Tuesday, Feb 12, 2008
It is not contained...
NY Times: Mortgage Crisis Spreads Past Subprime Loans
It's not just subprime anymore and it's not contained: "Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with subprime credit." Now, however, the collapse in home values is sucking in borrowers of all classes. Why? Because "banks are responding to the rise in delinquencies by capping home equity lines of credit in areas with falling real estate prices." The easy money is gone.
Posted by an bearin bui @ 03:07 PM (282 views) Add Comment
3 Comments
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1. Plato said...
So now we are seeing the knock-on effects of the Subprime collapse. Treating property as a 'clever investment' for short term financial gain is actually a form of gambling.and consequently the chances of losing are very high for the majority. Spending on a promise is attractive but doomed to failure. The dream in reality is turning into a nightmare for many which has been actively encouraged by Governments who should have known better. However many politcans have more than a simple interest in the Banks.
The Banks will recover all losses, make no mistake and we will all pay for this as usual.
2. lvmreader said...
It is time to revisit what credit ratings actually are. Anyone can stay on top of their bills while they are in a job. Does a credit rating measure your ability to keep your job? Does it measure your extended family's asset and propensity to lend to you? Does it measure your potential value to society based on your education, experience and connections?
What does it measure exactly? I have known people with £250,000 salaried jobs, no debt, no history of debt and they are classed under the same system as "poor risk".
What gives?
This whole mess is down to a corrupt and ill-maintained credit rating system. We need to remove all regulation on who can be a credit rating agency and let the market decide. The Governments of the world clearly have no clue and the current corrupt oligopoly has been proved to have soiled knickers.
3. lvmreader said...
The label "subprime" is just that. A label. And an especially bad one.
What we face here is a mispricing of risk. Period. Especially to those who are "over-levered"
The idea that "unemployed black men in string vests sitting on a porch in Alabama" are the root cause of this is nonsense. That segment of the market was always dwarfed by the so-called "middle classes with good-credit" who just wanted that bigger house, better car, more exclusive holiday and more nights out at restaurants.