http://www.mainstreet.com/article/real-estate/banks-are-making-it-easier-get-mortgage?puc=yahoo&cm_ven=YAHOO
According to this article, banks are loosing their "credit spigots" making it much easier for individuals to get mortgages during this economic recovery. The article talks specifically about Wells Fargo and how they require mortgage applicants to make a 5% down payment, and this payment can be from someone else if the applicant cannot afford it themselves. The bank also announced that they will be lowering the required FICO score for applicants. This is interesting because I wonder if it could start another issue like we had before the recession.
The article continues on to talk about how some individuals are skeptical of banks lowering their requirements because they feel as though it could send us back into a similar situation as we were in before the recession. However, analysts do not seem as worried because they feel as though it is a part of the business cycle and it needs to happen in order for the country to continue recovering.
This sounds dangerous to me! From what we've learned in class, eased standards of home ownership is what led to the collapse of the housing market in the first place. While the credit system is cumbersome and can be frustrating, I think it worked well and definitely needs to be maintained.
ReplyDeleteI agree with the comment above about this being dangerous. If investments banks are allowing clients to get a mortgage with less strict restrictions, more people are surely to get loans. Out of these people getting loans many will default because the client will be unable to fulfill their contract with the banks. This means the banks lose money and usually end up obtaining all the clients assets for compensation. This leaves people homeless and banks less rich meaning everyone loses.
ReplyDeleteNow that the economy has recovered and is continuing to move in a positive direction we are seeing expansionary policies both politically and privately. We should continue to be weary of our mistakes in the past, however, the housing market is on its way and this policy is not too dangerous (5% money down is nothing compared to 50 years ago but more than the 0% that we were seeing before the crash).
ReplyDeleteI honestly don't think people will go for it, its just a way for banks like Wells Fargo to make some extra money. Also because of what happened in the last recession, i think people have become more aware of what could actually happen to them if things don't go well.
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