St Casimirs Mortgage Minute

Millions of Spenders Are Ready to Come Back From the Mortgage Crisis

The number of people who lost their homes to foreclosure peaked seven years ago, and many are once again applying for loans as their credit scores begin to improve. These credit score improvements, combined with gains in both employment and income, could bolster consumer spending over the next couple of years. According to data from the Federal Reserve Bank of New York, the number of consumers with a new foreclosure added to their credit report totaled 6.8 million from 2007 to 2010. Negative events like short sales and foreclosures typically roll off a borrower's credit report after seven years, and for many, that anniversary is fast approaching. This could boost demand for homes, increase spending on durable goods like appliances and furnishings, and even prompt consumers to apply for new credit cards or auto loans. "Banks are awash in reserves, so it's a backdrop that's ripe for further extension and further growth in consumer credit," said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. However, many people who experienced foreclosure also had trouble paying other bills, resulting in a bigger hit to their credit scores, which could stay lower for longer.

From "Millions of Spenders Are Ready to Come Back From the Mortgage Crisis"
Bloomberg (07/07/16) Stilwell, Victoria