“lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing.”

[DaveS]

Seacrest wrote:
[quote=DaveS]

But he decides the following Christmas to spend more than he should, goes on vacation, etc. and is back up to $5,000 and a payment he can not afford. He's back to square one - in debt for more than he can afford.

Ain't the banks fault. The bank can not control how much OTHER credit a borrower decides to use. The bank was not irresponsible, the borrower was.

I am no expert in high finance, but weren't these kinds of situations already accounted for in the calculations of credit scoring systems and other risk-assessment models?

Seacrest,

Not in the example as I laid it out. Here's why, our homeowner had already qualified for both the CC and the mortgage. Assuming (again theory) he can manage both a $250 a month CC payment AND a $750 mortgage payment i.e. total debt payments of $1000.000

When he refinances the mortgage goes to $825 and the CC goes to zero i.e total debt payment of $825. He's CC rating is still within range to qualify for the 5% mortgage. And he can still maintain a balance on the CC for up to $175.00 a month.

The bank - nor the CC issuer - has no way to insure that he doesn't go above that. That is his responsibility.