Student loans undermine the US mortgage market

Student loans undermine the US mortgage market

 Get a mortgage in US, many citizens are still very difficult, despite record low interest rates to buy housing. The purpose behind this was the collected obligations for education loans.Americans matured 40 years still can not pay for the joined obligation to the banks.Recent data from the Government Save Bankin New York, says that in this age group accounts for up to 2/3 of the student loans.this circumstance backs off the recuperation of the home loan showcase: the quantity of property holders in the age of 40 has diminished in the final quarter of last year by 4. 6%, which was a record drop since 1982 Luke Nichter, professor of history, University of Texas, whose student debt is $ 125 thousand., Has no hope of obtaining a mortgage loan. Nichter pays $ 1,500 a month on student loans after obtaining a degree at Bowling Green State University in Ohio. He is one of the millions of students who, after graduating from university, burdened with debt."Student debt has a significant impact on the ability to buy a house, which means that reduced sales of washing machines and dishwashers, lawn mowers and other household goods", - says Diana Swank, chief economist at Mesirow Financial.This issue is empowered as an aftereffect of a rise in the understudy advance business sector, the volume of which surpasses 150 billion, while loan fees for a few existing loans exceeded 12%. Unlike mortgage loans from student borrowers with little hope of refinancing of obligation at lower rates.


Private and federal debt of students in 2012 has already exceeded $ 1 trillion"I think we need to see more buyers in the housing market, because now in many places cheaper to buy a house than to rent it - Swank says, recalling the record low mortgage rates and housing prices, which are now 25% lower than in during its peak in 2006 - their absence does not only prevent the occurrence of buyers who want to improve their living conditions, but in general slows down recovery of the entire economy. "According to the Bureau of Consumer Financial Protection (CFPB) The main reason for this jump is the lack of many parents' ability to finance their children's education after the 2008 crisis"Many families are faced with a significant reduction in the value of their homes, unemployment and a decrease in assets in their pension funds, in connection with which the parents had to cut spending on higher education of their children, which meant the growth of student debt," - says Rohit Chopra, Commissioner for Human student borrowers in the CFPB, a supervisory body established as a result of the credit crisis.Without significant changes in this area, many graduates of the United States will never be able to become owners of property that, according to research by the bank JPMorgan Chase & Co, will lead to the collapse of real estate market and a record seizure of the mortgaged property under the mortgage loan. During the March survey 9 out of 10 people said they want to have their own house. Nevertheless, the demand for rental housing is now at a ten-year maximum.Those who find jobs after graduation in the labor market, which is now in the US is not at its best, ruin their credit history, prosrochivaya payment more than 90 days. According to the Federal Reserve Bank of New York, nearly a third of student borrowers overstay their payments.About 60% of bank risk managers are expected to repay the student loan growth in a period of the next six months, according to a recent report by Fair Isaac, the company that created the FICO credit scoring system. Those respondents stated that non-payment of other types of consumer loans are likely to remain at the same level or decrease.The problem lies in the fact that most of the students of the debtor can not file for bankruptcy. And if the bankruptcy of the borrower takes a mortgage payment and credit card debts, then this procedure will not help in the case of a student loan. Due to changes in US law in 2005, the student can not be freed from debt, except in the case of his disability. In return for the loan the lender may require the debtor to reimbursement of income tax, payroll and even pension benefits."You have more chances to die in a car accident than say goodbye to debts in case of bankruptcy, - says Mark Kantrowitz, the head of the FinAid.org website dedicated to student grants and loans -. You can not escape payment of the loan."Megan Lilborn, after graduating from Texas Christian University in Fort Worth with a master's degree in the field of social issues and religion, regret that not spending money at the university more economically. By the time Megan got a degree, she got into debt by $ 40 thousand. As a result, Lilborn having one child is still forced to rent an apartment and do not even dream to buy a home."If I knew that it happened, I would have never picked up a student loan - Lilborn says -. I have learned to live on my money and stayed at his parents' house."According to data obtained from the Federal Reserve Bank of New York, around 37 million individuals have the public and private student loans. Almost half of these loans in deferment, that is, borrowers should not have to pay during their studies at university or facing unemployment. Nevertheless, in many cases, these percentages increased duty periods are added to the principal amount of the loan.Meanwhile, despite the weak demand for home purchase by students of the debtor, property prices in the US continue to grow. Only at the beginning of this year, housing became more expensive by almost 10% year on year. This jump was not observed since April 2006 In this case, the figure is continuously growing for 10 months. This situation may be indicative of an unhealthy state of the US mortgage market.