RECENT NEWS
Financial Times  Jun 29  Comment 
Subprime lender is growing fast in ‘guarantor’ sector but test will come from regulators
The Economic Times  Jun 19  Comment 
The country’s largest mortgage provider, Housing Development Finance Corp, says one in five of its customers is eligible as an affordable-housing borrower.
Financial Times  Apr 20  Comment 
Industrial giant beat expectations despite new $1.5bn charge over subprime lending
Financial Times  Apr 20  Comment 
Crisis-era troubles in financial services continue to haunt new CEO John Flannery
NPR  Apr 17  Comment 
House flipping is at an 11-year high in the U.S. New research shows borrowers with good credit like flippers, and not subprime borrowers, were mainly responsible for the crash. Is another bust coming?
Clusterstock  Apr 17  Comment 
Goldman Sachs launched Marcus, an online lending business, in October 2016. The business has originated $3 billion in loans, according to Goldman Sachs CFO Marty Chavez. But analysts have expressed concern about the quality of these loans,...
Bankstocks.com  Apr 6  Comment 
Bloomberg: Smaller Subprime Auto Lenders Are Starting to Fold N.Y. Post: Jamie Dimon gives Trump a mixed report card New York Times: Consumer Bureau’s Chief Gives…




 

What happened blaicasly was because of assuming that a trend was permanent. In the financial world, this is a form of mental disorder. Trends are why anyone could be a day-trader and make money, for a while. Their impermanence is why anyone that didn't get out of that in time lost their shirts. The subprime loans were designed to churn the loans. You had loans that were fixed for usually two years, then would become variable. The whole intent was for the borrower to refinance in two years, again generating all of the bank's new-loan fees. The trend for real estate to appreciate rapidly was counted on to continue to keep this attractive for the borrower. Borrow 100 with 5k in costs to pay off a loan of 95, wait two years, borrow 105k with 5k in costs to pay off a loan of 100, wait two years, borrow 110k with 5k in costs to pay off a loan of 105 but then the trend didn't cooperate by giving a home value of 110k, and the balloon broke. People still had the same house they did, but now a loan for more than they originally paid for it, and they can't get refinancing, and can't sell it for what they owe. Trends are temporary. People that think otherwise will eventually lose money. Now, how do you know when a trend is coming to an end? There's a story about the Crash of '29 about a broker who was getting a shoe shine, and the shoe shiner gave him a hot tip on a stock. He realized that when shoe shine boys were giving stock tips, the market was about to crash and he got out. During the day-trader era, there were stories about bus drivers and janitors making huge money in day-trading, just before that went south. How many times have YOU seen people offering to help people get loans in their answers right here on Yahoo, offers totally unconnected to the question being asked? It was a trend. Now it's not.

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