RECENT NEWS
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...
Reuters  Aug 18  Comment 
Private equity firms The Blackstone Group LP and TPG Capital Management LP are close to buying subprime mortgage lender, Kensington, Britain's Sky News reported on Sunday.
guardian.co.uk  Aug 15  Comment 
Former banker blamed for HBOS demise lands windfall after sale of subprime car finance firm to Provident Financial James Crosby, the disgraced former boss of HBOS, will pick up £850,000 from the sale of the subprime car lender Moneybarn to...
BusinessWeek  Aug 14  Comment 
Borrowers took $30 billion in new auto loans, the biggest increase of any type of debt. But that doesn't mean its a bubble.
New York Times  Aug 11  Comment 
The Justice Department is using a powerful civil fraud provision to investigate potential fraud in the marketing of securities backed by risky auto loans, Peter J. Henning writes in the White Collar Watch column.
New York Times  Aug 8  Comment 
A number of factors may be behind this year’s surge in corporate acquisitions. | Three leading private equity firms have agreed to settle a lawsuit over collusion. | Santander Consumer USA subpoenaed in subprime inquiry. | An upstart in China is...
BusinessWeek  Aug 8  Comment 
Subprime auto lending still hasn't returned to pre-crisis levels, report four economists at the New York Federal Reserve Bank
New York Times  Aug 7  Comment 
The company is the latest to be asked for information related to the underwriting and securitization of subprime auto loans.
Benzinga  Aug 5  Comment 
Federal prosecutors' recent request that General Motors' (NYSE: GM) finance unit hand over documents concerning its subprime lending practices could be the tip of a regulatory iceberg for the industry. Players at risk may include Credit...
USAToday.com  Aug 5  Comment 
What could possibly go wrong with subprime car 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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