Sunday, October 2, 2016

As big a problem as subprime mortgages

Unpaid subprime car loans hit 20-year high

Americans with lower credit scores are falling behind on auto payments at an alarming pace. The rate of seriously delinquent subprime car loans soared above 5% in February, according to Fitch Ratings. That's worse than during the Great Recession and the highest level since 1996. It's a surprising development given the relative health of the overall economy. Fitch blames it on a dramatic rise in loans with lax borrowing standards that have helped fuel the recent boom in auto sales. More Americans bought new cars last year than ever before and the amount of auto loans soared beyond $1 trillion.

Posted by lvmreader @ 10:45 AM (5068 views)
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2 thoughts on “As big a problem as subprime mortgages

  • Dealers are lending money to people they know won’t be able to pay off the loan. The loans are packaged into bonds which are offloaded on to small investors looking for yield in a low-yield world. The rates on subprime loans can be very high, and many of the poor are actually paying their car loans, so they too are getting hit in the pocket.

    The question is how this can happen again when this securitisation game blew up the financial system last time around. The answer is that the auto lobby is very powerful and carved out exemptions from the post-2008 reforms for itself.

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  • NINJAs are back!

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