Where is the US economy headed?

@maporsche,

However, credit should be available for those responsible consumers who wish to purchase homes and cars - and other high priced products. Availability of credit has been reduced too far that is hurting our economy unnecessarily.

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@okie,

okie, Please find it and share with us! From my readings about single mothers on welfare, more are finding jobs, because they're being forced to work or lose their welfare.

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@okie,

okie, You're playing games here. As the divorce rate increases, guess what happens? You are a misinformed, dangerous, neocon who sees only what you want to see, then spread it as gospel.

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@maporsche,

Quote:

Hawkeye is right that the culture in America needs to change, the government should be embracing that change and helping to redesign the economy based on what people are already choosing to do (save more, spend less). We should not be making credit cheap, bailing out banks so that they lend more money, and giving tax incentives to people who finance new cars/homes.

Someone last week (op-ed piece) said that the Obama solution to the American addiction to the drug of easy money is to secure the drug in the time of need. No where in his plans is any attempt to end the addiction. Other than some far off vague notion that the addiction should end there is no acknowledgement that the addiction is the problem, in his mind the problem that he is tasked to deal with is scoring of the drug. We call that being an enabler.

Look at health care, where his "plan" is to pretend that the money to pay for expanded access will appear by magic, that he does not need to pay for expanded access by reforming the market forces which continually drive medical inflation at 200-300% of the societal inflation rate.

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@hawkeye10,

The money will appear like magic; they are considering increasing the taxes on those earning more than $350K, but that's only now in the talking stages.

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@cicerone imposter,

cicerone imposter wrote:

okie, Please find it and share with us! From my readings about single mothers on welfare, more are finding jobs, because they're being forced to work or lose their welfare.

I am not talking about mini-trends, I am talking mega-trends here. There may a recent phenomena in the statistics, but overall since the 50's and 1970, the breakup of the nuclear family has played a huge roll in society, in education, employment, and the economy, there is no doubt whatsoever. I posted a graph for you last page.

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@cicerone imposter,

I don't believe this to be true.

What credit score would you consider a "responsible consumer" to be? >=720? Those customers have no problems getting loans for cars/houses, even during the worst of this 'crisis'. They might have trouble getting signature-only loans, or credit cards with high limits, but not secured loans.

When Obama talks about freeing up credit, it has nothing to do with these people. He's talking about credit for people with lower credit scores.....you know, people who are less responsible.

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@cicerone imposter,

cicerone imposter wrote:

The money will appear like magic;.....

I think we have identified the problem.

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@maporsche,

From Gov Duke:
It will take some time for the banking industry to work through this current set of challenges and for the financial markets to recover. During that recovery, the economy will need a strong and stable financial system that can make credit available. The challenge for regulators and other authorities is to support prudential bank intermediation that helps restore the health of the financial system and the economy as a whole. We want banks to deploy capital and liquidity, but in a responsible way that avoids past mistakes and does not create new ones. Bankers should operate prudently in the current challenging environment, but should not let fear drive their decisions. The Federal Reserve will continue to work with other banking agencies and the Congress to promote the concurrent goals of fostering credit availability and a safe and sound banking system.

Let's hope it comes sooner than later.

From the NYT:
Of course, there’s more to the story. Evan Clark, in Thursday’s Women’s Wear Daily, highlighted the impact that the credit crunch is having on retail. Indeed, just as companies are facing declining profitability, they are going to have an incredibly difficult time getting the credit they need to pull through. Lower consumer spending, rising cost of goods, and limited availability of credit " this is The Great Squeeze.

Many of the articles I've read in recent times have confirmed this credit squeeze. Our credit rating is 808, but Capital One bank refused to give me a credit card last month. I think 720 is somebody with a good credit rating. On the one hand, they won't give us a credit card, because we pay our balance on time every month. On the other, our economy suffers for not giving us the tool to spend our money.

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@cicerone imposter,

Yeah, I believe you about credit cards/unsecured loans.

But not cars/houses. Those never froze for people with good credit.

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@maporsche,

I beg to differ; I've read stories about middle class people with good credit ratings who were refused credit to buy a home. I'll try to find some links on them, but I know for sure I've read about them.

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@maporsche,

I know I have read several articles on this issue, and here's one from last September.

Quote:

Author: cjesposito | Date: Sun, 21 Sep 2008 5:53 AM
Having Your Loan Denied Due to Your Credit - Despite Having a Good Credit Score

Imagine applying for a mortgage for your dream home. You have good savings, a good job, very little monthly debt, and a decent credit score. Your loan approval should be a slam dunk, right? Now imagine how frustrated you are when the bank says your loan application was denied due to your credit report - despite having a good credit score
!

Everyone knows that you need to have a good credit score to get the best rates and terms on a mortgage. But, many people don't realize that their credit report can cause them to be denied financing, despite having a good credit score. It's more important than ever to understand your entire credit history - not just your credit score itself.

Here's a list of five things on your credit report that can prevent you from getting a loan approval, regardless of the actual score. The first four are pretty straightforward. It's the fifth scenario that catches people by surprise and leaves them frustrated.

I took out the first four, because it made this copy and paste too long.

5. Not having enough open accounts that are over two years old.

The first four scenarios above are pretty straightforward. It's easy to understand that something negative like a court judgment or a foreclosure on their credit report could prevent financing approval. But, this fifth scenario is different. How could you possibly be denied a mortgage despite having a good credit score with no derogatory accounts showing on your credit report?

The answer is that the credit report might not have enough accounts showing at all. In other words, your credit score may be fine. You may not have any negative things showing from your past on the report. But, if you don't have at least a few open accounts that are over two years old, then you might get denied financing.

For example, a recent owner builder applicant had a 673 credit score. His other loan qualifications fit well with the program guidelines. But, he was denied an owner builder construction loan because he had closed all of his credit cards. He only had one open account showing on his credit report. He thought at the time that he was doing the right thing.

In some ways, he was doing the right thing - he didn't have excessive car loans or credit cards. He didn't run up a lot of debt. He lived within his means. But, on the other hand, his credit report wasn't showing enough open accounts to approve the loan. The owner builder loan was denied, because of a lack of current, responsible credit use (i.e., no credit use). In the case of this owner builder, his owner builder construction loan would have been approved with flying colors if he had simply paid off the credit cards, but left the accounts open with zero balances.

Therefore, when you are reviewing your own credit report, make sure you have at least three open accounts that are each two years old - with no late payments. This is tough for some people who are young and haven't had the time yet to establish a lot of credit. In cases like this, the easiest thing to do is to get a few credit cards while in school. The tricky part is to have the discipline not to run up balances on those cards. And, in the end, that's the whole idea - lenders nowadays are looking for evidence of responsible use of credit.

This seems very relevant, because I have a FICO score of 808, but was denied a credit card from Capital One last month.

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@cicerone imposter,

That article kind of makes my point.

The people who are "responsible people" (your term, which I would consider to have a credit score of >=720) DO NOT have any problem. And you specificially pointed out cars/homes NOT credit cards. I'm having a hard time following what point you're trying to make.

It's the less than responsible (credit score 673 in your article) that DO have a problem.

That person with a 673 shouldn't be able to buy a house w/o a large down payment. That's the way the banking system should work. That will build a housing market that is less susceptible to swings in home value. That will encourage people to save their money for things they way to buy, but build better credit scores to get lower rates, etc.

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@maporsche,

You're wrong; it's the person who has the disposable income that can be applied to his mortgage loan without over-extending himself/herself that should be getting the loan.

That's the bottom line; not the FICO score or how good his credit is. Many are living on credit cards with very good FICO scores, but they're on the brink of bankruptcy if a major event happens that costs them more money.

Many people making good wages are in that position; even people who hold good paying positions who had to take salary and wage cuts have not learned how to cut their standard of living, and living off their credit cards. There was a recent article on this very subject this past week.

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@cicerone imposter,

Of course I didn't mean that you shouldn't also consider the other things you mentioned. I never said "it's only the credit score that matters". I just said that if you have a low credit score, I would not consider you a responsible borrower. Therefore you should not be able to qualify for a home without a larger down payment.

Do you disagree? Do you think we should go back to 0% down mortgages to people with mid 600's credit scores? Really?

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@maporsche,

Zero percent down is a bad idea; it means that those people never learned to save their money for a rainy day or understand the real cost of mortgages.

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@cicerone imposter,

Ok, so if I have a credit score of 673, like the person in your article.

What % of a down payment should be required of me (assuming that I meet the other standards, such as income).

The article you posted is piss poor on content. All it mentions is the guys credit score and it then concludes that it is difficult for anyone with 'good' credit to buy a house. #1, it's simply not true, if you have good credit you can get a mortgage. #2, it mentions nothing about the guys other financial responsibilities, his down payment, what his source of income is, etc.

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@maporsche,

True. Since El Stud and I have mostly retired we have a fraction of the income we once had, but we have banks falling all over themselves to refinance our house or lend us the money for another one. Great rates, free appraisals, and very modest closing costs too. Why? Because we have a great credit score.

It isn't the only factor involved, of course, but that credit score is a very very good indication that somebody pays their bills on time and as agreed and are responsible managers of credit.

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@cicerone imposter,

I'll fess up and say that this is the exact situation I find myself in now.

I was able to buy a house with zero down, then I moved out of state and I was able to buy another house with zero down, WHILE I still owned the first house.

I've learned so much over the last 5 years.

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@maporsche,

You're the perfect example of why so many homes were foreclosed upon; no down payment, and an adjustable interest rate.

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Where is the US economy headed?

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