Should they let people give up their homes without dinging their credit?


I'm continually encouraged by the quality of some of the comments we get here on WalletPop (To the guy who keeps spamming us with links to obscene stuff: I'm not referring to you!). In response to a post I wrote about bailouts for distressed homeowners, one reader had an interesting suggestion:

To me, the fairest solution would be simply to not record foreclosures from the evicted persons' credit reports, if the risks of the associated loan were not disclosed to the buyer and the buyer purchased for living, not speculative, reasons. If homeowners have to again become renters, I have to say, it won't be so bad and, when prices fall again, they'll be able to get back into the market with much more confidence, because it will be affordable.

The logistics of it aside -- not sure how you could convince lenders/the credit bureaus to expunge bad stuff from people's credit reports -- the concept is intriguing. It would be a way to let people get out of bad situations without having their credit hit so badly that they won't be able to by a home for years without using a subprime lender which, I seem to recall, was one of the causes of this problem in the first place.

I'm sure this will never happen and, if it did, it would severely damage the credibility of credit reports/FICO scores. Still interesting to think about.