RECENT NEWS
Reuters  Nov 17  Comment 
Citigroup Inc agreed to sell its Canadian subprime lending unit to an investor group led by private investment firm JC Flowers and Värde Partners for an undisclosed amount, as the...
Financial Times  Nov 8  Comment 
OneMain reins back growth amid a spike in delinquencies
Insurance Journal  Nov 7  Comment 
Goldman Sachs Group Inc. has settled a 2011 lawsuit claiming the investment bank fraudulently induced a bond insurer to guarantee payments on the doomed Abacus collateralized debt obligation ahead of the financial crisis. ACA Financial Guaranty...
Forbes  Nov 4  Comment 
Subprime Credit Card Surge Pushing Up Missed Payments Credit card lending to subprime borrowers is starting to backfire. Missed payments on credit cards that lenders issued recently are higher than on older cards, according to new data from credit...
Clusterstock  Oct 12  Comment 
The Office of the Inspector General late last month released the results of a damning audit of the charter school industry, which found that charter schools' relationships with their management organizations pose a significant risk to the aim of...
MarketWatch  Sep 30  Comment 
Subprime and prime auto loans, and the bonds linked to those loans, suffered increased losses in August. That won’t slow heading into year end.




 

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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