RECENT NEWS
MarketWatch  Sep 21  Comment 
Three men indicted this week for allegedly running a complex half-fake, half-real Ponzi scheme used the promise of high returns from buying, selling and collecting collateralized subprime and defaulted consumer loan portfolios to defraud doctors,...
Financial Times  Sep 13  Comment 
You asked, we answered: FT journalists on the financial crisis 10 years on
Motley Fool  Sep 12  Comment 
Strong performance has driven this subprime lender higher, but will it continue?
The Economic Times  Sep 10  Comment 
The crisis in the US subprime market during 2007-08 led to collapse of many financial institutions.
Financial Times  Sep 5  Comment 
Blackstone has bought thousands of properties that were caught up in the mortgage meltdown
MarketWatch  Aug 27  Comment 
A build-up of debt among a small corner of corporate America has echoes of the subprime lending boom that contributed to the U.S.’s economy collapse in 2008.
Clusterstock  Aug 24  Comment 
An overlooked area of the debt markets has "eerie similarities" to the 2008 sub-prime mortgage crisis. Mark Zandi, the chief economist at the analytics arm of the ratings agency Moody's, argued that rising risk taking and falling standards of...




 

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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