As we reported last month, U.S. banks are finally getting back into the business of making loans to consumers. And a new report says that it’s not just those with pristine credit histories that are able to borrow.
The folks at SmartMoney.com talked to the American Bankers Association’s chief economist who said that banks are now lending money to some consumers who recently defaulted on their mortgages, so long as they are current on all their other loans.
The article cites a study done by credit bureau TransUnion which found that, between February 2009 and August 2010, loans were given to 64,500 borrowers who had previously defaulted on a mortgage.
The reasoning here is that someone who defaults on an underwater mortgage but continues to pay all their other bills is not the same sort of risk as someone who misses payments on several smaller loans.
According to the TransUnion data, so-called “mortgage only” defaulters missed car-loan payments half as often as borrowers who have missed payments on several past loans. For credit cards, the difference was wider: 11% of the mortgage-only defaulters missed payments, compared to 27% for delinquent borrowers.
“A lot of responsible people through no fault of their own found themselves in mortgages that weren’t practical for them,” says the policy director at Americans for Financial Reform.
For Mortgage Defaulters, More Loans for the Taking [SmartMoney.com]