my beef with these loans is that local governments are using them as profit centers and the having them paid with property taxes changes the level of enforcement while likely keeping consumers in the dark as to the full implications of the loans and penalties
America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
61–70 of 194 posts
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#62I wish I could read this article... but i can't. It's been a problem for a while here on HN. I wish moderators would not allow articles with paywall.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#63Earlier quoted context omitted.
Could just leverage up on some 30 year treasury bills for at least 9% annually. 3-4x leverage will get you that.
So borrow money to lend money? What if the interest rate changes in those 30 years?
> So borrow money to lend money?
this is how it works. you don't think those lenders were lending you their own money do you?
> What if the interest rate changes in those 30 years?
the original loans are almost certainly fixed rate, the end borrowers may very well have to pay an adjustable rate, which just means more profits for the intermediate lender.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#64I wish I could read this article... but i can't. It's been a problem for a while here on HN. I wish moderators would not allow articles with paywall.
As long as there's a workaround, it's allowed.
https://news.ycombinator.com/newsfaq.html
Within the past few days the WSJ has changed access to their site and the previous workarounds no longer work. I wouldn't be surprised if a new workaround isn't found that WSJ submissions will no longer be accepted.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#65Earlier quoted context omitted.
I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. Is the book in the US generally stacked towards originators? Certainly, as I argue, with financial literacy being so low, most home-owners wanting to do anything to avoid moving, and family/…
I think you've hit the nail on the head when it comes to houses - people form irrational sentimental attachments to their real estate.
It's not necessarily irrational to want to stay in the same home after 40 years. Money is only indirectly beneficial. If you enjoy where you live that can be worth quite a bit.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#66The 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…
> We're going to keep going from crisis to crisis because banks can't say no, and the government(s) deems them too big to fail Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. The elderly woman in the article initially refused the $50k renovation to her 5 bedroom home, but then agreed because she thought the government was going to subsidize it for her. Th…
> Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would.
But they don't, and they won't, and that's why this wealth transfer works.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#67Earlier quoted context omitted.
I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. Is the book in the US generally stacked towards originators? Certainly, as I argue, with financial literacy being so low, most home-owners wanting to do anything to avoid moving, and family/…
> I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." I think we can amicably disagree. I'm not in the "fuck Wall St." camp. I understand what it is supposed to do and the value it is supposed to provide. > Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Yes.…
Yeah I think we're in agreement in general, just coming at this issue from different perspectives. I'd like to see things changing on the consumer side as well as the gov/regulation side described in the article:
Riverside County, Calif., has opened an investigation into marketing practices for PACE loans, and California Gov. Jerry Brown signed into law in September new requirements establishing uniform disclosures for PACE loans, an effort to make lending terms closer to those for mortgages. Homeowners who get a PACE loan now have three days to back out.
The largest PACE lender, Renovate America Inc., is accused in three lawsuits filed in November by borrowers of double-charging interest and administrative fees and failing to immediately credit loan payments. The suits seek class-action status. The company denies the allegations and says it will “defend PACE, our company and the program vigorously.”
In November, the Energy Department urged administrators of the loan programs to clearly explain loan costs and other terms, allow borrowers to cancel their loan during a short period and deter kickbacks to contractors.
It would be nice to be able to trust financial institutions/loan originators, have them explain things to consumers in easy-to-understand and fair ways, and have some type of more personal relationship than we have now with those who provide us with places to save/borrow money.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#68The 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…
> We're going to keep going from crisis to crisis because banks can't say no, and the government(s) deems them too big to fail Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. The elderly woman in the article initially refused the $50k renovation to her 5 bedroom home, but then agreed because she thought the government was going to subsidize it for her. Th…
"blame during the financial crisis of 2007-08 as many consumers took on home loans they had no intention of ever making good on"
Citation needed - for the number of consumers who "took a mortgage they never had any intention of paying" (your example), versus "people who took on a mortgage they couldn't keep paying (after the ARM bubble, which, let's not forget, all the banks were promising would be a matter of "refinance at the lower rate we'll have then").
I think the number of people who had no intention of paying a mortgage they took is probably vanishingly small.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#69Earlier quoted context omitted.
> Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. I think that is blaming the victim. As the article says, you have repair people describing the terms of the loan to people. If they don't understand what they're selling (and I'm sure they don't) then how can you expect the average person to? Not to mention the pressure selling that is probably being used…
People need to stop signing forms they haven't actually read and understand. Make the person stand there while you read and think about it. It pisses them off like you wouldn't believe. If more people were doing that, they'd have to change and have simpler, more straightforward terms.
Ever been to the ER and in a lot of pain? They will give you forms to sign and you will most likely sign every dotted line as soon as possible to get the pain to go away.
Humans are not rational economic actors. Never have been. Never will be. This premise underlies the entire structure of consumerism. Watch "Century of the Self" if you don't believe me.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#70Earlier quoted context omitted.
> Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. I think that is blaming the victim. As the article says, you have repair people describing the terms of the loan to people. If they don't understand what they're selling (and I'm sure they don't) then how can you expect the average person to? Not to mention the pressure selling that is probably being used…
> Saying that people intended to default however, is not true. I'm not sure if it's what roymurdock meant, but there's a nugget of truth to what he said. People did take on loans that they never planned to pay off personally. They saw the relentlessly upward trajectory of home prices and wanted to benefit. They took on loans with the intention of refinancing or selling the home a few years down the road. It wasn't an…
Except that's not what he said (or perhaps he just said poorly). He didn't mention anything about "personally", he said "making good on".
Someone flipping, re-financing or selling the home is inherently going to be making good on their mortgage. He is claiming there were swathes of people who had "no intention of making good" on mortgages.