theprof00 said:
according to records it wasn't lending to high risk people. It was the predatory lending after a decline in anti-usury enforcement. Yaknow those overdraft fees from banks? that is one of the forms of predatory lending. Basically people were loaning to no-credit people and had ridiculous fees and penalties, and were more concerned with repossessing rather than actually being paid. Think about it, the bank owns a house, gives them 150k mortgage, then after 10k something happens and they take the house back. If it happens enough, after interest and such, the bank could make 250k on just a 150k house. However, with the economy nobody was buying the houses, so all the banks had was property, not money. That is why sub-prime companies were the most troubled, because they had so much invested in the properties and no money. Not to mention that 61% of subprime borrowers actually had good enough credit to borrow from prime lenders. That means people were being tricked and schemed into contracts with typical high-risk penalties/interest rate. can you believe that? 61% of borrowers had good credit that banks were ready to destroy. |
Having good credit is not equal to being able to buy a house. Traditionally house purchases required good credit standing, little current debt AND a 10% down payment on said house. With Subprime loans suddenly you could have good credit, but a large amount of credit card or student loan or car loans debt, AND not only be able to purchase a house but purchase that house without a 10% down payment.