Buyers Caught in the Lending Freeze

by Peter Vernon on General

In an effort to save the flailing financial industry, the Senate has decided to give its nod to the revised $700 billion bailout plan. Although it was initially rejected in the House, it will be presented once again for final approval. The said bailout program involves the purchase of bad assets from private financial institutions, most of which are mortgage-related.

If this bailout plan is finally approved, it will free the banks from the burden of these troubled assets. The sad news is that banks have become hesitant about approving loans especially those at great risk of being defaulted.

With the credit industry becoming conservative, the consumers are the ones who will suffer more. Gone are the days when you can easily get approved for a mortgage. In addition to a credit score in the vicinity of 750, you should also make sure that your credit history has no traces of late payments. Otherwise, you will have to agree to a higher interest rate – that is, if your mortgage application gets approved.

On the other hand, businesses will find that the frozen up cash flows will make it difficult for them to complete payroll and some belts will be tightened. For this reason, many of the businesses might consider laying-off some of their employees in order to keep the business running. Again, this will not bode well for the national economy.

Until the $700 billion is approved and utilized, it is uncertain what the outcome is for the housing and financial industries. There is so much at stake and so much to be gained as well. If everything works according to plan, the entire nation will soon find itself on its feet and the market will once again enjoy a healthy level of consumer confidence.

But if this fails, you can expect millions more Americans to be jobless and homeless. For now, all everyone can do it to keep their fingers crossed and wait.