Friday, December 10, 2010

Keeping close tabs on troubled borrowers

A friend of mine worked at a store that rental out furniture.  He had to call the clients every so often to make sure they paid.  This program with the banks sounds like a more sophisticated way of doing the same monitoring.  
This goes far beyond the latest underwriting wrinkle, re-evaluating a would-be borrower's credit just before the mortgage closes to make sure that he hasn't taken out any other loans or run up other bills that would impinge on his ability to make his house payments.
And it could go way beyond monitoring for life events such as a major medical issue.
For example, the lender might ask you to sign a document at settlement that gives the servicer the right to run periodic credit reports to see if you are having any difficulty paying your bills. If the servicer knows you've missed a couple credit card payments or you are late on your auto loan, it might call to find out what's up.
But permission to monitor your credit goes deeper than that. If all of a sudden you start paying your bills on the 15th of the month instead of the first, for example, programs developed by IndiSoft or other technology companies will alert the servicer, which can then step up its surveillance
And of the homeowners that want to walk away. 
someone stops paying his mortgage but continues to pay his credit cards on time or takes on new debt — a second mortgage, for example, a car loan or a loan from a finance company — the IndiSoft executive said, "It's pretty certain you are dealing with a borrower who is not paying because he doesn't want to, not because he can't."
Dahiwadkar believes stakeholders also will be paying much more attention to other potential indicators of trouble. And no database will be off-limits.This also means less people get loans...putting downward pressure on home prices.  Mortgage rate right are also do that too.
This means that less potential homeowners will be qualified for a loan...putting downward pressure on home prices.  Right now mortgage rates are doing good job of that.

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