It may be of great interest to explain the scenario behind and general cause of the globe spreading term ‘Credit Crunch’. Within the last five to seven years, financial institutions, banks and lending organisations in an attempt to enlarge their clientele, had resorted to relaxing their criteria and rules for lending. This practice seemed to span across the globe. It did so significantly across the U.S.A. and U.K. The consequences of such practice, could not have been envisaged. Mortgagors, borrowers and loan applicants, were easily advanced loans and monies they couldn’t visibly have had the ability to repay.
In the U.K., a particular case study lends clarity: I watched the television programme where a mortgage advisor was being secretly filmed as he assisted a husband and wife to secure a mortgage for the purchase of a £150,000 property. At the point of declaring the incomes, so their affordability can be assessed, the husband and wife declared their income as £15,000 and £12,000 per year respectively. It was very clear that the applicants’ total incomes of £27,000 per year multiplied by the multiplier factor of ‘3’ i.E. 27,000 times 3, equaling £81,000, would in no way meet the purchase price of £150,000 for the property in question.
Right under the hidden camera, the advisor altered their earnings to £30,000 and £20,000 respectively. He was now able to come up with the new total of £50,000 which multiplied by the factor ‘3’ equaling £150,000 now meets the desired number upon which their mortgage was to be approved! Needless to say that the advisor was suddenly apprehended by the secret squad expelled and eventually imprisoned. Imagining how many of such fraudulent mortgages have gone to completion undetected, would explain why the many mortgagors could not now afford to meet their monthly mortgage payments and have to face repossessions or foreclosures(in the U.S.). A further consequence of this snowball effect is that lending institutions and Banks are taking remedial strategies by tightening their lending criteria and leaving many applicants unqualified for Credit…Hence CREDIT CRUNCH!
Here to your profit is this gift information,
Mr. Victor Okeghie.