Here is another sign that the credit crunch is easing — banks will lend money to people who have defaulted on their mortgages.
Tens of thousands of people have strategically defaulted on their mortgage, realizing that they owed far more on their mortgage than their home was worth.
The story reports that more banks are easing up on extending credit to borrowers with foreclosures or mortgage defaults on their records, but otherwise have good credit.
No doubt this is a growing group of people. From the story:
“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. The housing bubble and bust put otherwise responsible borrowers into bad situations, says Marcus Stanley, policy director at Americans for Financial Reform, a public interest advocacy group. “A lot of responsible people through no fault of their own found themselves in mortgages that weren’t practical for them.”
The paradox here is that while banks supposedly want to discourage people from defaulting on their home loans, they are quietly opening up credit to those who do.