Wednesday, August 22, 2007

Beyond Mortgages

From the Wall Street Journal:

It's not just mortgages. As it gets tougher to land a home loan, some people are also finding it harder and more expensive to get other types of consumer credit. Some lenders, such as USAA, are nudging up credit-score requirements across their auto loans, credit cards and personal loans. Bank of America Corp. and Capital One Financial Corp. recently raised fees and interest rates for some of their credit-card customers. And this month, Citigroup Inc.'s CitiFinancial Auto started charging higher auto-loan rates for borrowers with less-than-perfect credit.
Nationally, credit-card delinquencies are relatively low at 4% and haven't risen significantly in the past three years. However, in certain markets, especially those that have been hit hard by a decline in home values, delinquencies have spiked higher. In Fort Myers, Fla.; Port St. Lucie, Fla.; and Stockton, Calif., for example, delinquencies have jumped about two percentage points in the past year to as high as 5%, according to an analysis by Equifax Inc. and Moody's

"If [lenders] see a household start to go late on payments, they're going to be much quicker to respond," says Mark Zandi, chief economist at "They may reduce the size of the credit line or may raise the interest rate. They're responding much more quickly to any signs of stress."


David said...

I just love that the first thing credit card companies do when someone has trouble paying their monthly payment is increase fees and interest rate. Hmmmm, they are having trouble paying, so lets make them pay more, that should solve the problem!

Sippn said...

"Mark Zandi, chief economist at "They may reduce the size of the credit line or may raise the interest rate. They're responding much more quickly to any signs of stress."

Gotta agree with David - these people are fools if they think the credit line is not already maxed and they're going to get more in interest payments.

Pretty amazed with the Wall Street fiasco on top of the rest of this bubble. . . .

If they don't fix the mortgage market soon, prices will continue to tumble, but for those of you who are waiting. . . . in my best Dirty Harry fasion, "do you feel lucky?"

Curious said...


Last week BofA offered me a free (for one year) rewards card with 0% interest on cash advances and balance transfers.

Too bad I have no balances to transfer and I'm too darn chicken to do what I've heard others do with this kind of offer: Borrow the max and stick it in a one year CD at the best interest rate you can find.


Experiencing this firsthand and its been happening for at least 4 months. W/o spilling my guts for the ID creeps out there, suffice to say I’ve cancelled 3 cards during this time (with existing balances) to lock in very favorable terms offered during the Greenspan era “for the life of the balance transfer”.

While Greenspan may have wrecked our economy for years to come, his loose policy allowed me to transfer consolidated rate student loans from the early 90s from 8 & 12% to 4 & 5 % respectively. Saved me five figures in interest alone. He may have been a Wall Street mouthpiece, but I’d be a hypocrite to criticize him too harshly.

Specifically, I’ve “opted out” of a change in terms which cancels my card (though the SOBs keep the credit line active thinking I'll use the card just once, e.g. auto-payment) and prevents them from changing the terms for existing and future purchase balances, (n.b. they have to honor the terms of the balance transfers).

They pray each month I’ll be an hour late with a payment so they can renege and I get screwed with a unilateral APR change to somewhere between 14% to 24% . Uh-uh, ain’t ever going to happen, not with pre-scheduled e-payments.

I’m enjoying this ride.


Addendum: The SOBs will affect your FICO etc by decreasing your credit line. You once may have been utilizing 30% or less of your available credit, all of a sudden its 70%. Beware.

Gwynster said...

People are still paying off loans from the 90s? Finished grad school in 93 and paid off everything in 01.

highsierraguy said...

I was McGouged in Sacramento. My Aggie loan was a snap of the finger, my law loans exceeded 6 figures. I'm a dedicated civil servant earning one-third (or less) the salary of the guy I'm doing mouth-to-mouth combat with across the table (Brownfields housing, oh the irony). No regrets, the pension will be the pay off; if I live to collect it.

Gwynster said...


I feel for you. I'm another civil servant so I know how badly our wages suck. I was 110k in debt after grad school and thank god for the tech boom. Instead of paying it down aggressively, I should have taken those tech $ and put them into a down on a house. hindsight is 20/20

My DH got his MA from U of Chicago. We're almost done with that- 14 payments left.

highsierraguy said...

Gwyn- I guess nowadays one gets to burn their sheepskin after its paid off ! :) We once had an off-line about how far a west coast pension could take someone in some more rational state. Still exploring. And if I could guarantee the loonie wouldn't rise greater than the USD, I'd look there too, but I'm way over my head on that question.

My point(s) aren't about my financial choices, rather they're about actions outside my control. I haven't made a late payment since the mid-seventies for a guess(teenager late on the utilities probably), making way more than the minimum payments, FICO is high sevens, yet the banks who have dirty hands in the sub-prime, alt-A etc mess are the ones raising APRs and cutting credit limits on me at the same time. Cap One, BofA (no card with WAMU but you can bet they're squeezing too).

I just love looking at a rather large balance at 4.09% that used to be 12% (of course now it's now unsecured, no SallieMae to look to--so the card cos. shit). All said and done, I'm sitting fine waiting for the Cat 5 to become a wimpy tropical storm.

buying time said...

I can't complain too much about the housing bubble....after all we sold in 2006 and used half of the proceeds to pay off our student loans (80k). Its very liberating being completely debt free (no student loans or mortgage).

norcaljeff said...

Take the cash advance and park it in a 5% ETrade account until the 0% goes away. It's free money and no risk, why are you chicken for crying out loud???

Curious said...


cluck cluck cluck. Too damn chicken to borrow even with the payoff. Meh, maybe I'm waiting for two years free interest.

It's still borrowed money. I hate that. I dunno, but I am thinking about it.

Today we got a $35K no interest offer for 12 months from BofA and we're a W2 loosers™. This one was a "Business Prime". WTH?

I've read about how "smart" BofA's move was on CFC but these offers are starting to scare me. Are they looking for a revenue stream to finance that move?

I'm about ready to move all cash out of BofA!