Houston backs off credit score enhancement plan to pay off first-time buyer credit card debt
I could write a book in response to this article:
White backs off ‘credit enhancement’ with tax dollars
Houston plan ‘hit a nerve across this country,’ councilwoman saysBy CAROLYN FEIBEL
Copyright 2009 Houston ChronicleFeb. 24, 2009, 8:44PM
Mayor Bill White yanked a controversial plan Tuesday that called for the city to use taxpayer funds to pay off some personal debts for first-time home buyers, following a flood of outrage and criticism from across the city and beyond.“I don’t think we ought to be in the business of paying off someone’s debt so they can buy a house,” White conceded during an impassioned City Council meeting. “Paying off people’s credit cards is ridiculous.”
Many council members expressed “embarrassment” over the idea, which received national media attention after the Chronicle wrote about it in Tuesday’s editions. The story appeared to strike a nerve among taxpayers already angry over the recession, the housing meltdown, and federal bailouts of banks and automobile companies.
“Everybody’s outraged about this,” said Councilman Ron Greene, adding that a constituent e-mailed him a copy of a bill and asked him to pay it. “This was not well reasoned.”
The “Credit Score Enhancement Program” would have given up to $3,000 in grants to individuals who are trying to qualify for mortgages through the city’s homebuyers assistance program. City officials had said some applicants fall short of eligibility by only 10 or 20 points on their credit scores, and paying off some debt balances can quickly improve their numbers.
Councilwoman Pam Holm waved a thick stack of e-mails from angry residents.
“I do not understand how we can ever justify spending taxpayer dollars to pay somebody’s credit card,” she said. “I don’t understand how it can be even considered to come up. I am truly embarrassed. I think it shows poor leadership.”
National outrage
Kris Errickson, a stay-at-home mom from northwest Houston, appeared before council to voice her indignation.
“This proposal is a slap in the face for the average Joe who is trying to get ahead,” Errickson said. “The government should not punish taxpayers and bail out those who cannot buy homes.”
Errickson said later that she and her family moved recently from the Heights to a less-expensive home near Timbergrove. “We adjusted our living so we could afford to live in a house,” she said.
“If you can’t afford it, and you can’t qualify, then you shouldn’t have it,” she said.
Councilwoman Anne Clutterbuck said news of the plan had hit a nerve across the country.
“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,” she said.
Hoped to curb crime
Councilman Jarvis Johnson said the $3,000 grants were not a good idea but said the city needed to promote home ownership because it increases the tax base and lowers crime.
“If you look at where the money was going to be put, into Houston Hope areas, they are areas that are typically underdeveloped — where there is crime because of a lack of home ownership,” he said.
The $3,000 grants would have been available only to those who agreed to buy a home in a Houston Hope area. Those neighborhoods, which the city is trying to revitalize, include Sunnyside, Denver Harbor, Fifth Ward, Trinity Gardens and Acres Homes. The $444,000 proposed for the program was leftover money from a $1.5 million appropriation the city made for emergency home and roof repairs after Hurricane Ike. Councilwoman Wanda Adams said the money should be spent on those still in need of home repairs.
Good intentions
Housing Director Richard S. Celli said that the plan would only have been able to help applicants pay off installment debt like student loans, and not revolving debts, such as credit cards.
“This program was never intended to pay off someone’s flat-screen plasma TV,” Celli said. “This program was intended for hardworking, credit worthy low- to moderate-income individuals who needed a helping hand in paying off some debt like a medical bill or a student loan.
My first thought was: What a stupid idea, waste more money on the banks.
My second thought: Those credit card bills are most likely going to get paid anyway since the account holders want to buy a home.
Then I read some of the comments in response to the article and they just go to show how VILE and incredibly IGNORANT so many people are.
The same goes for the government. The IGNORANCE is overwhelming. You could replace half the American people and especially elected officials with monkeys and nobody would notice the difference. You just can’t beat their stupidity.
It’s hard to believe that despite the Business Week 2/08 article on FICO scores NOBODY bothered to ORDER FNMA and FHLMC to STOP utilizing FICO scores. The gruesome details:
Lenders agree: FICO scores do NOT predict defaults
The Houston money would be MUCH better spent on MAKING Obama issue an executive order to prohibit FICO scoring.
Just think of the GOOD jobs you’d be creating by hiring back some of the many thousands of underwriters to MANUALLY underwrite mortgages and auto loans again. It takes skill and experience and these are high stress jobs, but they are also good paying job. Desirable jobs for skilled Americans.
You add 1 - 10 hours of work to each loan. It takes time to request documentation from borrowers to prove the incorrect credit reporting and to establish whether a loan SHOULD be approved. “Compensating factors” should be part of many low income borrowers’ approvals.
It would be too cool to be treated as HUMAN BEING.
Isn’t it WORTH a few extra underwriting hours to prevent so much misery, foreclosures, suicides and economic crisis by putting truly qualified people into homes with properly underwritten fixed rate mortgages?
That’s what I used to do in the early 90s until FICO scores become MANDATORY.
I turned away many prospective clients because I did not think they’d be able to stay current on the loans. Despite HIGH debt/income ratios and past credit problems, I’m not aware of ANY of my buyers being late on their mortgages.
They knew to contact me if they ran into trouble. Many stayed in touch and sent referrals and/or we refinanced as rates went down.
I’m disturbed by the idea of paying people to buy homes in high crime areas.
That’s like the signing bonus in the military, it might well get you killed.
I’m especially worried after reading some of these vile comments in response to the article. They’re not going to help anyone. If the economy gets worse, the people in the cities and especially in those bad neighborhoods will be so screwed.
Crime is high now? What if unemployment doubles?
One of the primary reasons my buyers did so well was that they bought into the very LOW end of GOOD neighborhoods on the San Francisco peninsula. You can’t imagine how many fixers I’ve seen.
It was a LOT of work and I could only do it because I got both the real estate and mortgage commission and part of my commission went back to the buyers for remodels/carpets, whatever. Obviously, the homes all needed at least some cosmetic work and landscaping, but we made sure they were structurally sound. I’ve learned so much from the home inspections.
Even during the last real estate slump in the early 90s most of my clients had NO problem refinancing with lower rates and some even got cash out for remodels due to appreciation.
I don’t think you can revitalize bad neighborhoods by putting more poor people into subsidized and possible CRAPPY homes.
I’m not familiar with Houston, so I don’t know how bad it is. But sometimes, you just have to be realistic and bulldoze everything. Rebuild or turn the neighborhood into a park?
There’s so much that COULD be done. Develop a NEW sustainable town for people wanting to try something different. Building isn’t so hard. So many construction workers are unemployed. Land is cheap. The possibilities are endless and the sky is the limit!
I’m afraid the geniuses in Houston or any government could only screw it up.
I can only hope that the SUCKER BUYERS get a clue and don’t just buy houses because they can.
Owning a home and struggling to make the mortgage payment, especially in a BAD neighborhood and in a crummy house, is not all it’s cracked up to be.
I don’t expect Houston or any government to take action to prohibit FICO scoring unless there’s MASSIVE pressure from the general public.
So you might want to send this post to your city or state housing departments and if you’ve been campaigning for Obama, try to get his staffers’ attention. I’m still waiting to see some CHANGE, but heard Richard C. Hoagland yesterday and he was very optimistic about changes in the Obama administration. One ought to give him a chance.
Posted by Christine on 02/24/2009 at 08:33 PM
2003 Suit (appealed, Experian filed credit reports on PACER) • Fair Isaac - credit scoring fraudware • (2) Comments • Permalink
You have said before that FICO scores do not predict defaults or risk. Here’s another example of such a thing that is very relevant to today’s financial issues: http://news.slashdot.org/article.pl?sid=09/03/03/036223
I’ve been encountering a number of journal entries of online friends that talk about credit card companies dropping their credit limit with no warning. They also described a side effect of this is an instant lowering of their credit score because their ratio of credit used to credit max jumps. Very ugly :-(
I’ve been posting for years about creditors lowering the limits and closing accounts. I specifically remember Citi closing a client’s account with a ZERO balance after credit inquiries due to having to move after Katrina.
Funny how people don’t care until it happens to THEM. And then all they want is their credit limit restored or the formula changed so it works for THEM. They don’t care about all the OTHER issues.
I didn’t know that traders also relied on obscure formulas, but it’s not surprising.
Recently I considered that I might have the perfect 850 IQ. 
I actually LIKE to think.
