Try to think outside the box and what is preached by the economics professor. The lender is not using his/her own money, it's someone else's a.k.a fractional reserve banking a.k.a. printed out of thin air. Hence there is a profit, short of default. Backtrack a few years of rock bottom mortgage rates. Real inflation, which runs at around 8-10% was higher. Don't forget that fixed rates were offered and locked in. So no, it's not impossible, far from it. It's all profit, borrow at X%, relend at X+2%. Just a matter of being in that privilieged position.
That is just general idea of lending to average Joe; however; often it isn't the case when you dealing huge long term loans with hidden agenda behind. We have inverted yield curve on long bond; that is someone thinks the long term inflations will go much lower than current. It isn't the common wisdom about long term inflation anyway.
Yep, the same kind of people that you stand in back of at the convienent store waiting to pay for your gas, while they're buying hundreds of dollars worth of lottery tickets. I saw an article about how dumbasses are RENTING those huge, + $2,500 clown wheels for they're cars. Yes, I said RENTING. Those spinning ones have got to be some of the silliest things I've ever seen.
had to see for myself. i am surrounded by stupid borrowers and these "clowns". amazing.... http://www.detnews.com/2005/autosinsider/0501/25/C03-69726.htm
I'm saying son, all I gotz to do is sell three "20 sacz" and the rent for my rimz is payed for.....nah mean Yo momz hurry up and slice up some of that gummit cheese for me
This is the reason they are subprime in the first place. They have outstanding debt that creates a high debt-to-income ratio. If the credit company knows that your income is $50,000.00 a year, and your monthly minimum debt payments are $3500.00 (mortgage, car payment, and cc's), your DTI is 84%. Your score is going to be low even if you make timely payments, because the risk of you taking on another debt is higher. You may ask how credit companies know what your income is, but that is easy because you report your income everytime you apply for new debt. Even if you lie about it, it is usually verified by the cc companies and the real number is what gets reported. It is a classic example of the ant and the grasshopper. The ant works all summer long to prepare for the winter while the grasshopper fritters the days away. Once winter comes along the grasshopper is screwed because he did not prepare for what lies ahead. These people do not think ahead and when they only have to pay $35.00 a month to borrower another $5,000.00 on a card, all they think is "I can afford another $35.00 a month", rather than thinking do I want to spend another $35 a month for 28 years to borrower this 5 grand. That is why I do not feel bad that more people are going to have to go into Chapter 13 bankruptcy rather than 7. The Chapter 13 will teach them a lesson that they won't soon forget.
What is with all the goodie goodies on here dissing people that are subprime? Are you happier than they are?? I think not, if you were happy you would not give a rats ass if somebody was renting wheels or whatever. I see wheel renting as a possible business opprotunity.. the glass is not half full btw, it is underspecified... time for another round here at the beer bar... later
Personally, I am not trying to diss all subprime people, but I am dissing the ones that continue the negative habit of continually borrowing money when they are unable to afford it. There is a very good reason for people to be concerned with this situation too. The subprime market has created a lot of foreclosures in the real estate market, which negatively affects everyone in the neighborhood. With a majority of subprime borrowers doing 100% loan to value loans, when they foreclose in a slow market, the lenders have to short sell the homes. I'm sure you are familiar with the term, but for those who are not, short selling a home means the lender takes less for the sale than the amount they are owed on the loan. What does this mean for the other homeowners in the area? Values go down because the home sold for less than it's actual value. Lenders will take the offer because they are just trying to free up capital to loan to the next person. Their interest is getting as much money back as possible in the shortest amount of time. They aren't concerned with the property values in the area. The subprime borrower in this case has no vested interest in the property as well, because they didn't put a down payment on the property. They are basically paying an inflated rent bill on the property. They are most likely not to care about foreclosure because of this.
I was watching one of the home buying shows with my wife. This young lady buys a townhouse for 200k, reasonable for her market, but then she gets a 40 year loan with payment of $1,600! Hello, WTF are you buying for if you can't afford atleast 10% down. I mean we are talking 200k, not 600k in OC, CA where I come from. Honestly, I don't know if I would be so quick to buy a house again, atleast in Denver. After figuring costs, if I sell now after 3 1/2 years I might break even or pocket 10k at best. And I bought for 10k less than they asked. You have to realize that the tax write-off is roughly 30 cents on the $1, since most folks are in 30% bracket.