Defaults Rising on Subprime Loans. What did New Century and Everyone Else Expect?
March 15, 2007
When rates were low almost anyone could get a home loan with no money down. The booming real estate market flooded financial institutions with cash and companies like New Century Financial and Accredited Home Lenders Holding Co couldn’t loan money out fast enough. It was inevitable that rates would rise and that subprime lenders would eventually be unable to make their payments.
How can the following headlines of the past few days come as a shock to anyone?
- Large Subprime Lender Stops Issuing Loans
- Accredited, New Century Lead Subprime Meltdown
- Record foreclosures hit mortgage lenders
- Sub-Prime Mortgages Worry Investors
I’m not a financial expert, just a guy who digs personal finance, and I saw this coming years ago. How can anyone in the financial industry be surprised at how things have played out? What did they expect would happen?
Hard Times Ahead
The people I feel sorry for are those that borrowed at these unrealistic terms and will now lose their homes. Common sense should have told them this would happen but when you’re looking for a break and cheap money comes along I imagine it’s hard to pass up.
Unfortunately both the lenders and borrowers are now in a pickle and it doesn’t look like it’s going to get any better. I’ll take this as a lesson that common sense can go out the window when times are good and you have to rely on yourself to keep a level head.
All posts by Ben Edwards