Forums | MacLife

It destroys it for about ten years.

Yeah, the problem is in the way the system is set up. The credit reporting system isn't really designed to determine true creditworthiness, or the overall state of one's financial situation - but that's what it has become. If you don't take on debt, but have assets and income, you get a low score. If you have low income and assets and high debt, but make all your payments on time (even if it is the minimum which guarantees you'll remain in debt forever), you get a high score.

Soon however, financial services won't be able to discriminate based on credit score. After this latest meltdown, too many people will have some bad marks on their reports. If they insist on serving only those with high credit scores, they'll be cutting their potential market considerably.

"jingle mail"


This is why lenders used to want 20% or more as a down payment...less chance a property "goes under water": when a home's value is less than the outstanding debt.

Also careless of the lenders because mortgages are non-recourse.  All the lender can claw back is the property itself, not assets with total value equal to the loan.  I.e. if a home is valued at 80k and the loan is for 100k, non-recourse means the lender can't legally demand another 20k.

History of late payments are a warning that the person is already in over their head.

That's why they are seen as bad.

What was really bad, at Crow Canyon Country Club - a woman's husband died.
She was well off, they were rich, but all the finances were handled by him. She never had a credit card of her own.

Her 20 year old son was able to get all kinds of credit cards but she kept being rejected because she was late 40s with no history of her own, even though she owned a house and was loaded.

Graphic Autist wrote:

That poor lady...all loaded with a huge house, but no credit card. The horror!

It shows how pathetic the system is.

btw - try renting a car or hotel room without a credit card. Many places don't except debit because they can't an auth for security.

user wrote:

Surely she could have gotten an American Express card.

Or her bank.  I can't imagine the bank where she has her actual money turning her down.  Maybe a clueless CSR just reading what's on the screen, but an actual bank manager should have some leeway for these situations.

Pariah wrote:

Ribtorus wrote:

ShnickyShnack wrote:

From what I've heard, the banks simply don't have the resources to negotiate with individuals who are struggling to meet mortgage payments; it's easier for them to just say no to all requests for renegotiation, and go into foreclosure.

I find the whole foreclosure thing to be baffling ... just walking away from a home and all that. Wouldn't it destroy your credit rating?

It's hardly in the interest of the credit economy to seriously deny credit for too long.

You would think that but..
In my role as a printing press operator I have printed the confidential, internal worksheets banks use to score someone for a loan. Basically the way banks think is that 2 or 3 late pays are every single bit as bad as defaulting on a loan or declaring bankruptcy. For the most part you either have good credit or bad with practically no in between.

That's an internal conflict within a bank's departments between those whose job is to market loans, and those who collect on them.

I was listening to NPR this morning, and they had a report on homes in South Florida that were built with toxic drywall from China. One homeowner asked his bank for forbearance on payments, since he was having to rent an apartment as well. They refused.

In that case, if I were him, I would tell the bank to come get the keys. If they want to be hardball smurfs, be a hardball smurf back. Let the bank deal with the builder over the drywall issue, and then trying selling it afterwards. I have zero sympathy for any bank that would do this to a homeowner in this situation.

Here is an interesting variation on this. In short: homeowner gets behind in her payments and files for bankruptcy, but when the mortgage company tries to file a claim to recover the home the judge finds that they do not have a clear title because of vagarities of mortgage-backed securities.

As this article points out: the homeowner will have a hard time trying to sell the home if and when she has to do that, but I wonder if this is the first part of a more general trend?

What really sucks are the people who move out, stop paying their mortgage, and rent the house out.
That should be criminal (if it isn't already). As in go to jail criminal.

D'Eyncourt wrote:

Here is an interesting variation on this. In short: homeowner gets behind in her payments and files for bankruptcy, but when the mortgage company tries to file a claim to recover the home the judge finds that they do not have a clear title because of vagarities of mortgage-backed securities.

As this article points out: the homeowner will have a hard time trying to sell the home if and when she has to do that, but I wonder if this is the first part of a more general trend?

Good. I hope she ultimately wins, and the bank gets to suck it.

Not because she necessarily deserves a bailout, but because banks need a reminder that responsibility works both ways. Maybe half a million down the toilet will cause them pause in the future. Doubtful, but it's a good start.