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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (57762)	8/13/2016 10:09:38 AM
From: robert b furman	Respond to of 78954

One of the key features that protects those who make the loan is called Terms and Conditions of the loan itself. If an auto is repossessed and a loss is incurred Standard procedure is a for the lending institution to audit the loan papers made and kept by the dealer. IF there was a fraudulent submission made on the loan request -t he loss incurred gets charged back to the dealer. Dealers in general have a lot of assets and are very protective of them. Once again the wild wild west of the no document insanity of the subprime real estate loans made in 2008 had a shadow banking system of "Loan Originators" who fraudulently put credit requests together. Many of these loan originators were misfits from the auto industry and knew how to make things look good and became very good at it - especially when there were no terms and conditions agreements and or assets to claw back losses from. It was a perfect storm of excess credit being extended to those who didn't fit past sound credit standards. It was the initially a "good thing" for those who had bad credit to be able to share in the American dream of house ownership. It was a pipe dream created by politicians for the benefit of their constituents. Sadly it created excess credit which spiked the price of entry level homes and higher. Ultimately those hurt the most were those who had hoped to have been helped the most. Classic case of unintended consequences. I think the parallel in today's world are the student loans. There is a huge amount of high yielding money be made on the backs of this easy money to students. I have a friend whose son has just graduated from Law school - good kid. He has loans of 90,000 at a blend of 6.75 % - twice that of a 30 year mortgage. I asked him if he could refinance it and he said even his local banker can not do it as there are no assets to collateralize the loan with. Some one is yielding 6 plus percent on a very good kids loan - I'd like some of that !