Your Financial Guide

Following the subprime mortgage crisis, lenders and underwriters have made the criteria for securing financing much more strict and tedious than in the past. However, more analysts are saying that they may be going overboard with the rules, making it too difficult for creditworthy individuals to qualify for a mortgage loan.

Citing commentary from a speech made by Chicago’s Federal Reserve Bank President Charles Evans, Dow Jones Newswires reports that the Federal Reserve Board may push for promoting heightened financial literacy in lieu of tightened lending restrictions. Evans also commented that striking down “nonstandard” mortgage products may disqualify many Americans from securing financing.

“Specialized (high risk) products may actually be appropriate for certain people, so such a policy would have some real costs,” the Dow reports Evans as saying.

Rather than eliminating certain products and establishing excessive procedures and criteria, Evans has proposed establishing more programs aimed at preventing foreclosure by educating homebuyers and providing financial tools and resources.

In a prepared speech to the Indianapolis Neighborhood Housing Partnership, the Dow reports Evans as saying that “such an approach might keep those who shouldn’t be in exotic mortgages from getting them while leaving such mortgages available to the small group of people for whom they are appropriate.”

Financial literacy programs have popped up nationwide as a means of both helping consumers improve their overall financial condition and giving then insight on how to prevent credit card, mortgage, and other forms of debt from spiraling out of control. In addition to federal education initiatives, many community organizations, banks and mortgage guarantors are also creating their own programs to aid consumers and prevent another subprime crisis.

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