The Failing Credit Industry Influences the Likelihood of a House Foreclosure

The Failing Credit Industry Influences the Likelihood of a House Foreclosure

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A major economic issue in Florida is the growing number of house foreclosures. This supports why “[Florida] has one of the nation’s highest foreclosure rates” (Meek 67). A possible cause behind this could be the failing credit industry because nationally, an increasing number of consumers are being laid off from their jobs, being victimized by identity theft, and are overextending themselves by creating excessive debt. These consumers are struggling to pay back their loan obligations, which can include credit cards, auto loans, and other types of personal loans. For this reason, many consumers are becoming delinquent on their loan accounts. As required by the Fair Credit Reporting Act, which was passed by Congress on October 26, 1970, the lenders report this negative information to the consumer reporting agencies, which are Equifax, Transunion, Experian, and Innovis. Such has a negative impact on the credit bureau scores of the consumers because they can become low, which will cause lenders to view them as high risk borrowers. This may cause lenders to give such borrowers higher interest rates, fees, low loan amounts, and larger minimum payments on their loan products because the borrowers have a high potential of not paying back the loans. Lenders must follow the credit history data they receive from the consumer reporting agencies and take into consideration the income of the consumer to determine his or her creditworthiness, which is the level of reliability in paying back a loan. In the past, lenders were not as strict in determining how creditworthy a consumer was and as a result, they had major losses. For example, from 1990 through 1992, there was a United States loans crisis in which an estimated $125 billion dollars worth...

... middle of paper ... becoming low, which is causing lenders to view them as high risk borrowers. Low credit scores suggest a low level of creditworthiness, which means that the borrowers have a high potential of not paying back the loans. Lenders are giving such borrowers higher interest rates, fees, low loan amounts, and larger minimum payments. They do so with the goal of trying to accumulate as much profit as they can from the borrowers for the time that they are successfully making payments on the loans. However, some lenders are denying loans to high risk borrowers to protect themselves from experiencing a loan loss. The failing credit industry is causing consumers to pay high interest on their loans. For this reason, consumers are struggling making their mortgage payments and as a result, an increasing number of consumers are becoming more likely to have their houses foreclosed.

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