Surviving Real Estate Industry
Many experts believed that the economic disaster of the last financial crisis was triggered by subprime mortgage crises. With the booming of real estate industry, bank and financial institutions were lowering their mortgage loan requirements. When too many mortgage loans went to bad credits, the crisis was happened.
Today, working middle classmen find too much trouble when they want to buy a house. Since the last financial crisis, bank and financial institution become much selective and give many requirements such as impossibly high credit score or huge amount of down payment. Off course that situation smacks down housing market and real estate industry. The snow ball has been rolling, many real estate business collapsed and much more people working in real estate industry become laid off. It is true that bank and financial institutions are willing to prevent such subprime mortgage crisis from happen again. But is this the right policy?
Economic will grow when the real sector is rising. Since the banks hold their fund instead of lending it, the real sector will have no funding and stuck from development. As mentioned above, working middle classmen won’t be able to buy a house without a mortgage loan. Rather than giving high requirements, lowering the debt-to–income requirement could be win win solution. With lower ratio, working middle classmen would be able to afford mortgage rate but in other hand, their credit inventory will be limited thus makes bank risks on the loan lower.