The banks have certainly been behaving despicably in recent years can have been very careless about the way they have been conducting business. Of course, the governments of the world haven’t done all that much to stop them and have allowed the banks to conduct their business in just about any way it wants.
Why have they been irresponsible? Well, for a start they were allowing people with very bad credit histories to take out loans and many of them weren’t able to keep up with repayments. As a result lots of homes have been foreclosed and are now selling for peanuts. Many homes are just sitting empty and have turned the area into a ghost town.
Another problem with the banking industry is that mortgages given out were as much as 125% of the purchase price. This means if you bought a home for $100,000 you would be about to take out a loan for $125,000. But what happens when there is a crash in property prices and your home is now only worth $80,000? Well, you’re into negative equity which causes real problems if you want to sell your home or refinance.
Another big problem was that people were taking out Adjustable Rate Mortgages (ARM) which started off at a very attractive low rate of interest. But eventually the mortgage interest rate jumped up to an amount that was unaffordable. So therefore people were “delinquent” on the mortgage resulting in foreclosure.
So if you’re now in a position where you have bad credit and/or negative equity you might feel really depressed about your finances. A lot of people are getting re-mortgages at a lower rate of interest however this is normally only good for those who are not in negative equity or only by a small amount.
So as you can see things are very different in terms of getting finance compared to some years ago. If you are looking for a low FICO score home loan, or want to refinance your negative equity home you are going to find it tricky. So make sure you read as much as you can and learn about what new developments are happening in the finance industry.
