Credit Crisis and Home Loans in America

Do we have a Credit Crisis especially on Home Loans in America?



As a Realtor, I am relatively certain that Credit is significantly tighter than it used to be a few years back. I also think I would also label it as "Crisis Level" especially for home loans!


You might be thinking or saying "Duh" or "Duh Dad" as my kids would say.


I try to read a lot of financial advisory kind of stuff, somewhat haphazardly and Internet directed (like front page of yahoo home page or misc news found on social sites like face book and twitter, often followed up by further links or googling of a topic...)  And this stuff is all over the place as far as analysis and advise, so its kind of hard sometime to really know what to think.

So I thought I will throw in my two cents... Thats why I have a blog.  

From where I am sitting, there is no doubt that there has been a significant tightening of standards on both credit score and income to debt ratios as well as appraisals.  The entire Home Loan process has gotten to be a "significant hurdle" to a Realtor's transaction going through, that would be my income we are talking about. 

Considering my recently decreased income, due to the lack of availability of "qualifiable" home buyers and the fact that for every one buyer we get we send away 10 buyers that would like to get a loan if they could, but they are too high of credit risk, too low of credit score, they might not have enough income, or enough provable and documented income, they might of been born in September when they are only loaning to people born in July...  Ok I am being a bit sarcastic and the lending institutions and banks have a right to want a better quality product, but I believe the pendulum may have swung too far.


The problem is in the past so many Americans relied on Credit Cards in down times and now in these down times, these credit card companies have gone wacko on us... They are raising interest rates at the drop of a hat for being one day late on a payment that was more than the minimum required (I know because it happened to me!).

Many of you probably know, but just in case, if you average or current balance exceeds 50% of your credit limit than you credit score gets docked at Equifax, Experian, and Trans Union and the other Credit Reporting Bureaus.  This reduced score as a result of your lower credit limits can reduce your ability to get a home loan, or make that home loan cost you more...  They get you coming or going!

Credit Card companies have been slashing peoples credit limits, many following down payments on large balances, effectively “freezing the card” and many just halving the allowable credit on customers with no balance at all.

Many speculate that Credit Tightening Crisis we are experiencing is part of the banks repositioning to ensure greater stability.  Many speculate it is a big money grab or "bank grab" by the Federal Government or the rich.  I really don't know!

I understand the goal of safe and stable but I question their overall logic. If they cause massive losses and bankruptcies who will they lend to and who will have money to save in their accounts?

The Rich I suppose! But the rich don't get service charges and fees, they don't bounce checks and they want a good return on their money, so where will the bank put their money to get this return? The Rich don't want to borrow it at the ridiculous bank rates that the bank needs to pay the Rich what they expect on a deposit account. So how will the Banks make any money?


The Banks, Credit Card Companies and the Home Loan Industry NEED the average Joe and Jill of America to pay all the loan fees, monthly account fees, overdraft fees, mortgage interest, credit card interest, etc.


My thought is with the current combined effect of personal lines of credit, credit cards being tightened simultaneously with no way for people to use their homes to refinance some of this debt, you will see a growing number of bankruptcies and further foreclosures and homes for sale or on the auction block, due to the inability for the consumer to maneuver like the banks and even our government maneuver, with credit (or a printing press).

Check out this cool site someone pointed out that shows the time line of the banks and I believe their market cap. I played with it for about 30 minutes.



http://www.nytimes.com/interactive/2009/09/12/business/financial-markets-graphic.html



Maybe the Rich may just let the Banks fail, buy up all the assets and then open up their own new banks and mortgage companies to give of us average folks home loans and credit cards and a place to have a checking account. 

Or maybe the Government will take over and instantly implement total socialism, taking over all private industry and giving us all "cushy" government jobs, with a National ID card we can use for everything from food to health care. 

Maybe you can get rich trading currencies on the Forex  http://budurl.com/ForexMBot

What do you think?




Chris Ormsbee is a Realtor and a licensed Real Estate Broker in the State of Colorado. He works for Century 21 Action Realty in Montrose Colorado. The office is located at 1245 E Main St. Montrose, CO 81401. The office number is (970) 249-7777.



Chris Ormsbee is NOT an Accountant, CPA, Lawyer, Surveyor, Structural Engineer, Political Reporter or a certified Financial Planner. He is a basically normal dude who is also trying to become a better internet marketer and actually make money selling information on the internet.



Check out other ramblings and stuff as well at:

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Real Estate Blogs:

http://www.YourCOREAdvisor.com/blog

http://montrosegoldteamblog.com/

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http://www.thedivorceworkshop.com/

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http://IdeasThoughtsWhatevers.blogspot.com/