RECENT NEWS
Financial Times  Jul 15  Comment 
Former JPMorgan banker becomes chairman of US Santander arm
Financial Times  Jul 15  Comment 
Lender supported by Neil Woodford and Michael Spencer to offer doorstep loans
Clusterstock  Jul 9  Comment 
China's stock markets have nosedived over the last month and banks are starting to worry that the collapse could be tipping over from a hefty correction into a full-blown financial crisis. The Shanghai Composite has collapsed over 30% in the...
New York Times  Jul 2  Comment 
Mr. Dundon built a small regional lender into a national powerhouse in subprime auto lending.
TheStreet.com  Jun 29  Comment 
NEW YORK (TheStreet) – Auto leasing is a more popular option for car buyers than ever, but post-recession credit restrictions have locked out lots of potential drivers. According to auto pricing and analysis site Edmunds.com, 28% of all new-car...
Forbes  Jun 24  Comment 
A new study concludes the mortgage crisis was just as bad with prime as subprime, and that the loan-to-value ratio explains it all.
Yahoo  Jun 24  Comment 
Of the subprime vehicle loans bundled into securities, 73 percent now exceed five years, up from 64 percent during the first three months of 2014, according to data from Citigroup Inc. Loans as long as seven years are increasingly being put into...
Clusterstock  Jun 19  Comment 
Lenders may have learned their lesson from the financial crisis as lending to low-credit borrowers continues to decline. According to analysts at Credit Suisse, debt being taken on by American households has increased since its trough in 2013,...
Forbes  Jun 12  Comment 
Recall the warnings of the subprime crisis prior to the 2008 great financial crisis. Those warnings were real but many later claimed nobody saw it coming. It feels just that way to me today.
Yahoo  Jun 8  Comment 
As the housing market continues to stabilize, a possible trend seems to be re-emerging, the demand to invest in subprime loans.




 

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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