As Wall Street tries to recover from the swirling chaos of the recent Fannie Mae / Freddie Mac bailouts, the typical consumer applying for a home mortgage is finding himself up against more restrictive criteria than any time in memory. As the Indianapolis local economy continues in its trend to remain strong, relative to urban areas in surrounding states, the creditors will find that they will be forced, sooner rather than later, to relax the newly stiffened practices to determine creditworthiness in order to remain a viable industry. Meanwhile the Indianapolis real estate agent is another victim in a long list of casualties resulting from lending institutions whose agents work on partial commission and spent many years doing whatever they had to in order to secure a loan.



The lending institutions have really created their owns problems, and now the consumer, and the housing market, is paying the price. In the Indianapolis real estate lending market, loans were extremely easy to get until late 2006 when the overall real estate market began to hemorrhage with properties it could not sell. Until this time, home mortgages that did not require a down payment, borrowers with bad credit, and little income verification practices were resulting in mortgages with payments that the borrower simply could not afford once the ARM rates adjusted.

Compounding the problem was that many lending institutions would work closely with a particular appraisal company that they ?do a lot of business with?, thereby assuring with a wink that the property appraisals would be favorable to secure the mortgage, even as the actual property values were plummeting due to over-saturation of the selling market. Meanwhile, the Indianapolis real estate agent was referring his customers to particular lending agents whom he ?does a lot of business with?, and the cycle spun out of control.

Now the lenders are being more restrictive, as a knee-jerk reaction to being stuck with tons of foreclosures that they cannot sell either. Among the restrictions, is the return to the necessity of having a credit score over 650 to be considered for a mortgage. If this is the new rule, all of the former Indianapolis real estate agents, who used to enjoy an inside angle on all of the best real estate deals, and who have since been forced into bankruptcy, will also be unable to secure a loan.

Being slammed by the sudden jump in interest rate on those sub-prime loans the lenders handed out like candy, resulting in damage to credit scores is enough of a price for the consumer to pay for simply accepting a deal that turned out to be too good to be true. When the original loans were brokered, it was all on the contingency that the sub-prime portion would be refinanced to a lower fixed rate before the rate adjustment. Now the same Indianapolis real estate lenders are refusing refinances on their own product because there is not enough value in the property to secure the loan. Nice trick.

To get the Indianapolis real estate market back on track, and the national financial market as a whole, something drastic is going to have to be done to level out the playing field between lenders and borrowers. This can only be accomplished with a combination of cooperation and forgiveness.

While the federal government is busy trying to bail out corporations for the mess they have created, they also need to consider bailing out the consumer. In the past, this form of government bail out has been called ?bankruptcy?. Bankruptcy is still a viable option, but the creditors, who created the bulk of this mess, are going to have to stop considering bankruptcy and foreclosure as a negative on the credit report when issuing new loans or, at least in Indianapolis real estate circles, the lending institutions are going to find themselves with no customers at all.