RECENT NEWS
Forbes  Jan 28  Comment 
You won't become the next Christian Bale or Steve Carrell by shorting pools of securities containing auto loans, according to Citigroup's Mary E. Kane.
guardian.co.uk  Jan 27  Comment 
Adam McKay’s subprime meltdown drama is fast, witty and furiously righteous. But when it comes to the real events behind the story, is it a good bet? Director: Adam McKay Entertainment grade: B+ History grade: A– The global economy went...
New York Times  Jan 27  Comment 
The bursting of the bubble did not cause the recession. The Fed did.
Yahoo  Jan 25  Comment 
One year ago, analysts at Bank of America Merrill Lynch drew a parallel between the subprime mortgage crash and the disorderly fall in the price of oil.
Forbes  Jan 21  Comment 
After stocks went on a wild ride Wednesday the online lender decided to hold off, potentially losing the loaded honor of being the first company to go public in 2016.
Financial Times  Jan 13  Comment 
Bradford-based subprime lender shrinks doorstep lending book
New York Times  Jan 8  Comment 
The Securities and Exchange Commission’s annual report of credit ratings agencies finds that dubious practices persist long after the subprime meltdown.
Clusterstock  Jan 6  Comment 
The charter school industry — consisting of schools that are funded partly by tax dollars but run independently — may be heading toward a bubble similar to that of the subprime mortgage crisis, according to a study published by four education...




 

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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