Subprime

I think it was a result of letting people with 560 credit buy homes with ZERO downpayment.

 

560 is not that different from 600 with regards to credit suckiness. Yes, the no equity issue was bad also. Combine the two and we have our present mortgage situation. I just remember as a loan officer never doing loans under 660.

 

I thought subprime was a percentage rate lower than what the Fed sells its money to banks, associated with variable interest rates. It's a term used as a hook/come-on to borrow money that is lower than the Prime Rate at borrowing time but invariably rises to a rate that's much higher than the Prime Rate.

 

Never heard it explained that way. The term "subprime" refers to below "prime" credit worthiness of the borrower, not any specific rate benchmark. Subprime rates are mostly higher than regular rates due to the borrowers riskier risk profile. Adjustable rates are the ones that start out low and then can rise. Yes, there were subprime loans with adjustable rates that started out low and then rose, hence our present mess. Most of those people would have never qualified for the mortgage in the first place if cash flow was done at the higher rates. That's were the mortgage companies failed.

 

Had a guy call me yesterday. His boss had used me to purchase a home. He has a 9.5% ARM through Wells Fargo. It's going to 12.4% in three months. He makes $45,000 per year with VERY LITTLE debt.

Problem is, he doesn't pay any of his bills. 454 credit score. One of the lowest scores I've EVER seen. He can bust his ass for 6+ months and try to get his credit up and go FHA, call Wells Fargo and BEG, or put the house on the market.

 

I sure hope you denied him. MOST of the time, a person's credit score reveals a lot about his/her character and character is one of the 5 C's of credit. Very little debt and he still doesn't pay the bills he does have? What was his excuse?

 

wow - save some money. $100k with a mortgage that low, you should be socking away huge dollars...not having $20k to get rid of that second mortgage is nutty.

 

Totally agree. I see these people ALL the time - I see someone drive into the parking lot in a $35k car that's brand new and already has big rims or whatever on it, they walk in, and I see them sit in the call center, a job I know pays $30k per year... Drive by any cheap apartment complex and you'll see some rust buckets right next to some high-end stuff. People are just morons.

 

Completely agree. AND these are the fuckers that are going to eventually get bailed out while you and I keep making our mortgage payments like good little soldiers. THAT is what is going to piss me the hell off.

 

re: bail out

I wonder if the gov will penalize those banks it bails out. They need their butts kicked too.