RECENT NEWS
The Hindu Business Line  Jun 3  Comment 
Clearly not in India. No, but in the US. And surprisingly, really really big in China.Another subprime crisis? Not yet, but it seems to be definitely headed in that direction.
Financial Times  May 29  Comment 
Credit markets heat up as lenders push into murkier areas
Benzinga  May 14  Comment 
LoanNow is unveiling a new lending arm aimed at subprime customers at this week's Finovate Conference. The company has made its name as a lender by offering fast loans through its website to people whose credit scores are undesirable to...
Forbes  May 5  Comment 
The troubled mortgage servicing sector has a new tumbling stock: Nationstar Morgtage Holdings, the second largest servicer of subprime mortgages nationwide and one of the industry's fastest growing players.
Insurance Journal  Apr 30  Comment 
Swiss Re, Europe’s second-biggest reinsurer, said regulators should prevent catastrophe bonds from being repackaged like subprime mortgages. “It’s important for traditional players like us and regulators that we make sure we don’t get into...
Forbes  Apr 22  Comment 
Oil companies are on the hook for nearly a quarter of the overheated $1.2 trillion high-yield and leveraged loan market.
Motley Fool  Apr 22  Comment 
A subprime mortgage generally refers to loans made to borrowers with low credit scores, and while they're not as common in the current loan-making landscape, they are slowly making a comeback.
Insurance Journal  Apr 6  Comment 
Pacific Investment Management Co. accused American International Group Inc. of misleading investors about “colossal” losing bets on unregulated credit-default swaps and subprime debt before the 2008 financial crisis. Pimco seeks to hold AIG...
Insurance Journal  Mar 23  Comment 
American International Group Inc. shareholders won approval on Friday of a $970.5 million settlement resolving claims they were misled about its subprime mortgage exposure, leading to a liquidity crisis and $182.3 billion in federal bailouts. U.S....




 

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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