#sub-prime

Only a doodle of 3 happy bubblegum babies. Knight, Bishop & Krang. There ain't many shots like these. Normally Knight tries to bite Krang constantly =,)

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denoting or relating to credit or loan arrangements for borrowers with a poor credit history, typically having unfavourable conditions such as high interest rates. "the sub-prime mortgage market"

requested by sub-prime

Based on data from the National Suburban Survey from September 2010, Christopher Niedta & Isaac William Martin found that the person who has experienced home mortgage foreclosure since September 2007 resembles the average American but is somewhat likely to be younger, Latino, and a parent. The foreclosed are also more likely to report various other measures of financial distress, including recent job loss. The experience of foreclosure is associated with more problems in the neighborhoods where respondents currently reside, including such problems as crime, unemployment, and a lack of affordable housing. Respondents who have not personally lost a home, but who know the foreclosed, are also experiencing more economic distress and more neighborhood problems than those who have not. These descriptive findings suggest the human costs of the foreclosure crisis and the limits of informal social safety nets for addressing those costs.

Remember the financial collapse? Pretty hard to forget, since we're all still dealing with the long-term repercussions from the Great Recession. However, it seems like the institutions have fully recovered, by way of mergers and consolidation, and re-upping on the same approaches that drove us to the collapse in the first place. The proverbial “Wall Street” is doing just fine, pretty much like nothing ever happened. But what about “Main Street”? It took almost three full years to get it past Republican obstruction, but as of July last year we have a new dog in the fight between Wall and Main streets: consumers vs. big finance.  The Consumer Financial Protection Bureau was created in 2011 as part of Dodd-Frank, in response to the 07-08 crisis that drove us into the Great Recession. Apparently it took something that monumental to put governmental powers under enough pressure to force a move like this. Theoretically, this sounds like an obvious thing to have. Massive corporate conglomerates dictate byzantine terms for their lending practices, specifically designed by extremely smart people to maximize benefit to the institution, i.e. extract as much profit as possible from each borrower. So how is any average consumer — particularly the ones most in need of financial assistance — expected to know or fully understand what they’re getting into when they sign loan documents, for example? Consumers need someone in their corner to help keep the institutions in check, helping to fight for terms that are not designed to the exclusion of the best interest for the customer’s financial future. Lending relationships and practices need to be advisory and partner-like, vs. predatory. This was clearly the missing piece in the puzzle that resulted in nearly total financial collapse. Borrowers (consumers) were being “sold” financial products, specifically mortgage loans, as if they were essentially free money. Loan officers used past performance data on home value increase over time to convince homeowners that values would only go up, never down. In our already spending/acquisition-focused American culture, spending money you didn’t have was the status quo. These loan offers were just adding zeroes to the amount of easily-borrowed money available. The attitude on the institutional side seemed to be, “Hey, they signed the documents, they must know what they’re getting into.” This was at its worst when in the context of what was termed the “sub-prime” market. That term was consumer-friendly label for people with poor or bad credit and/or employment/income that was not easy to document or verify. Because these people were accustomed to being rejected for new credit, imagine how receptive they must have been when someone cold-called their house to tell them they could save $700 on their monthly mortgage payment. Once interested, then they were sold on the idea of taking out additional money from their home’s equity (difference between what was owed and its appraised value), for any purpose! Jet skis, vacations, flat-screen TV’s, you name it.  The catch was buried in a stack of 50+ page loan documents, usually in the form of a stiff pre-payment penalty, preventing any refinancing of the loan before the “adjustable” rate, and the payment, ballooned by 20, 30, or even 50%. As soon as that initial “teaser” period ended, usually two to three years, their payments skyrocketed far beyond what their income would allow. Now they’re on a terribly slippery slope into foreclosure, bankruptcy, personal financial collapse. Such is the primary storyline for the collapse of Detroit. Just one of hundreds of cities laid low by the mid- and long-range effects from those sub-prime lending practices. Richard Cordray was appointed initially as the head of the enforcement arm of the CFPB, but now he is the head of the entire operation. He’s ridiculously smart — Marshall Scholar at Oxford, MA in Economics, JD with honors, and was even 5-time Jeopardy champion, undefeated — but wow, what a challenge he has ahead of him. Somehow he must find a way to defend the rights of consumers in an atmosphere where lending corporations and governmental interests and agencies are directly linked in cooperation, and those connections are not always openly communicated. It’s almost like Mr. Cordray has to be a mole for consumers, nestled into the system that dictates what financial corporations can and can’t do with regard to their consumer lending practices. Mr. Cordray, to you I extend a hearty congratulations for your long-awaited and well-earned confirmation. I also extend my hand to help in any way I can. I am but a lowly consumer, but I also had years of experience inside the mortgage lending industry, from a marketing perspective. It could be argued that the marketing of financial products is a prime contributing factor to the problems we’re facing. Is it possible to bring the system even a bit more into balance between consumer and corporate benefit? I certainly hope so. But you sir have your work cut out for you. We as consumers are most certainly rooting for you.

-Laura Gottesdiener, Mortgages in the Era of Mass Terror

The Credit Crisis Explained - This is the best visualized explanation of the credit crisis.. Noticed the subtle start of the crisis, started by the government. This is why other countries such as Canada (although some Canadan banks also participated in the purchased of these sub-primed mortgages and paid the price for it) were not as affected as here in the US.