Subprime

[bara]

For publicly flogging anyone who thought subprime mortgages was a good idea.

Its been done before and failed then to. In the 18th centiury.

http://www.cracked.com/article/214_7...ch-in-face_p2/

http://us.ft.com/ftgateway/superpage...20081348572327

Same basic principle then as now. Take something that is pretty much worthless, rename it, create a fictionally inflated value, sell it to a bunch of people and then never address the underlying problems that made the original purchase worthless.

((Sorry if this is posted somewhere else, ran across this and thought I would share.))

[mikoyan29]

A subprime mortgage in and of itself isn't a bad idea as long as the bank does their homework and charge the appropriate interest rates. Why it was a bad idea in the last meltdown was because the banks were selling those mortgages almost immediatly and packaging them as investment bundles. The investment folks made the assumption that housing prices would never go down, so they figured if nothing else if the person defaulted, they would get to sell the house. But as we know...that was wrong.

[Panacea]

A subprime mortgage in and of itself isn't a bad idea as long as the bank does their homework and charge the appropriate interest rates. Why it was a bad idea in the last meltdown was because the banks were selling those mortgages almost immediatly and packaging them as investment bundles. The investment folks made the assumption that housing prices would never go down, so they figured if nothing else if the person defaulted, they would get to sell the house. But as we know...that was wrong.

They also were issuing mortgages to people who had no income, that was another problem.

Subprime loans are fine for people with adequate income but bad credit to allow them to buy a home. But the interest rates are very high, and it is often better to improve your credit score to buy a conventional mortgage rather than go subprime.

[mikoyan29]

They also were issuing mortgages to people who had no income, that was another problem.

Subprime loans are fine for people with adequate income but bad credit to allow them to buy a home. But the interest rates are very high, and it is often better to improve your credit score to buy a conventional mortgage rather than go subprime.

That was my point, there were many issues that led to that meltdown but lack of due dilligence was probably number one. But that lack of due dilligence was more due to the banks realizing they were going to sell the mortgage almost as soon as the ink was dry on the paper. They made their money, the collecting on it was going to be someone else's problem. But for the life of me, I do not understand how that is not fraud.....but then again, I don't have Congressmen in my pockets like the banks do...

[protege]

But for the life of me, I do not understand how that is not fraud.....but then again, I don't have Congressmen in my pockets like the banks do...

They knew things were going to come crashing down back in 2003. Bush actually *warned* about it, but nobody wanted to listen. Banks and investors were too busy shuffling the house of cards around. There was so much money to be made, that they took advantage of things. Of course, regulations weren't as strict, making that possible. Also not helping...was the desire to get more low-income families...into owning their own homes. Good intentioned idea...but bad result in execution.