http://www.totalbankruptcy.com/blog/bushs-role-in-the-economic-crisis/ Bankruptcy and financial news Sun, 12 Feb 2012 16:04:44 +0000 http://wordpress.org/?v=2.9.2 hourly 1 http://www.totalbankruptcy.com/blog/bushs-role-in-the-economic-crisis/#comment-71 bob baldwin Tue, 23 Dec 2008 17:24:59 +0000 http://dev.totalbankruptcy.com/blog/bushs-role-in-the-economic-crisis/#comment-71 Make it political if you wish but remember these excerpts from the Bankrtuptcy Review Commisions report from 1997: Companies specializing in lending to borrowers with tarnished credit histories have been among the fastest-growing credit issuers in the past five years. Although losses are substantial, effective interest rates of 18 to 40%, make this profitable. General credit issuers have recently entered the sub-prime credit market, which suggests that such marketing may expand. Some industry analysts predict that sub-prime lending will cause total loan default rates to double by the year 2001, warning that “by lowering their credit standards and saturating the market with loans, many banks will be unable to avoid potentially enormous delinquencies and write-offs.” On May 2, 1997, the FDIC issued a warning about the risks posed by increased sub-prime lending. They were on the money. They went on: Home equity lines of credit, virtually unknown a decade ago, have permitted many American families to make significant purchases – financing an education, renovating a home, or consolidating debt obligations at lower interest rates. Regulations governing the solicitation of home equity lines of credit will permit more aggressive marketing beginning on October 1, 1997. Prior to the change, lenders who wanted to take a mortgage on a home could advertise only for customers to apply; now lenders can send pre-approved lines of credit for home equity loans.167 Lenders offer credit cards, equity checks, and overdraft protection to homeowners. In addition, some new home equity lines of credit exceed the value of the home. While some lenders will not lend on a partially secured basis, other lenders now routinely issue lines of credit at a loan-to-value ratio of 125 percent, thereby increasing the amount of credit available. While home equity borrowing is sometimes less expensive than credit card debt, it means that homeowners risk losing their houses if they are unable to make timely repayments. Make it political if you wish but remember these excerpts from the Bankrtuptcy Review Commisions report from 1997:
Companies specializing in lending to borrowers with
tarnished credit histories have been among the fastest-growing credit issuers
in the past five years. Although losses are substantial, effective interest
rates of 18 to 40%, make this profitable. General credit issuers have
recently entered the sub-prime credit market, which suggests that such
marketing may expand. Some industry analysts predict that sub-prime
lending will cause total loan default rates to double by the year 2001, warning
that “by lowering their credit standards and saturating the market with loans,
many banks will be unable to avoid potentially enormous delinquencies and
write-offs.” On May 2, 1997, the FDIC issued a warning about the risks
posed by increased sub-prime lending.
They were on the money. They went on:
Home equity lines of credit, virtually unknown a
decade ago, have permitted many American families to make significant purchases – financing an education, renovating a home, or consolidating debt
obligations at lower interest rates. Regulations governing the solicitation of
home equity lines of credit will permit more aggressive marketing beginning
on October 1, 1997. Prior to the change, lenders who wanted to take a
mortgage on a home could advertise only for customers to apply; now lenders
can send pre-approved lines of credit for home equity loans.167 Lenders offer
credit cards, equity checks, and overdraft protection to homeowners. In
addition, some new home equity lines of credit exceed the value of the home.
While some lenders will not lend on a partially secured basis, other lenders
now routinely issue lines of credit at a loan-to-value ratio of 125 percent,
thereby increasing the amount of credit available. While home equity
borrowing is sometimes less expensive than credit card debt, it means that
homeowners risk losing their houses if they are unable to make timely
repayments.

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