Subprime loan: “A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders due their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.”
Stupid greed: Making huge loans with little or no collateral to people who have no history of paying bills on time . . . or at all. But housing prices have been going up for a while so they’ll go up forever and provide a cushion for the lender in the event of default, right?
Financial ignorance: Not understanding the basic terms of the largest financial transaction you’ve ever made.
Looks like a bad marriage to me. Subprime loans typically required sizable down payments, which reduced the risks for everyone involved. But then the lenders relaxed their standards.
If the government wants to tighten some regulations for future transactions I could understand that.
But politicians had better not dive in and help either party in this case (Hillary is just buying votes with her promises on this topic). Otherwise they’ll just be reinforcing two sets of bad behavior. The lenders deserve no sympathy at all. They took foolish risks and should pay the price. I feel more for the borrowers, but citizens need to understand that if they make bad financial decisions that other taxpayers are not obligated to bail them out.
I’m all for home ownership, but many people need some basic finance and life lessons first. Even if they can afford it they may not know how to maintain it. I’m a big fan of Junior Achievement (12 years of teaching classes for various grades) and other financial programs that help people understand basic finance and budgeting concepts.