Mortgage Forum Live

Credit Bureaus Field Flood Of Requests

By December 7, 2008

National organizations called credit bureaus develop credit scores and credit checks for American banks. Sub-prime mortgages were so called because they were offered to less-than-qualified borrowers — those whose credit scores were below the “prime” credit range. After this summer’s subprime loan upheaval, the public wants to know: exactly what is a good credit score?

Most loans, however, were only offered to those who could afford to pay them back, so it is troubling how the obscure subprime section of the $10-trillion U.S. mortgage market could have caused such worldwide havoc in the credit markets. But, it did, and along with a very sharp 10% correction in the domestic stock market, the pain this development caused was real and so were the losses.

Within days potential loan applicants, with less than perfect financial histories, found that suddenly there was no money available. This was caused when many subprime lenders were forced to lay-off employees and close up shop. Those looking to take out loans for homes, cars, or other expensive items found that when they checked their online credit scores they were no longer eligible for loans that they would have been approved for just days earlier.

Credit bureaus have been inundated with both credit report inquiries and requests for credit assistance. The bright side of the subprime loan collapse is that consumers are now starting to pay more attention to consequences of their financial decisions and credit bureaus are now making their resources more accessable.

The crisis in subprime lending means, unfortunately, that more and more people are in default on their mortgages and stand to lose their homes. It is good that the rental market is there for these people; in most places in the United States, there are lots of properties even someone who has defaulted on a mortgage can afford. Still, for those who are in need of a loan, that process will doubtless be more difficult across the board.

Most financial experts forecast the loan difficulties to continue for at least two years. However, the Federal Reserve has made the moves necessary for the economy to overcome the drag of the subprime fiasco and the disruption in the credit markets by cutting the rate at which it lends money to banks. Many experts also expect the Fed to cut interest rates to encourage people to keep spending and to make loans more attractive to those who do qualify.

- Daniel Lesser

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