MILLIONS FEAR NEW “F’ WORD…FORECLOSURE

Home ownership was the bedrock of the banking business and the backbone of our strong economy that made America the richest country in the world. Today, that backbone has scoliosis and is in need of an adjustment.

Mostly I blame the banks for this debacle because when the economy is going good, they always seem to ease the loan standards, and the tried and true 3 C’s are forgotten.

Capacity is simply your ability to repay the loan. They will review your monthly income and expenses to determine if you can afford to make the monthly payments. They will consider open lines of credit as well.

Next is collateral. Do you have a sufficient down payment that you can use as collateral? Essentially you would be saying, “If I don’t pay this loan, you can take this piece of property and sell it to pay off the remaining balance. The lender may determine the amount they are willing to lend you based on what they think the collateral is worth. In other words, you can’t borrow $200,000 to buy a house valued at $100,000.

An un-secured loan is a loan without collateral. The lender is offering the loan strictly on the value of your good name.

Third is character. The lender will review your credit history to see how you’ve handled debts in the past. Did you pay on time every month and pay the debt in full? Or did you settle any of the debt or declare bankruptcy? These questions aid in revealing how you are likely to handle debt in the future.

Keep these three C’s in mind if you plan on doing any borrowing in the future. You will want to present your best self to your loan officer.

Keep these three C’s in mind if you plan on doing any borrowing in the future. You will want to present your best self to your loan officer.

Gradually all these proofs of credit worthiness were lowered or disappeared and unqualified buyers jumped on the opportunity to own a home they could not afford, erroneously assuring themselves that the crazy upward spiral of prices would continue and someday bring them a windfall profit and or allow them to continue to live the good lifestyle.

As always, sub prime borrowers found it easy to walk away from their mistakes as they had little or no money of their own invested.

What a fiasco! I fear that once again the people at fault in this mess will leave the dirty clean-up job to the taxpayers. guidelines…based on the old-reliable 4 C’s of credit and morphed to ridiculous low or no standards at all. Just bundle that loan with others and sell the package to another financial institution.

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