WHAT Causing The Housing Meltdown ?

Definitions of FICO Score on the Web • FICO is a credit score scale used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender. www.ff.com/public/glossary.jsp • A generic credit score developed by Fair, Isaac and Company, Inc., that was designed to predict the possibility of borrowers becoming seriously delinquent in their credit obligations. www.fultonmortgagecompany.com/Glossary.asp • A rating system created by the Fair Issacs Company. FICO scores are based on information reported in consumer credit files. The formula used for FICO scores creates a standardized rating of a borrower's credit history. www.redhotfunding.com/glossary.html • A credit score is a numerical index which represents an estimate of an individual's financial creditworthiness. It is based on a subset of the information in an individual's credit report. Lenders, such as banks and credit card companies, use credit scores to determine credit limits and interest rates FICO score. en.wikipedia.org/wiki/FICO_score

Using the bank’s own words against them. Banks claim the higher the FICO score usually 700 or above the less risk that the possibility of borrowers becoming seriously delinquent in their credit obligations to pay their loan. People with FICO scores 700 and above get the lowest interest rate because they are less risk according to the banks. These people pay hundreds of dollars less in the interest rate that the bank charges.

According to the banks people with a FICO score of 600 or less have a higher possibility of borrowers becoming seriously delinquent in their credit obligations to pay their loan.

What makes no sense!Banks increase the risk by charging higher interest rates to these people with a FICO scorer of 600 or less knowing the possibility of borrowers becoming seriously delinquent in their credit obligations to pay their loan. These people with a FICO score of 600 or less pay hundreds of dollars more in the interest rate for the same loan.

Who is more likely to have a FICO score 700 or above?

someone who makes $1,000 a month or someone who makes over $10,000 a month? The answer is someone who makes over $10,000 a month. The banks are giving the wealthy and rich people lower interest rates, than people who are struggling to make a living. Example 1 Single mom who makes $1000 month and has a house full of children needs a car to get to work to keep a roof over her and kid’s head will pay hundreds of dollars more in the car payments than a person who has a lot more money simply because that she might have had some problems in the past like being laid off her job at Enron can’t pay hear her bills on time causing her credit score to drop. The bank increases the risk by charging more money knowing that the possibility of borrowers becoming seriously delinquent in their credit obligations to pay their loan this makes no sense. while the bank makes huge profits over the course of the loan.

Example 2

Ken has a job at Enron for five years and was making all his payments on time. He got laid off, can’t make his house payments and soon ends upends up with a FICO score less than 600. He tries to refinance his house for a lower payment. The Banks refuse to give him a lower payment because his FICO score is less than 600 causing him to lose his family home. The bank, ends up with the home resells the home at the new market value causing the family to become homeless. This is like organized crime and discrimination by the banks using FICO score to charge higher interest rates knowing the possibility of borrowers becoming seriously delinquent in their credit obligations to pay their loan. Example 3

Banks invented option arm loans giving them to people with a FICO score of 620. A lot of people take these loans not knowing the risk. When the loan becomes fully amortized, the payments can double then causing the possibility of borrowers to become seriously delinquent in their payments. The bank loves this because they can take the home leaving borrowers without anything. This again is like organized crime by banks.

The majority of Americans have low FICO scores, this is how the banks get away by charging unnecessary interest rates to Americans and the poor. It makes no sense that the bank would double the risk by charging more money knowing that the possibility that the borrower may default on financial obligations to the mortgage lender. FICO score should not be used as a justification to charge more money to Americans and the poor or someone who the Banks considers a risk. FICO scores should only be used to determine who doesn’t pay their bills and denies further credit to those who don’t pay their bills. FICO scores are causing the housing industry to come to its knees because of the greed in real estate. The culture in the housing industry has been buy a house for $200,000 hold onto the house for a few years and sell at a higher price when the market value increases. Today, houses are sitting on the market longer, because more people can't qualify for a home loan because of the prices is out of reach of mom and pop the common people the engine that keeps the great America moving. Elevated house prices and property taxes, foreclosure at a record high, people are leaving the State of California because of the greed in real estate. Escalating prices cause many bank to close leaving the debt to the taxpayers. Because of this material greed and FICO scores fraud caused by the banks and unsavory real estate practices this is leading to a national housing crisis, and the American dream of owning a home is becoming a nightmare! Young adults can't afford to leave their parents' home because of increased housing prices. The next generation of Americans won't be able to own a home if this FICO score fraud and real estate greed by Banks and sellers driving prices out of the reach of common Americans continues.

The Solution

1. Abolish FICO score practices that allow banks to charge higher interest rates because of low FICO scores increasing the risk resulting in the possibility that the borrower may default on financial obligations to the mortgage lender.

2. One interest rate for all barrowers and to set a cap on the interest so the banks cant charge an exploited interest rate causing a national debt for the next generation to pay.

3. If a house cost say $200,000 to build cap the markup at say 20% and adjust the mark up price and taxes depending on the growth of the economy the same capped amount would apply to sellers as well. This would stabilize the real estate market with steady growth and bring back the American dream of homeownership.

4. People caught in the current subprime mortgage convert those loans to 70 years loans

5. Reduce the mouse and land prices to a price that is not out of sync with the people that service and live in the area e.g. Los angles California “Crenshaw Boulevard $739,000 800 sq foot 3 br 2 ba Apt/Condo/Twnhs ZIP Code: 90005 $509,000 2 br 2 ba Single-Family Home ZIP Code: 90026 “ this is where the poor lives, mom and pop the common people the engine that keeps the great America moving people who makes about $15000 $2500 a month will never be able to get a peace of the American dream because of the greed and the different incentives to drive up housing prices .

5. When housing prices drops adjust the borrowers mortgage, taxes and insurance to the current home value.

Congress needs to take a look at the FICO scam perpetrated by banks this material greed and FICO scores fraud caused by the banks and unsavory real estate practices immediately. It has become a serious crisis especially here in California, one we may never recover from if allowed to continue.

Thank You.

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