As we TRUDGE through this economy accepting the failure of Real Estate, the dispossessing of tens of millions of people from their homes, from historic job losses, failed stock market ventures, record bankruptcies, and Acts of God such as earthquakes, oil spills and hurricanes, IF THAT IS NOT ENOUGH.......Our systems have finally and I believe fatally been turned on US......or our fellow man...his family, wife & children.
We have successfully blemished and black-marked everyone who has defaulted on their line of credit. Oh, not just a slap on the wrist mind you, but when we punish, we do it right....all the way...
For about tens of millions of Americans....their MISTAKE or MISSTEP whatever you want to call it... will haunt them for the next 7-10 years hurting their ability to get competitive financing or any financing at all....
More than 40 million consumers have credit scores of 599 or lower which will effectively keep them not only out of the Real Estate market, but out of the Retail, car and luxury purchasing market for some time to come....
Millions have joined this latest statistic in just the last 2-3 years and there is plenty more expected.......
While it is true that FHA will forgive in 3-4 years so that you may re-purchase a home, between now and then remains a problem. Keep in mind that the ranks of people falling into this will keep FHA forgiving for many years to come. What do we do between now and then to help these people?
The walking credit wounded, the unemployed....where do they go and what do they do....? I am aware that unemployment will be harsh in my neck of the woods for 2-3 years. That means unstable Real Estate values, low or no growth and small businesses put at risk..
I am thinking that if we shorten the FICO scoring and record keeping periods to say.....4 years, then a man and his family who fell into today's recession can then effectively plan to come back within a reachable, hopeful time period. This can and should line up with the FHA policies as well.
I believe that 7-10 years is TOO MUCH to put on anyone. To have explain and be reminded of this for this length of time is counter-productive, time consuming, and doesn't encouraging or support solutions.
I believe that this is a supportive step to help correct and jump start not only the economy, but the Psyche of the buying public by tracking someones economic FALL for no longer than 4 years. That is sufficient time to tell the story of someone who failed at credit.
So, here is how it would work....during the 4 years, it is understood that no credit or expensive credit may or may not be available. If you are in let's say your 3rd year, lenders and retailers would encourage you to keep clean for the next year and then apply to them for tiered financing or privileges. Getting started offers like competitive rates (not punitive rates) and for those that maintain good habits....eventually can graduate to premium rates.
If you have ever made a mistake (whether public or private) where you wished for a second chance, this suggestion is based on those feelings. People with families and children desperately need another chance to make good. America should be that place and should encourage that thinking even more......
The results from this are very predictable....people will work hard to get back into the game. They will have goals to purchase homes, cars, and luxury items as well as plan educational and recreational futures. Heck, this could even discourage people from a life of crime giving them hope and to do the right thing and prosper.
I submit it for your consideration..............
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