The 2008 crash isn’t too difficult to understand for anyone willing to look into the situation. Even I saw the sliding toward oblivion as early as 2003. When a town of <35,000 acquires a dozen store front mortgage brokers in a matter of months and they each push mortgages written for 110% of home value with zero down and no validation of income HOW CAN IT NOT END IN DISASTER?
And could I get lucky again with a guess? It sure seems to me the national debt, the Fed and Pentagon spending will soon have US sunk in a national bankruptcy situation. And we can be sure that there will be the same winners and losers in the coming crisis as 2008. Those winners sure learned their lesson 10 years ago.
The subprime auto lending will not be the same as the housing crisis. You can easily repo a car and not so easy to repo a house. Also the interest rates are not comparable. The home mortgage rates were not necessarily adjusted for risk at the same level that a car loan is. Car loans might have 25% interest rate while that same credit rating may have only got a 5% rate on a home mortgage in early 2000’s.
I have been seeing this same repo car for years. It is a old cop car with 2 dozen cameras mounted on it. It drives through parking lots scanning for license plates. I can’t say for certain but I suspect that they are doing 2 things. One checking for active repos. If they get a hit, they call the tow truck in. Second, they are creating a database of tags by location. So when a repo order does come in, they check there database and see that this plate has been scanned 5 times in this parking lot. It seems to me like an efficiently run repo business to me.
What happened with the home mortgage crisis is that financial institutions let greed get in the way of common sense. There was a certainty back then that home values would continue to rise, literally forever. And therefore if you got yourself involved in having issued a bad mortgage it wasn’t a big deal, because you just foreclose and then sell the house for more money than you’d lent out in the first place.
Of course, any time anyone says an absolute like “it will never stop going up,” you know that’s exceedingly unlikely and therefore should not bet the farm on it.
What’s even dumber with the car loans is that no one believes that particular fiction. Everyone acknowledges that the value of a car plummets the instant you drive it off the lot, and within a few years it’s worth less than half of what it was bought for.
So they’re handing out car loans like candy, and when someone can’t pay even repoing it isn’t going to make up all the money that was put on the line.
The only institutions who are virtually guaranteed to make money on bad car loans are the buy-here-pay-here lots, and their entire business model is based on repossessing the car over and over again - and they aren’t charging any 0% interest, either.
I’ve had 4 homes and 4 mortgages through banks. I paid them all off within 10 years. Only one of those mortgages was ever sold and that was after 8 years. Banks have a hard time giving up the interest payments in the early going just like any for profit business would. It may make a difference what risk of repayment the borrower presents as to when the bank decides to bail and sell the mortgage…
Are you certain that none of your mortgages were sold @TwinTurbo? Most people see no change in their dealings with their local bank when their mortgage is sold.And while the home buyer should be notified of the transfer of ownership of the loan there’s always been a lot of oversight in details like that. And when notice is made it might be worded so vaguely that it reads like junk mail.
Another phrase for corporate bailouts is - Corporate Socialism.
We bailed out the banks in 2008 because of their own ineptness. Their mortgage bundling was extremely bad idea and is what drove the banks into the financial downfall. Banks started by bundling some prime loans with subprime loans and sold them (also insured them through companies like AIG) as prime loans. Then when loans started to fail…it failed quickly and the banks and insurance companies like AIG tried to hide it. Some people saw what was happing and bet against the mortgages. Banks actually had to create these types of transactions because none existed. And those people made BILLIONS AND BILLIONS.
And now the banks are bundling loans again.
Who’s going to bail them out this time? Personally I’m tired of it. Estimates of the bank bailout is much larger then the initial $700 billion. Closer to $16 TRILLION. Yup…we got screwed.
No question. The one that was sold was preceded by notification and a change in the payee and address to make payments. Insurance needed to be changed to the new note holder as well. I’m not one that would miss details like this. All payments went to the original note holder and when I made the final payoffs, the banks that originated the loans provided the final payment details and accepted the checks I wrote or deposit transfer checks through the same bank to their mortgage department. I received the satisfaction of lien and new title document submission from them as well.
Might I guess that your situation and attention to detail is rare @TwinTurbo.
And think of all the miles and miles of driving with all the tire wear and potential for a collision that Twin Turbo avoided with his attention to detail Miss Carolyn. Everything is linked to automobiles these days. We’ve just left out the make and model in some posts.
Naive capital was the main reason for the crash. Institutions that had no business whatsoever jumping into extremely complex investment instruments (the country of Iceland was one notable example) relied on investment grades given by S&P or Moody’s. The rating agencies we’re paid usually by the seller of those instruments. Quants working for both the sellers and the rating agencies came up with complex mathematical models designed to show that housing prices always went up and that many of these investments we’re almost as safe as a FDIC insured passbook savings account.
The folks who bet the opposite way were foolish as the institutions they purchased insurance, or credit default swaps (CDS) against a drop in the housing market didn’t realize the CDS sellers didn’t have the capital to back up that insurance.