Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 105

CITIGROUP INC.-HOME FINANCING
www.citigroup.com Facts:
• 1812: Founded in New York City
• 1914: Opened first international branch, in Argentina
• 1998: Merged with Travelers Insurance Group
• 2008: Lost $27.7 billion Took funds from government during financial crisis
• 2010: Revenue estimated to fall 40% compared to 2007
Citigroup Inc. (Citi) provides various banking, lending, insurance, and investment services to individual and corporate customers worldwide. It operates more than 7200 branches and 7000 ATMs. Citi had more than $150 billion in credit-card loans outstanding in 2010 in addition to huge volumes of home loans and business loans.
The financial crisis of 2008-10 created very serious problems for Citigroup. To illustrate the nature of some of the problems, we use the example of one family: Tom and Marie Duston purchased their first home in 2008 when home loans were still very easy to get. They bought a beautiful new 4-bedroom, -bath home with a down payment of only $8500.
The Dustons did not have the funds needed, so they asked about refinancing the loan balance of $306,500. At first, the bank wanted them to pay off the loan, but it finally agreed to try to work to refinance it. The Dustons felt trapped! It was difficult to understand that they were underwater by 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 home owners current on their mortgage payments, the bank agreed to refinance $285,000 on the home on a 30-year fixed mortgage at
The difference between the debt of $306,500 and $285,000 was essentially forgiven due to the government program. Find the new home payment not including taxes and insurance.