RECENT NEWS
CNNMoney.com  Nov 5  Comment 
Read full story for latest details.
TheStreet.com  Nov 4  Comment 
NEW YORK (TheStreet) --Capital One Financial Corp. was issued a subpoena by the New York district attorney's office as part of an investigation into the company's subprime auto finance practices, Reuters reports. The financial services...
MarketWatch  Nov 3  Comment 
Only a quarter of domestic U.S. banks are in the business of originating subprime auto loans, a Federal Reserve survey released Monday showed. The Fed's senior loan officer survey found that only 19 of 76 domestic banks are in the subprime auto...
Yahoo  Oct 31  Comment 
Securities and Exchange Commission is investigating the subprime auto lending and securitization practices at No. 2 U.S. Since the start of the year, Ally has issued $2.75 billion in three deals of bonds backed by subprime auto loans, down from...
Financial Times  Oct 27  Comment 
Fed’s asset purchases have led investors to scrum for subprime assets
MarketWatch  Oct 23  Comment 
General Motors disclosed in a Securities and Exchange Commission filing that its GM Financial unit was served with additional investigative subpoenas to produce documents from state attorneys general and other governmental offices relating to its...




 

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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