Just as defaults on sub-prime loans are showing signs of diminishing, a new wave of lending problems may be about to hit. Defaults by homeowners with good credit are on the rise.
Many of these borrowers have interest only loans, commonly referred to as "option ARM" loans. When these loans adjust, the borrower is required to make payments that includes interest plus principal. Unlike sub-prime loans, which typically adjusted upwards after two or three years, these option ARM loans usually had a five to seven year period before the borrower was required to pay both principal and interest. For many, that grace period is now coming to an end.
Even if a borrower's interest rate remains unchanged, the additional principal payment (on top of the interest payment) could mean an increase of 50% in the monthly payment. Because lending requirements have tightened and home values have declined, these borrowers can not refinance their loans. And with property values down, some homeowners can not sell at a price that will cover the loan amount.
Lenders are starting to see defaults on these loans, and there is concern in that as these option ARMs adjust, a new flood of delinquencies will hit the banking industry.
Showing posts with label MedFICO. Show all posts
Showing posts with label MedFICO. Show all posts
Tuesday, August 5, 2008
Wednesday, February 6, 2008
MedFICO - Good Credit = Good Healthcare?
You already know that your credit score affects your financial health. But soon it may determine your physical health as well. Fair Isaac, the company that brought you your FICO score, is working with Healthcare Analytics and Tenet Healthcare to create a new MedFICO score. Just as your FICO score tries to predict whether or not you will pay your credit cards and mortgage bills, MedFICO is intended to determine your likelihood of paying your medical bills.
The healthcare industry says the reason this score is needed is to help hospitals decide whether a patient is capable of paying a medical bill, or whether they should write the bill off as uncollectable. Without this prediction, hospitals find it very difficult to balance projected income with expenses.
But consumer advocates have raised some alarms. We already know that there has been identity theft when it comes to our financial credit scores. What assurances do consumers have that there will not be similar problems with our health scores? In addition there is great concern over patient confidentiality. If medical bills become available for other to see, what is to stop an employer from hiring someone based on their medical history? Will hospitals provide different levels of care depending on whether the patient is deemed a good or bad credit risk? And what about simple clerical errors? How will an incorrect score affect the quality of care?
MedFICO's designers counter these concerns by stating that only the medical provider's name and amount owned will be seen on the report. But that does not guarantee the patient's medical history will be secure. For example, if someone has an unpaid bill to the Betty Ford Clinic, would the presumption be made that the individual had a substance abuse problem? If there are monies owned to Sloan Kettering, will some people assume the patient was treated for cancer. These are just some of the many questions this scoring system raises.
MedFICO is still in the development stage, but it may be implemented as early as this summer. I'll be sure to update you as more information becomes available. But you need to know this is on the horizon.
The healthcare industry says the reason this score is needed is to help hospitals decide whether a patient is capable of paying a medical bill, or whether they should write the bill off as uncollectable. Without this prediction, hospitals find it very difficult to balance projected income with expenses.
But consumer advocates have raised some alarms. We already know that there has been identity theft when it comes to our financial credit scores. What assurances do consumers have that there will not be similar problems with our health scores? In addition there is great concern over patient confidentiality. If medical bills become available for other to see, what is to stop an employer from hiring someone based on their medical history? Will hospitals provide different levels of care depending on whether the patient is deemed a good or bad credit risk? And what about simple clerical errors? How will an incorrect score affect the quality of care?
MedFICO's designers counter these concerns by stating that only the medical provider's name and amount owned will be seen on the report. But that does not guarantee the patient's medical history will be secure. For example, if someone has an unpaid bill to the Betty Ford Clinic, would the presumption be made that the individual had a substance abuse problem? If there are monies owned to Sloan Kettering, will some people assume the patient was treated for cancer. These are just some of the many questions this scoring system raises.
MedFICO is still in the development stage, but it may be implemented as early as this summer. I'll be sure to update you as more information becomes available. But you need to know this is on the horizon.
Subscribe to:
Posts (Atom)