RECENT NEWS
SeekingAlpha  Aug 30  Comment 
By Josh Arnold: Shares of America's Car-Mart (NASDAQ:CRMT) have been largely range bound for the past year during a tougher macro environment for car sellers. The retailer of low end used cars has produced some bad earnings reports in the past...
Benzinga  Aug 29  Comment 
Is there a risk of a subprime auto lending “bubble”? The New York Times raised that question in July, in a lengthy investigative article on its DealBook page. According to the article, the number of used-car auto loans -– mostly to...
New York Times  Aug 26  Comment 
We largely avoided the 2007 crash but didn't learn from it. Now we're facing our own bailouts.
SeekingAlpha  Aug 23  Comment 
By Orange Peel Investments: The news today was that Bank of America (NYSE:BAC) came up with $16.65 billion to resolve the biggest liability having to do with the subprime crisis from 2008. It's the end of a process that has been a dark cloud...
New York Times  Aug 21  Comment 
Prosecutors are also preparing a separate civil case against Angelo Mozilo, the man who came to embody the risk-taking in subprime mortgage loans.
New York Times  Aug 21  Comment 
First Investors Financial Services Group is accused of giving credit reporting agencies flawed data about thousands of car buyers.
MarketWatch  Aug 20  Comment 
Countrywide Financial Corp. co-founder Angelo Mozilo is facing a civil lawsuit over subprime mortgages, according to a report by Bloomberg. The Los Angeles U.S. attorney is reportedly getting ready to file the lawsuit against Mozilo and up to 10...
Yahoo  Aug 20  Comment 
Subprime auto loans are back and defaults are starting to rise
Benzinga  Aug 18  Comment 
For home buyers who have a solid credit score and other favorable financials, getting approval for a home mortgage loan is relatively easy. For buyers who have less than attractive financials, however, life can get a little unpleasant. That is why...




 

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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