Real Estate Professional Network

For Mortgage Defaulters, More Loans for the Taking

SmartmoneyBy Annamaria Andriotis

After years of turning down all but the best borrowers, banks and other lenders are now extending credit to a surprising group of customers: former homeowners who defaulted on their mortgages.

Some of the growth may be expected in specialized areas such as asset-based lending and retail finance.  And, though some companies remain cash-rich, some small growth may appear in credit usage rates, which also rose toward the end of the year at some institutions.

What does this mean for all of us?  Certainly, we would all hope that the trend continues - and grows.  An increase in the volume of corporate loans can generate not only greater opportunities for the lenders and businesses involved, but also (eventually) opportunities for growth in the economy as a whole. 

Some banks are extending credit beyond the best borrowers to include those with significant blemishes on their credit reports, says James Chessen, chief economist at the American Bankers Association. At the moment, borrowers who have defaulted on their mortgages -- but are current on all other loans -- are among the attractive candidates for new loans.

And while more recent data isn't available, experts say the number of loans granted to mortgage defaulters has likely continued to grow. The banks approving these loans consider these borrowers a special group, says Steven Chaouki, a vice president for financial services at TransUnion: Because they are current on all other loans, banks see them as a lower risk relative to borrowers who have missed payments on multiple loans.

For banks that are wading back into lending to borrowers with less-than-stellar credit, this group represents a small step into the risk pool. If a bank feels confident that the borrower is back on his feet financially, they are willing to take the risk to lend to them.

Downtown Condos and Williamson County Real Estate

Exit Realty Music City is one of the upcoming Real Estate firms in Middle Tennessee with a team of talented agents specializing in all aspects from Land/Lots to Estate homes. I can help with finding you the right home in Williamson County although have a passion for new luxury condos. Please don’t hesitate to call me or let me refer you to one of our other talented agents in our office. I won’t let you down.(615) 517-1189       

EXIT Realty Music City | 508 Autumn Springs Court | Suite 1B | Franklin | TN | 37067|615-807-1204

Each Office Independently Owned and Operated