Subprime Loans are Back

Bad News: Subprime Loans are Back and Ready to Exploit More People


Now, a similar lending style is cropping up at auto dealerships, which are already infamous for exploitative lending practices. Tragically, those with trashed credit from the earlier financial crisis are being pushed into risky loans, thus exacerbating the problem even more. Net worth for people of color has dropped dramatically since the recession, and that problem is likely to get worse as people are forced to take out bad loans in order to access transportation — many low-income people of color need cars to get to work and navigate their communities, which often have poor public transit access.

People are getting in over their heads with vehicle loans, falsifying their income, signing exploitative loans, accepting loans with outrageous interest, and more. If it sounds familiar and you’re wondering why Congress didn’t do more to put subprime lending in check, you’re not the only one.

The answer to that question lies in part in lobbying from the banks, which have a vested interest in continuing to offer subprime loans, thanks to the large profits it generates. For Congress to enact meaningful reform, it make take a firebrand like Elizabeth Warren to push for harsher regulations and better enforcement.

Meanwhile, subprime lending is posing an immediate problem in low-income communities of color across the United States, and regulators need to act soon if they want to prevent another financial bubble that explodes in the face of the financial industry. As the resurgence of such loans indicates, the banking industry appears sluggish to learn from its mistakes — perhaps it’s still laboring under the belief that it’s too big to fail?

Read more: http://www.care2.com/causes/bad-news...#ixzz39GHY3akT

It tells a lot about a system when all this is allowed to happen again!

Here in the UK loans on horrible conditions are also offered to desperate people. I do not understand how this can continue to do on like that?

In fact, this was not just "allowed" by the government, but mandated: when banks were just looking at creditworthiness, activists cried "foul", demanding that they be made to issue loans to minorities more often - even when they didn't qualify properly. So, of course they were left with loans they couldn't afford, giving them worse credit ratings and leaving banks holding bad loans as well.

The sad thing is, there still seems to be no political will to fix or even acknowledge that mistake yet: they'd rather just throw vast amounts of money away propping the mistake up so they can carry on a bit longer. Like the ultra-expensive short term loans all over the UK, they rarely if ever make things better in the long term - just delay problems a bit, while they grow faster than ever before.

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Originally Posted by js207

In fact, this was not just "allowed" by the government, but mandated: when banks were just looking at creditworthiness, activists cried "foul", demanding that they be made to issue loans to minorities more often - even when they didn't qualify properly. So, of course they were left with loans they couldn't afford, giving them worse credit ratings and leaving banks holding bad loans as well.

The sad thing is, there still seems to be no political will to fix or even acknowledge that mistake yet: they'd rather just throw vast amounts of money away propping the mistake up so they can carry on a bit longer. Like the ultra-expensive short term loans all over the UK, they rarely if ever make things better in the long term - just delay problems a bit, while they grow faster than ever before.

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The way it has been explained to me, these loans were also sold on which created a lot of problems/

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Originally Posted by thir

The way it has been explained to me, these loans were also sold on which created a lot of problems/

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That helped insulate the original issuers from the consequences of their bad loans, yes - indeed, that was government policy too, the very raison d'etre of Fannie Mae and Freddie Mac, between them holding five trillion dollars of mortgages. Senators Hagel and McCain urged caution and drafted legislation to rein it in, but instead its lending standards were weakened in 2006 to expand it into sub-prime loans. http://www.washingtonpost.com/wp-dyn...802111_pf.html