Homeowners who have defaulted on their mortgage loans are getting loans again. The chief economist of the American Bankers Association says that banks are extending credit to those with serious blemishes on their credit. They are saying that borrowers who are current and pay all of their bills on time, their car payments on time and any other loans on time but that have defaulted on their mortgages are some of the “most attractive” candidates for the new loans.

From February 2009 to about August 2011 over 64,000 people who defaulted on their mortgages received consumer loans. This is according to TransUnion. Most of these consumers got credit cards but a lot of them got car loans. In fact, about 40% of the defaulted homeowners were given car loans, personal loans and line of credits.

The lenders believe that those who have defaulted on their mortgages and yet are current on their other obligations are a good credit risk because the housing bust put these borrowers into a situation they did not want to be in but were forced into by the market. The lenders take in many factors when deciding to give a loan so each situation is different.

But past homeowners seeking to get credit need to understand that they will be charged with higher rates and that getting credit is not always a good thing. It can become another trap. The average credit card interest rate is about 15% but for those who have defaulted on their mortgages the interest rate they are paying is 20% to 25% ! Wow, now that is high interest. Takes me back to the early 80’s! Getting a car loan if you have excellent credit can be as low as 4% but if you have a mortgage default that same car loan to you is going to be as high as 19%! Maybe consumers in that position should save their money and buy a car with cash.

 

5 Responses to Mortgage Defaulters Get More Access To Loans

  1. As Wellington Short Sale Agents, it is important to inform potential sellers about the possible effects a short sale may have on their credit.

    This article makes a good point that distressed sellers who make an effort to pay their bills in the future, will be able to repair their credit. Which is good news.

    Laurie Hellmer

  2. As Wellington Short Sale Agents, it is important to inform potential sellers about the possible effects a short sale may have on their credit.

    This article makes a good point that distressed sellers who make an effort to pay their bills in the future, will be able to repair their credit. Which is good news.

    Laurie Hellmer
    Chicago

  3. Wellington Short Sale Agents provide some interesting information for homeowners. It is reassuring knowing that a past homeowner that was having a difficult time in paying their mortgage can now quality for a new loan.

    Jimmy Williams
    Eustis, FL

  4. Great information for Florida homeowners who may have suffered a hardship due to the economy. There is hope after a mortgage default! Short Sales are almost always a better option than foreclosures. This is yet another reason for financially distressed Wellington FL sellers to consult with Wellington Florida Short Agents like you and Nestor regarding their options.

  5. You make an excellent point about paying cash Katerina. Credit can be a trap for many. As a Wellington short sale agent you are giving your clients excellent advice — you can rebuild and move on.

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