I wonder: If it's actually a tax assessment does it transfer with a sale of the property to the new owner? I can foresee a scam of buying a property, fixing it up with the max loan available and then flipping it to an unaware buyer who checks last year's taxes as an estimate of what to expect and then gets a nasty surprise.
America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
131–140 of 194 posts
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#132Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#133The 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…
Marx and other classical economic thinkers speculatively connected the fall in the rate of profit to increases in inequality and long-run economic cycles [1]. Essentially, the idea is that since the rate of profit exceeds the rate of growth, rent seekers (capital holders) tend to get richer and richer and own more and more of the wealth. This impoverishes all other parts of the economy and starves it of resources, ca…
Sounds right... Not sure Marx imagined what that process would look like alongside the emergence of a new species through (autonomous corporations).
I expect the details of solvency for funds, pensioners, etc, will fade away into history as we move away from the large institutions and individual risk that necessitate them.
What happens when every citizen controls thousands of autonomous corporations, each with perfect credit (if limited means)? Many rules of economics will no longer apply.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#134Earlier 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.
And tie up at least $1k for 30 years... most people can't afford to do that. The current rate is 2.9 and the long term average is 7. If you can get a 9 return right now, it's illegal.
a) its not tied up, treasuries are one of the most liquid markets, you can buy and sell in a milliseconds notice.
b) if you are talking about self directed investments at all, you are waaaaay past the financial situation that "most people" are in and probably accepted that a long time ago
c) and what's 2.9 multipled by 4?
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#135Earlier quoted context omitted.
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.
Didn't work for me.
It seems to only work for mobile now; I could not get it working from a desktop browser (with or without incognito mode), but using the web AMP link from my mobile shows me the whole article.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#136Earlier quoted context omitted.
> 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. 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…
> A good example of how the average person thinks financially... how many homeowners do you know that consider their home an "investment". Probably most, if not all.
Homeowners are often legally required to sign a document agreeing that their home is not an investment.
It not being an investment is mostly the fault of your local government(and, I suppose, of the local homeowners themselves who don't make it an issue). If cities removed all the non-hazard-related zoning laws, property values would mostly be tied to the expected cap rate. And this would happen whether or not homeowners knew how to calculate a cap rate. And valuing something based on its profit potential seems close to the definition of an investment.
OTOH, this reduces the ratio of property owners to renters, who are less likely to care about property rights(I wonder if this is one reason the cities skew left?). So your city might end up like California if you did that, and something even worse than zoning might come along. Historically, only property owners could vote, which is one way to solve that problem; it's possible the modern approach is to segment a certain percentage of the population into SFHs. You could check that hypothesis by seeing how SFH-owners skew politically(I haven't done this).
I don't actually know anyone who owns an SFH, isn't an investor, and considers their SFH to be an investment. So I'm speculating on their motivations.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#137As a real estate investor, I lick my chops when I see news like this. But as a human being it's so terrible to see happen over and over again. Watch "The Big Short" if you haven't - everything will crash again.
So when are you and your fellow investors gonna stick to being human beings? This game has gone on long enough. We're talking about peoples' lives. We're talking about an entire generation of people who can't afford to buy houses because the generation before them gave in to bad credit. We're talking about entire generations of people who are going into a personal debt based economy of fear and coercion. Is that the…
There's likely nothing he can do as a single investor. It's like the Prisoner's Dilemma. He could opt out, but now he has to find a new line of work, and meanwhile there's plenty of other investors who will take his place and nothing will change. There's no way to get them all to change their ways at once.
The only solution is government action; it's one of the big reasons we have a government, to fix things that "the invisible hand" cannot or will not. The problem is that our politicians are either totally corrupt or inept. So just like they failed to prevent the 2000s mortgage bubble, and the 1990s dot-com bubble, and the 80s S&L crisis, etc., they're going to fail here too.
In short, if you want to blame someone, the only people to blame are the voters.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#138The 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…
Marx and other classical economic thinkers speculatively connected the fall in the rate of profit to increases in inequality and long-run economic cycles [1]. Essentially, the idea is that since the rate of profit exceeds the rate of growth, rent seekers (capital holders) tend to get richer and richer and own more and more of the wealth. This impoverishes all other parts of the economy and starves it of resources, ca…
[deleted]
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#139Earlier quoted context omitted.
I think you've hit the nail on the head when it comes to houses - people form irrational sentimental attachments to their real estate.
Human irrationality around shelter is a market inefficiency which the banks are happy to take advantage of. They're also happy to write documents that are incomprehensible to the buyer, providing terms in their favor, as they know they are not working with experts, 99 percent of the time. When individuals are put in opposition to large institutions, the individuals are going to lose. No amount of financial education…
Yes, yes, and yes. I was not trying to shift the blame to the consumer. Information asymmetry is why we need strong consumer financial regulations.
Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis
#140It's very similar. I was working at a mid-size bank a few years ago that was into this. Buy up or make auto loans, bundle them and have them securitized and rated by by a credit rating agency (Moody's, S&P, etc) then you can sell the loans on the open market where they are scooped up. There are lots of state pensions and other retirement plans that end up buying these securities.
It's the same problem as before--banks are incentived to make the loan, but not hold onto it and therefore the banks don't really care about the quality of the loan so long as they can sell the bag to someone else.