Houston Scraps Plan to Pay Off Applicants Credit Cards to Facilitate Mortgage Qualification

February 25, 2009 No Comments »

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How’s this for a bad idea.

Yesterday, Houston Mayor Bill White was the subject of a great deal embarrassment after details of his so-called “Credit Score Enhancement Program” wound up on the Drudge Report via Houston Chron.

The much ridiculed program was essentially a bid to boost home sales for borrowers with less-than-adequate credit scores, by falsely inflating those scores.

Borrowers looking to qualify for mortgages through the city’s homebuyers’ assistance program would receive up to $3,000 in grants to pay off credit card balances quickly.

That in turn would (ideally, no guarantee) bump their credit scores up the necessary 10 to 20 points so they could qualify for mortgage financing.

The plan immediately drew major criticism from council members who felt the initiative was going too far to promote affordable housing.

“This issue has hit a nerve across this country,” said Councilwoman Anne Clutterbuck. “Not just here in the city of Houston. Giving people the ability to increase their credit score artificially because we’re allowing them to pay off their credit cards is exactly what got us into this (national economic) crisis in the first place.”

Affordable housing advocates showed modest support for the program, noting that lenders had boosted minimum credit score requirements in recent months.

But it’s hard to justify a program that would provide mortgage financing to a borrower who couldn’t pay off their own credit card debt, especially by artificially improving their credit risk at taxpayers’ expense.

Seems we just can’t let go of the easy credit attitude that has fueled this mortgage crisis for years now…will we as a nation ever get it?

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