not including taxes and insurance, increased from SI 100 per month up to the figure found for 4 abwe. Find the increase in the monthly payment