A New Horizon Notices Those Who Defaulted on Mortgages Now Being Offered Credit

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As the economy slowly improves, banks have been increasingly lending to an unexpected demographic: former homeowners who previously defaulted on their mortgages.

A New Horizon Credit Counseling 1-800-556-1548

A New Horizon Credit Counseling 1-800-556-1548

We’ve been helping clients who have previously had their homes foreclosed upon reduce their extremely high credit card interest rates.

As the economy slowly improves, banks have been increasingly lending to an unexpected demographic: former homeowners who previously defaulted on their mortgages. Many of the borrowers receiving such credit offers had defaulted on their mortgages but were otherwise current on their credit card payments and other loans. Nonprofit debt consolidation firms, such as A New Horizon Credit Counseling Services, have noted that many of their clients have been offered new credit cards after defaulting on their mortgages within the past few years. There is a catch, though.

Steven Stark, Chief Operating Officer of A New Horizon, explains that many of his organization’s clients were offered credit cards while still digging out of foreclosure – but with interest rates as high as 25%. “Often times these individuals are cash strapped and struggling to alleviate their financial burdens,” says Stark, “but these high interest credit cards may make their debt problems even worse.” According to a new report by TransUnion, nearly 65,000 borrowers who had defaulted on home loans received new consumer loans between February 2009 and August 2010. The majority of these borrowers received consumer credit in the form of credit cards.

“We’ve been helping clients who have previously had their homes foreclosed upon reduce their extremely high credit card interest rates,” says Stark. While his organization helps consumers lower their interest rates and manage their debt, Stark cautioned that the best policy is often to avoid such high interest rate cards altogether. “If a consumer’s only option to re-establish credit is to do so at a high interest rate, then they should use the card sparingly,” Stark explained.

Industry experts suggest that this new lending trend comes as banks recognize that the housing bubble affected many otherwise responsible borrowers as evidenced by their repayment of their credit cards and other debt obligations. Experts suggest that the number of consumer loans offered to one-time defaulters will continue to grow as lending markets ease up.

A New Horizon Credit Counseling Services is a nonprofit credit counseling organization that has been helping consumers since 1978. For more information about their debt consolidation programs, contact 1-800-556-1548. They can also be found on the web at http://www.anewhorizon.org, or reached via email at slieberman(at)anewhorizon(dot)org

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Stuart Lieberman
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