The Mortgage Crisis: A Way Out
Up until now there has been no silver bullet for the continuing economic crisis brought on by the mishandling of mortgages's by the banking industry. In the good old days, banks used one simple rule to qualify people for a mortgage and that was you could only qualify for a house based on 25% of your gross income. There were no sub-prime or Adjusted Rate Mortgages nor were there the selling of mortgages to mortgage brokers. There was just that tried and true rule that worked for years. Only when the banks tried to improve on what already worked by realizing that more money could be made quicker, and easier by changing the rules, adopting new regulations and enticing more people into mortgages that they couldn't really afford. that we ended up in this economic crisis.
The banking industry is continuing to thwart economic recovery. All the while they are still managing to garnish and hoard vast amount of wealth. The President's stimulus and the initial bail-out has had no real impact on current economic conditions. Worse still the United States is not helping the rest of the worlds economies with our prolonged indecision of implementing reforms that would stimulate our own economic recovery. Only when the United States gets a handle on this runaway economic downturn will the rest of the world begin to recover as well. The European economic crisis is an extension of our own.
One of the greatest hindrances in stimulating economic recovery especially solving the mortgage crisis is individual credit scores.The criteria for loans today are based solely upon credit scores. Trans union, Experian and Equifax are the main reporting agencies that determine a persons or business credit worthiness. In other words the numerical score given is the basis for the amount they can receive and the interest they are charged for the use of these funds. The higher the score the lower interest they are charged and the greater the amount of the initial loan they can have. The problem today is that qualifying credit scores are so unreasonable for the majority of the population now.
A vast majority of people today are faced with their credit scores diminishing through no fault of their own. Lay-offs, becoming ill, or even reduced incomes are all factors when faced with keeping up with the ever increasing cost of living. Credit scores have been reduced by over 150 points for just one late payment or missed payment on only one bill; so, when it comes time to say refinance, purchase , or have a line of credit on one's home or to buy a used or new car the banks are now turning these people down because of their credit score. This does nothing to spur economic recovery.
Credit scores should not be used as the sole determination when it comes time to apply for any loan. Credit worthiness should be based on merit, ones current equity in their home, references, character and length of home ownership. Think of the movie "It's A Wonderful Life" where George Bailey goes to bat sort of speaking for all the John Does of the world in supporting their right to live in decent housing by having a home of their own. Where greed and total disregard for all those John Does by Potters of the world, the Banks and financial institutions, continue to reap even greater monetary gains by sanctioning more foreclosures. .
The Banking and finance community has to realize that the best way to immediately have an impact on economic recovery is to lessen the criteria on peoples credit scores so more people will be able to purchase necessary items, stave off foreclosure and in general stimulate economic growth. Only in this way will the United States lead the world toward a better future. Ushering in National Economic Reform is vital in achieving the economic stability and growth in insuring that the financial institutions comply with new set guidelines for credit scores.