RECENT NEWS
New York Times  Feb 4  Comment 
In the wake of the financial crisis, when rating agencies were blamed for feeding a subprime mortgage frenzy, Congress used the Dodd-Frank Act to adopt a battery of changes for the rating industry.
Equitymaster  Jan 29  Comment 
Posted by Equitymaster        Subprime - the word reminds us of the dark times in the global economy, the shadows of which continue to haunt till today. The term signifies the period when fancy and risky products such as subprime...
Forbes  Jan 28  Comment 
2014 was a blockbuster year for automakers, which reported their strongest annual US sales since 2006. General Motors (GM) and Chrysler posted double-digit sales gains in December. Nissan, Honda (HMC) and Toyota (TM) posted their best US sales...
New York Times  Jan 27  Comment 
A booming business in lending to poor people with bad credit who need cars to get to work is as much about Wall Street’s demand for high returns as it is about used vehicles.
NPR  Jan 23  Comment 
Dealers are extending loans to a growing number of people with weak credit, and more of them are having trouble making payments. The situation is evoking comparisons to the subprime mortgage boom.
Wall Street Journal  Jan 23  Comment 
T-Mobile will extend its best service offers, including financing plans for cellphones that can cost $650 or more, to any buyer who makes at least 12 payments in a row regardless of the person’s credit score.
The Australian  Jan 9  Comment 
THE saying that people who ignore lessons of history are bound to repeat it is a fair reflection on the mortgage broker scandal.
Wall Street Journal  Jan 8  Comment 
As Uber’s rise hits the price of a taxi medallion, Medallion Financial is expanding from its traditional loans to cabbies to finance subprime consumers buying boats and recreational vehicles.
Wall Street Journal  Jan 7  Comment 
As Uber’s rise hits the price of a taxi medallion, Medallion Financial is expanding from its traditional loans to cabbies to finance subprime consumers buying boats and recreational vehicles.




 

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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