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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (15647)	6/21/2004 6:25:24 PM
From: Ramsey Su	Read Replies (2) \| Respond to of 110194

ild, there are many "problems" with real estate that are different from previous rounds, causing me to believe that if this bubble bursts, it is going to be one hell of a mess. In no particular order: I do no remember any previous real estate bubbles being supported by interest rates that is so low, which will automatically eliminate lowering rates as a remedy when it crashes. There are a ton of fraudulent loan applications on file right now. Many of the stated income apps are questionable. The problem being if these borrowers are ever foreclosed upon, they should immediately sue the lender. I am willing to bet that most of them can demonstrate that the loan broker or loan officer played a part in "preparing" the application and most likely responsible for coaching the borrower into committing fraud. The volume of subprime lending is unmatched. I was discussing the subject with some friends and none have the answer. Imagine this. A borrower with a FICO of above 630, or just above what a lender considers subprime, applies for and receives a loan as a non subprime borrower. Upon signing the loan docs, has this borrower just crossed the threshold into subprime territory with the added debt? My reasoning being that if they are struggling to be barely above subprime prior to taking on new credit, it wouldn't take much to push them over. I opine that we need to keep an eye on employment. Any sign of weakness would bring an end to this cycle.