Title is definitely a bit overblown, while it sounds like there's a definite problem with the incentive structure that incentives people to sell loans that borrowers can't afford, 22B isn't close to the size of housing bonds during '08. Further peppering the article with comments about it being the 'fastest growing category' don't take into account the fact that the absolute size isn't really that large. It sounds like someone should take a look at better regulating these loans, but the sky isn't falling.
America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
11–20 of 194 posts
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#12The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…
Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil. If I'm reading it right, defaulting is basically equivalent to being behind on your taxes.
Does anyone know if this bundling to property tax payments also gives these loans repayment priority in a foreclosure? If it does, such loans could poison otherwise sound mortgages by superseding them to the remaining equity.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#13The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…
Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil. If I'm reading it right, defaulting is basically equivalent to being behind on your taxes. Does anyone know if this bundling to property tax payments also gives these loans repayment priority in a foreclosure? If it does, such loans could poison otherwise sound mortgages by superseding them to the remaining equity.
I would assume so. I'd think that this would be treated the same as government backed student loans. Bankruptcy and foreclosure don't mean anything... the loans are here to stay.
That just highlights another problem. Big money using the government as its muscle... but that's another rant for another time.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#14OK - The 'web' search/link isn't working for me anymore. Maybe it's time to start rethinking WSJ submissions. Based on the first paragraph, this is the exact same article: http://www.msn.com/en-us/money/realestate/loan-boom-echoes-s...
AMP version worked for me through the 'web' link.
I think it works if I use the web link first, before trying the direct approach.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#15The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…
Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil. If I'm reading it right, defaulting is basically equivalent to being behind on your taxes. Does anyone know if this bundling to property tax payments also gives these loans repayment priority in a foreclosure? If it does, such loans could poison otherwise sound mortgages by superseding them to the remaining equity.
>> Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil.
Hey, it worked for student loans right? I have no idea how all this is going to play out, but it won't be pretty.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#16The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…
Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil. If I'm reading it right, defaulting is basically equivalent to being behind on your taxes. Does anyone know if this bundling to property tax payments also gives these loans repayment priority in a foreclosure? If it does, such loans could poison otherwise sound mortgages by superseding them to the remaining equity.
> Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil
Also, because "PACE financing is structured as a tax assessment instead of a loan, the PACE programs do not have to provide to homeowners the same disclosures about the financing costs that traditional lenders must provide" [1].
> defaulting is basically equivalent to being behind on your taxes
Beyond being collectable as a tax lien, such a default would complicate the property's underlying mortgage. This is because "the tax liens for PACE financing take priority over other lien-holders, and those lien-holders are not notified or given an opportunity to object."
Furthermore, based on the article, it is unclear if some municipal or state governments are partially or fully guaranteeing their PACE liabilities.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#17The title made me think that this was going to be about subprime auto loans, which are definitely in "crisis" territory. This whole mess (subprime auto, renovation, and home loans) comes from the increasingly rent seeking nature of Wall Street. It used to be that fortunes were both made and lost on Wall Street. Now, for large investors ("whales"), it's 3.5% or I take my money to another fund. If I don't have a consis…
Agreed. Also, some economists/researchers are claiming that subprime lending wasn't alone in triggering the crisis, but that it was also a prime crisis as well; that debt levels were already unsustainable, more generally. Not to say that subprime wasn't a big component, but that there may be macro patterns still emerging that's difficult to see/process.
I think this article from M.I.T. Sloan was posted here a while back: http://mitsloan.mit.edu/newsroom/articles/rethinking-how-the...
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#18Seems like an example of how it's easy to be "fastest growing" when something is really small. These loans started about five years ago and the cumulative amount loaned is about $3.4 billion. Most of the activity has been in the past year, so of course the rate of growth is over 100%. But the absolute numbers are utterly tiny. For perspective, subprime loans peaked at over $600 billion per year, and total mortgages outstanding are around $14 trillion.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#19OK - The 'web' search/link isn't working for me anymore. Maybe it's time to start rethinking WSJ submissions. Based on the first paragraph, this is the exact same article: http://www.msn.com/en-us/money/realestate/loan-boom-echoes-s...
It should work if you use the "web" link in an incognito window. WSJ remembers if you visited it directly and then shows the paywall even with a Google referer, but incognito mode defeats that. I agree it's getting to be something of a pain. Thankfully this article seems to be republished in many places.