Hello:

The middle class are turning into the new sharecroppers. They're sharing their crop with predatory lenders. Minimum payments are designed to have them pay FOREVER!! The subprime meltdown is only the beginning.

In my view, predatory lenders are WORSE than drug dealers. At least there's TREATMENT for drugs.

Did you know that MBNA bank was the largest contributor to George Bush? Did you know that MBNA bank wrote the recently passed bankruptcy law? Do you know that the largest payday lender (who can legally charge over 300% interest on their loans) belongs to Wells Fargo? Do you know that our service men and women are PRIMARY TARGETS of predatory lenders?

Did you know that the fox is guarding the henhouse?

excon

PS> Rent the movie called Maxed Out.

You turning the home buyer into a victim ? In many cases they outright lied to get their loans approved. No one felt sorry for them when the home prices were rising and in some cases 2nd and 3rd homes were being leveraged as well as remodel the kitchen ,buy the SUVs and pay for the family vacations .
Bush made the same mistake the other day in floating the idea that they were victims worthy of a bail out .

There are many patient people out there who did not get suckered in by teaser rates and sub-primes .They waited until their ducks were in a row. They waited for the bubble to burst or to at least a point where the market stabilized. Now they are in a position to get in the market .

But now they are going to be required to have their tax money bail out those who were not as responsible ? Why should they ?

For that matter ;why should the banks and Hedge funds get a bail out either . Let them sink for all I care . There are winners and losers in the financial games of life . Everything to a degree is a risk. If the nanny state is there to bail you out of your bad decisions then the bad decisions will continue .

Hello tom:

Regulating predators isn't bailing out their victims. If we did that, there wouldn't BE any victims. I don't disagree with you, however. Some lied. I have no sympathy for them. But, some were lied to. I have plenty of sympathy for them.

Like I said, sub prime is only the beginning. I was referring more so to the credit card and payday loan industry.

Philosophically, I don't agree with bankruptcy at all. However, I can live with people getting a second chance. But, I liked it better, when my representative wrote the law. Not the lenders.

excon

We have discussed usury laws before .They should be enforced . However I also pointed out that in many cases those payday loans are the only loans that the buyer can get... and they have already determined it acceptable for whatever reason.

The sub-prime rate issue affects such a small segment of the market it is hard to make the claim that the middle class is becoming a sharecropper class as a result. As for credit cards . I use them to my advantage. I rarely pay interest on them and accumulate valuable freebies in exchange for my patronage.

I believe that personal finance should be a required mathematics course in the public schools .

I have to put my two cents in here (big shock).

You may remember that I am a commercial lender/credit analyst by trade. So I have a certain level of expertise here.

There are a few points that need to be cleared up.

Many people borrowed money for reasons other than real estate. As a lender, purpose of the loan is supposed to be taken into consideration in my decision-making process. If people are leveraging real estate for home improvement, that's one thing. But people were leveraging their homes in order to go on vacation, buy a car, a new computer, to pay off credit-card debt (using long term debt to cover short-term expenses) or some other stupid reasons. The lenders should have rejected those loans beause the PURPOSE of those loans was bad. That is where the guilt of the lenders lay. The borrowers are also guilty for using loan proceeds for these terrible purposes. Both parties are guilty here.

Another point: lenders are guilty for having lowered their lending standards. This is the same mistake that we saw in the SNL crisis in the 80s. Low lending standards led to high default rates, which led to failures of the lenders, a tightening of the fisc, and a global recession. The same process is occurring now, albeit on a smaller scale, in the sub-prime market.

Even sub-prime loans are supposed to have fixed standards. The lenders, in many cases, were guilty of lowering those standards in order to book more loans and reap profits, with no regard to the increase in risk. Now it is coming back to haunt those lenders. The standards that were in place prior to booking these crappy loans were good, safe standards, but still loose enough to allow for strong lending. There was no need to change those standards.

Had they stuck to those standards, the lenders would not have made those bad loans because they would have realized that once the principal payments start kicking in, those borrowers wouldn't be able to service their loan payments. The entire problem would have been avoided. Instead, they looked at the cash flows of the borrowers only during the principal-only or low-interest-rate periods of the loans, not their cash flow after the sunset kicked in. So the lenders are at fault for making bad loans.

On the other hand, the borrowers are at fault for not bothering to look past the sunset period. These borrowers thought that they could borrower on low-interest rates, with no principal payments and just roll those loans over every five or ten years until they sold the home. They never really understood that there's always a cost for borrowing money, and interest rates aren't fixed forever. They fooled themselves into thinking that the low-payment periods would last forever. And for that THEY are guilty. They were less often "tricked" into these loans than they simply participated in "willful blindness". Lenders are required by law to provide all sorts of disclosures about current and future payments before the borrower signs on the dotted line. If the borrower failed to read the disclosures, that is their fault. So at least part of the guilt lies with the borrowers as well.

Bottom line, both the borrowers and the lenders are guilty of greed. The borrowers wanted cheap money and the lenders wanted to book loans.

The silver lining in all this is that this will NOT turn into another SNL crisis. Banks have strict requirements for what portions of their portfolios may be sub-prime real estate, prime real estate, and loans for other industries. So no single bank will be hit as badly as they were in the 80s. Sub-prime lending is too small a portion of any bank's portfolio to bankrupt the bank completely. Even Countrywide, the hardest-hit lender of sub-prime loans, is still operating, thanks to a capital infusion from Bank of America. Sub-pime lending is still only a PORTION of Countrywide's total real estate portfolio, and they are not in imminent danger of failure any time soon.

Furthermore, the sub-prime lending market is a very small portion of a very large real estate industry, which is in turn a very small part of a very large economy. So the effect of even a complete failure of the sub-prime real estate industry will not have the same effect on the overall economy that the SNL crisis had.

And lastly, unlike in the SNL crisis, where we saw both the failure of the borrowers to make their payments AND a major decrease in real estate values, the current real estate values are holding roughly steady in most areas of the country. In the 80s, banks that foreclosed STILL lost their shirts because the foreclosed properties had lost their values. But as long as real estate values remain strong, the lenders can recover their principal from sale of foreclosed properties. And real estate values ARE remaining strong. So, for now, we are NOT seeing another SNL crisis in the making.

Elliot

Yeah I understand the issue .I was told by an agent why it was a good idea if I were to pay less than the full amt. of the statement from time to time. That I wasn't really a Preferred Customer unless I did so they could make some money off me . I shot that idea down in a hurry and told her that her bank and card were not the only game in town and that I get frequent offers from others. So far they have not dropped me and recently my plane ride to Seattle was paid for from the point rewards accumulated . Like I said... education is the best medicine .

I worked for a credit card issuer for a very short time. I left there because I could not stand being a part of an industry that takes advantage of people.

I got several dirty looks while in training because I would ask why doesn't the issuer take more responsibility in preventing identity theft by simply asking for the application to include ID or notorization. I was told that it would affect profits because it would slow down sales. You all know that you are not responsible for fraudulent or unauthorized charges. Did you know that it doesn't hurt the credit card issuer a bit? They simply charge it back to the merchant and charge a second transaction fee to boot. So, the issuers don't really care if the card belongs to the right person (or that is the distinct impression they gave me.)

Payday lenders target the working poor. A recent story on our local news told several horror stories how they get into a circle of debt that they can't get out of.

People borrowing too much for a house doesn't really get under my skin like these other do. If people are too dim to figure out how much they can afford, that is their problem.

Quote:

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Originally Posted by tomder55

Like I said ... education is the best medicine .

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Hello again, tom:

I couldn't have said it better.

By the way, what lesson is learned by those young and inexperienced 18 year olds who, with no job, on their first day of attending the college of their choice, are inundated with offers from credit card company’s??

Of course, the schools of higher learning get a significant piece of the action from the credit card companies too. That's a wonderful lesson our kids are learning at school. But, don't get me started!

excon

That is why I said personal finance should be a part of public school math curriculum.

Quote:

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Originally Posted by tomder55

that is why I said personal finance should be a part of public school math curriculum.

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Hello again, tom:

If it is, I'll bet MBNA will contract to teach the course.

excon

YOu should mention that the *only* entity that is EXEMPT from the usury laws are banks and their credit card business.


Anyway, there is a crisis in the mortgage paper out there packaged for investment. I listened to Kramer that frenetic money man on cable, and he calls those who are sitting in homes and not paying mortgages, whether it is because they have 100% mortgages and can't afford the payments, or whatever, "squatters".

Banking is like the freewheeling unregulated industry it was before the great crash! Another example of an entity where a foxes are watching over the hen house, just like the mining industry and other businesses Bush has appointed cronies to head up.

Quote:

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Originally Posted by excon

Hello:

The middle class are turning into the new sharecroppers. They're sharing their crop with predatory lenders. Minimum payments are designed to have them pay FOREVER!!!! The subprime meltdown is only the beginning.

In my view, predatory lenders are WORSE than drug dealers. At least there's TREATMENT for drugs.

Did you know that MBNA bank was the largest contributor to George Bush? Did you know that MBNA bank wrote the recently passed bankruptcy law? Do you know that the largest payday lender (who can legally charge over 300% interest on their loans) belongs to Wells Fargo? Do you know that our service men and women are PRIMARY TARGETS of predatory lenders?

Did you know that the fox is guarding the henhouse?

excon

PS> Rent the movie called Maxed Out.

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Yes. For example: I receive a least two prequalified credit card invitations in the mail every week and very very few are worthy a second look. Most of my mail goes immediately into receptacle file thirteen. Unfortunaly in Vegas, many people max out their cash limits on credit cards after reaching their daily limits on their checking accounts at the ATM. They then go right back to the one arm bandits.


Bobby