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Yep. The were feeding the thirst of the global pool of money that wanted to invest. I'm almost positive most of the high risk loans weren't to poor people, they were to middle class and above...people that qualified for traditional mortgages but were convinced they could have more. It would be nice to see some statistics on this, but I can't find any.75% of the subprime loans issued the past 5 years were done by institutions that were NOT covered by the 1977 CRA....Community reinvestment act....just heard on cnn.... these institutions took these high risks and created these very bad and unsound loans, all on their own....their own poor business decisions.....
Sigh, you don't really understand. People that qualified for regular mortgages were encouraged to take out subprime mortgages because the subprime mortgages put them on the hook for more money...think $200,000 house vs. $750,000 house. The more these lenders could lend, the more they could make when they resold the mortgages.Where on earth did you get that assumption?
How can they be "high risk" if they're to middle class and above? Sub-prime means they DON'T qualify for traditional mortgages?
You can't find any stats because this scenario is in your head.
I wonder if that really happened much?
The Journal did endeavor to get to the bottom of an important question: what sort of people wound up with subprimes? The authors found that subprimes aren't a primarily urban or lower income phenomenon, but are more widely distributed than commonly believed across income levels, ethnic groups, and regions. That adds a new wrinkle to the problem.
However, one paragraph I object to characterizes subprime lending as the linear progression of a trend towards making credit available to lower income borrowers that began with the Community Reinvestment Act and continued with FHA loans. Huh? Those were government, not private sector, initiatives. FHA lending featured almost everything that subprimes lacked: sensible loan to value ratios, income verification and other assessment of the borrower, and realistic rates. In large measure, it was the favorable FHA record that led private sector lenders to take interest in lower to middle income borrowers.
It's much more accurate to depict subprime lending as yet another instance of recent lax lending practices, which included cov-lite LBO loans, CDOs, historically low risk spreads for junk bonds, and overheated commercial real estate lending, that to depict it as the result of programs to promote affordable housing.
From the Journal:
The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.
High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash.
It's much more accurate to depict subprime lending as yet another instance of recent lax lending practices, which included cov-lite LBO loans, CDOs, historically low risk spreads for junk bonds, and overheated commercial real estate lending, that to depict it as the result of programs to promote affordable housing.
Where on earth did you get that assumption?
How can they be "high risk" if they're to middle class and above? Sub-prime means they DON'T qualify for traditional mortgages?
You can't find any stats because this scenario is in your head.
Understanding how globalization affects the real estate industry may help shed some light on how it has becomes so vital for the economic well-being of societies around the world and what forces will play a role in the future. In this analysis, we will examine the subprime mortgage crisis as well as other trends in the real estate industry, such as the role of real estate investment trusts (REITs), demographics, offshoring, and government policy.
In todays globalized world, the finance industry and markets around the world are highly integrated. If a company, bank, government, or any institution wants to raise funds, debt (i.e. bonds) is issued and then rated by an agency on the institution's ability to pay back the debt. Credit rating agencies, such as Standard & Poor (S&P), are responsible for rating debt obligations. In an ideal situation, the S&P rating gives a close to accurate picture for investors who want to make a decision on how much risk they are willing to have when making a purchase.
To decrease risk, securitization has evolved. Securitization is the packaging of loans, such as car, home, and credit loans. To attract more investors, securitization pools assets with varying degrees of risk. There are many foreign investors in U.S. securities and securitization is taking place in markets around the world. Securitization leads to a diffusion of high and low risk investments and, in the case of real estate, it makes investments more liquid (easier to trade). Securitization increases the pool of investors who can finance the loans. In real estate, it also increases the suppliers, since non-banking companies have started to issue mortgages.1
Mortgage-backed securities are integrated into different types of investment vehicles, such as collateral debt obligations (CDOs), which were developed in the 1980s and became popular in the 1990s. CDOs acquire a variety of securities, including asset-backed securities and mortgage-backed securities, then sells the rights to the cash-flow from these entities and the associated risk. These rights are divided into tranches (tiers), depending on their length of the loan (short or long) and its risk. Now people around the world are investing in real estate by buying CDOs and other investments which incorporate mortgage-backed securities. Whenever there is volatility in a major market, such as the current crisis in the U.S., many around the world will be impacted.
see, thats the thing, the 5 year balloonsimply not true, my husband and i took out a subprime mortgage when we refinanced from a higher interest rate 30 year fixed, to save money...we had plans to sell the home before the variable rate kicked in 5 years later...which we did.
simply not true, my husband and i took out a subprime mortgage when we refinanced from a higher interest rate 30 year fixed, to save money...we had plans to sell the home before the variable rate kicked in 5 years later...which we did.
I find it rather astounding that the notwits on this board keep trying to blame the government, or the Dems or Republicans for what has been essantially at meltdown of the PRIVATELY OWNED banks.
Do you people NOT understand that if the rating companies (Moody's for example.. ALSO PRIVATE COMPANY) had done its job properly that NONE of this would have happened?
Of course you don't. That's why nobody seems to ever mention their role is this disaster.
Most of you are so faithfully sticking to the canard that government is the problem that even when there is TRILLIONS of dollars worth of evidence that makes this issue so apparent that even a child could understand it, you continue to want to make this an indictment of government.
Now to the extent that you can blame government at all, you can blame government for is NOT BEING SOCIALIST (read regulatory) ENOUGH.
Do you neocons and Republican apologists actually get that?
I rather doubt it.
Most of you Democratic and Republican Party basher really have no idea what the problem is or why it happened.
It is evident from your postings you're more than just somewhat clueless.
This disaster is really a brilliant failure of private corporations to regulate themselves, folks.
Government's role in this was NOT having a role in preventing it, as it should have.
The bond buyers KNEW what they were buying, folks.
They KNEW, but they didn't care because they thought the band would play on.
And we need to bail them out, why?
Because the rich must be rich otherwise they'll shrug and none of us will get credit they make by inventing money they don't have?!
Fuck them.
75% of the subprime loans issued the past 5 years were done by institutions that were NOT covered by the 1977 CRA....Community reinvestment act....just heard on cnn.... these institutions took these high risks and created these very bad and unsound loans, all on their own....their own poor business decisions.....
Yep. The were feeding the thirst of the global pool of money that wanted to invest. I'm almost positive most of the high risk loans weren't to poor people, they were to middle class and above...people that qualified for traditional mortgages but were convinced they could have more. It would be nice to see some statistics on this, but I can't find any.
But you have to keep in mind, people would rather blame minorities than face facts.
