Wall Street has been lying to us for months.
What's going on is that the financial markets created a market for fraudulent loans, and that's exactly what they got, fraudulent loans.
Yeah. Greed insisted the banks, brokers, and mortgage lenders deliver high returns (higher than the artificially low rates the Fed allowed on checking and savings accounts accounts and CDs, anyway) and they obliged them and safety take the hindmost.
There is a tremendous difference between subprime lending and ordinary lending.
By 'ordinary', I presume you mean the old 80-20 loans, God rest their souls. :-) At least by the 1980's, many banks and lenders were allowing 80-10-10 loans. But none would allow 100-0 or interest-only or negative amortization or ARM loans.
Subprime borrowers are stupid. They do really stupid things, and most of them got in terrible trouble because they were too stupid.
Now, now. The evil lenders are supposed to take all the blame for this. :-)
Bet you didn't know there is a market for loans which have been discharged in bankruptcy (heavily discounted, of course). The people who collect on them count on a certain percentage of debtors being too stupid, too ignorant, too senile, too cowardly, in a hurry to refinance, whatever.
Hmmm. I would think, once the mortgage debt is discharged in bankruptcy and no payments were due on them, the debt would be worthless.
I had a client who paid off his nephew's loan which had been discharged in bankruptcy just to stop one of these predators from calling him all the time. I wanted to go after them but he decided it was just too much trouble and let it go.
Is this why the loan can still be sold? |
