Are the Big Banks Guilty of Reverse Redlining? Until reading an article in the New York Times by Michael Powell called The New Poor, I had never heard the term reverse redlining before but I knew exactly what he meant.
We have all read articles and heard the media blame our current economic and housing crisis on irresponsible people buying homes they couldn't afford and that they were pushed by greedy real estate agents. It was not the bank's fault it's the consumer, maybe the real estate agent, right? They should have known better, they should have read the loan papers yada-yada. Are our current economic struggles the consumer's fault or did the bank lure them into it? You decide. Below is a typical scenario of someone struggling financially in many US cities today that did not have a huge real estate bubble that burst:
A homeowner bought their house 10-15 years ago the traditional way, modest down payment, fixed interest loan. They lived within their means and made payments on time. As time went on and credit loosed up they took on consumer credit. It was easy to do because everyday when you opened your mailbox there was an onslaught of pre-approved credit card and loan offers (usually from big banks). When all this debt seemed overwhelming, a god send came. The big bank then sent you a pre-approved offer to refinance your house, roll everything into one easy payment, simplify life and consolidate your finances.
Many homeowners consolidated because that is what the media, financial guru's, the bank and everyone else said was "the smart thing to do". The only problem with this scenario is many of the homeowners that consolidated debt with a refinance went into sub-prime loan products that were riskier and more expensive than they had to be in spite of the fact that many of these borrowers had good credit and qualified for lower rates. Why, because the bank targeted these people; many banks actually had cold call lists and concentrated on zipcodes to push these consumer loans, then refi's to "less sophisticated consumers" because of the money it generated for the bank. Now these homes that have been owned and lived in for over a decade by hardworking responsible people are going into foreclosure.
I have been seeing this trend for a while when I go on listing appointments. A distressed homeowner that needs a short sale or is fearful their house will be lost to foreclosure has actually lived in it since the 1990's and owes more than they paid for it. Why, because they consolidated their debt, not because the market is bad. Yes, I have been seeing this for a while but not heard or read about reverse redlining until now and when I did, I knew exactly what it meant. So you tell me, are the big banks guilty of reverse redlining? Many state and local regulators think they are and have been obtaining the ammunition they need to file lawsuits against them from many disgruntled ex-bank employees willing to blow the whistle on their former employers. As they say, no good deed goes unpunished.
This article was written by: Jennifer Manchester. If you want to learn more about Staging your Charlotte, NC home to sell contact Jennifer Manchester at www.JenniferManchester.com and make an appointment to give your home a competitive edge and use the ultimate home seller's marketing tool to beat out your competition and get your home sold faster.
If you would like to search homes for sale in Charlotte, NC or search homes for sale in Matthews, NC or search homes for sale in Mint Hill, NC and surrounding areas, you can see for yourself what is available. If you would like to meet with Jennifer Manchester to discuss buying or selling your home in the greater Charlotte, Matthews, Mint Hill area visit her at www.JenniferManchester.com to schedule an appointment today!