Gene Mundt - Let's Talk Mortgages & Real Estate!

     For many reasons, more and more often I am talking to those wishing to become home buyers that simply ... and I'll be kind ... have challenging credit histories to work with.  Whether through problems of their own making, or as a result of the housing and financing crisis, many people simply do not have credit scores that even begin to allow them to think about purchasing a home anytime soon. 

    And, if that is the case ... maybe, just maybe ... we need to start thinking about the long term ramifications of this situation for the individual ... and the country.  If credit scores are allowed to correct themselves in the current manner, we may be collectively suffering through a long and difficult time period in which fewer Americans are capable of home buying or buying anything that involves credit.  Elongating this misery for so many just doesn't seem like the intelligent or right thing to do.

    Because credit is so critical to what I do each day, the topic is obviously on my mind alot.  To that end, I recently wrote an article here on ActiveRain entitled, "FICO SCORES ... How They're Arrived At ... How They're Affected by Short-Sales, Foreclosures, & Bankruptcies".  And although I attempted to pass on some general concepts I had read and learned while searching for my own answers as to how credit scores (FICO) were equated ... I still think it is an un-exact science in application.  I've never read or seen anything that writes about this topic with full clarity or speaks of an exact method.  No one speaks of it with certainty, it's more round-a-bout. 

    We do know however, that a certain "pecking order" has become the known standard as it relates to distressed sales, foreclosures, bankruptcies, and late payments.  There seems to be an accepted order that ranges from bad to severe to hopeless.  Modifications are better than ... Short-Sales are promoted over ...  Bankruptcy is ...  Each option delivers its own depth of toll to a credit score.  Each brings its own consequences to someone's credit future.  Some actions will take longer to rectify, others more easily accomplished and in shorter time. But do not be lulled. Within the current credit structure, each is still severe. 

    So, if the numbers of those being affected by crisis is so high ... shouldn't we be DOING something that addresses this issue?  It would seem to benefit us all ... and sooner if we do so.

    Perhaps using the same theory of what got someone into their credit situation in the first place would be a good place to start with this new gauge or equation of scores.  If you lost a home or car because you lost your employment ... should that not be viewed in a kinder, gentler way than if you lost it through poor monetary management or bad investment decisions? 

    It's a known fact that certain regions of our country were (and still are) harder hit by the housing crisis and job unemployment.  Should that be a criteria that enters into the new equation also? 

    A huge number of families' credit is destroyed by catastrophic illness and the resulting medical bills.  Prior to the current housing/financial recession, some experts reported this type of issue contributing to almost 50% of the poor credit ratings.  Could this be another factor to consider?

     When I started in the business eons ago (1975), the little savings and loan I worked for had its Board of Directors determining who and who did not get home loans.  They were the standard you had to pass in order to receive your financing.  Now this chore is accomplished in a large part, technologically.  Sure, underwriters also contribute to the yes and no of receiving approval ... sort of like in the Roman Coliseum with the yay or nay of thumbs up or down ... but loan files don't even get that far unless the scores dictate so. 

    Maybe it is time that the rules ... and the methods ... are more "retro".  A combination of our modern technology .. and old-fashioned human common sense.  The problem is not going to rectify itself.  The problem will not go away on its own.  Justice and good health will not be totally restored to the public's lending and credit issues until these issues are addressed.

    Maybe the time is now?