RECENT NEWS
Clusterstock  Aug 17  Comment 
Banks are scaling back on lending to Americans with the lowest credit scores, according to a study from TransUnion.  Lenders processed fewer new personal loans, auto loans, and credit cards for subprime borrowers year-on-year in Q2 for the...
Financial Times  Jul 25  Comment 
Subprime lender’s switch to full-time collection agents carries risk and opportunity
Benzinga  Jul 22  Comment 
Stop me if you’ve heard this one before. Subprime auto lending has soared since the U.S. mortgage bubble burst back in 2008, and, predictably, default rates have started to follow suit. This week, 90-day auto loan delinquency rates eclipsed...
Forbes  Jul 13  Comment 
Given that the auto sector is a massive part of the economy, this could be an early warning sign of a slowing economy. That, in turn, would be good for the gold price.
Forbes  Jun 26  Comment 
Coming out of the recession, there was an increase in subprime auto loans, but that was a case of the market returning to normal. Now that we're back in more normal times, auto lenders have returned to scrutinizing potentially risky subprime loans...
Financial Times  Jun 22  Comment 
Berkshire Hathaway provides C$2.4bn financing package for Home Capital Group




 

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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