Subprime
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Question of the Week: Readers Respond to Money Morning's Credit Score Query
More Americans than ever before are seeing their credit score slip to the subprime level, according to a new report released last week by credit-scoring firm Fair Isaac Corp. (NYSE: FICO). That means it's going to get a lot tougher for U.S. consumers to borrow money - especially given that banks are becoming more and more reluctant to lend.
"It's hard to see the good news in this report, unless you are speaking for the payday lenders, title lenders, and pawn stores," said John Ulzheimer, president of consumer education at Credit.com.
The FICO report shows that 25.5% of consumers - or nearly 43.4 million people - have a credit score below 600, putting them in the subprime realm. That makes them a high risk for lenders and means they'll have a tough time getting a credit card, mortgage or auto loan under stricter lending standards.
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We Want to Hear From You: Are You Taking Care of Your Credit Score?
More Americans are seeing their credit score slip to its lowest level ever, according to a new report released this week by credit-scoring firm Fair Isaac Corp. (NYSE: FICO). That means it's going to get a lot tougher for U.S. consumers to borrow money - especially given that banks are becoming more and more reluctant to lend.
"It's hard to see the good news in this report, unless you are speaking for the payday lenders, title lenders, and pawn stores," said John Ulzheimer, president of consumer education at Credit.com.
The FICO report shows that 25.5% of consumers - or nearly 43.4 million people - have a credit score below 600, putting them in the subprime realm. That makes them a high risk for lenders and means they'll have a tough time getting a credit card, mortgage or auto loan under stricter lending standards.
Another 9.5% of consumers have "fair" credit scores in the 600-649 range, which is still considered subprime. With "fair" scores, they're likely to need to seek loans, but may not be able to find one.
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As Scary as it Seems, Greek Debt Crisis Won't Spawn Second Global Meltdown
The Greek debt crisis is starting to display an uncanny resemblance to the subprime crisis that sank the U.S. housing market, sent the global economy into a tailspin and touched off the worst financial crisis since the Great Depression.
Indeed, Greece has behaved very much like a subprime country:
- It has borrowed more money than it can possibly repay - all the while lying to everybody about its true state of affairs.
- "Liar loans" have been made, in Greece's case, to enable the country to "cook the books" with regard to its budget deficits.
- New problems continue to emerge - apart from the liar loans - making it impossible to be sure all the troubles have been unveiled.
- And as was the case with the subprime-mortgage crisis, embattled Wall Street investment-banking-giant Goldman Sachs Group Inc. (NYSE: GS) appears to have been intimately involved in the business.
To understand why the Greek debt crisis won't spawn another global financial crisis, please read on... -
Mortgage Markets Show Increased Stability, But Limited Opportunity
[Editor's Note: This analysis of the U.S. mortgage market is part of a two-story package that appears in today's issue of Money Morning. To read a related story on the outlook for adjustable-rate mortgages (ARMs), please click here.]
It doesn't have four letters, but "mortgage" has definitely been a dirty word in the financial world the past few years. That's especially true when the word "mortgage" is paired up with such other terms as "subprime," "delinquent," and "foreclosures."
Little wonder that mortgages - along with the derivative securities backed by them and the often-unseemly practices of the people pushing them - have gotten much of the blame for precipitating the economic meltdown from which the American economy is now struggling to recover.
There's still plenty of woe in the mortgage world. But in recent months there have also been some signs that the real-estate-financing markets are at least regaining some semblance of stability, with foundations being poured for a rebuilding phase that might not be too far down the road.
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Warning: This is Not Another Wall Street Conspiracy Theory, These are the Facts
Just last week, the House Committee on Oversight and Government Reform held a hearing on the U.S. Federal Reserve's decision to directly pay billions of dollars to banks as part of its scheme to bail out insurance giant American International Group Inc. (NYSE: AIG).
According to committee Chairman Dennis Kucinich, D-Ohio, the testimony that congressmen heard just didn't "pass the smell test."
What really stinks about the whole mess is not only the cover-up of what really happened and why, but the inability of anybody in Congress to actually do their homework and be able to frame pointed questions and get to the truth.
It's not complicated, but it is convoluted. Here are the facts and some questions that Congress needs to ask - and that the American people deserve straight answers to.
For the inside story on AIG's collapse, read on... -
My Confrontation With Ben Bernanke: The One Question He Refused to Answer
The Secret Service agents watched me warily as I approached U.S. Federal Reserve Chairman Ben Bernanke.
I didn't waste any time. After introducing myself, I showed him a copy of the talk he gave at the American Economic Association (AEA) meetings in January 2007. I circled all the times he used the words "panic," "crisis," and "stress" in his speech, entitled "Central Banking and Bank Supervision of the United States."
A total of 36 occasions.
I asked him point-blank: "Did you know in advance that a financial crisis was headed our way?"
He looked nervous. I could tell he was uncomfortable with my question. He looked at me stoically and smiled.
And he refused to answer.
But there was no doubt in my mind what the correct answer was. I think he was worried about his job if he said, "Yes."
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Wall Street's Stranglehold on the Economy Is Choking Americans
America's Founding Fathers were afraid of any concentration of power in the republic. They were particularly afraid that banking interests could hijack our fledgling democracy.
And yet today, 234 years later, our Founding Fathers' worst fears have come true. Wall Street's stranglehold on the economy threatens our very prosperity, and the future of a truly democratic republic.
It's high time we address the truth about Wall Street's tyranny and set a course for a more secure economic future - one that's anchored by a safe banking system, not a system rigged by banks.
How Wall Street is Choking America? Read on... -
A Note to Bernanke: Sorry Ben, More Bureaucracy Isn't the Answer
U.S. Federal Reserve Chairman Ben Bernanke's latest thesis is that the home mortgage bubble had little to do with record low interest rates, and was actually much more a problem of regulation.
It sounds plausible - until you give it some real thought. After all, I believe that humanity has already tried a system with tight, vigorously enforced regulations, and no price mechanism.
It was called the Soviet Union. -
With T-Bill Yields at Zero, it's Time to Beware of the "Bond Bears"
There is some interesting action unfolding in the dark corners of the credit market.
Although this exploratory sojourn takes us fairly far afield from our regular stomping grounds in the equity markets, it could have important implications for our investments. So grab a thinking cap, and let's go exploring.
First, let's have some context. As you know, governments around the world have unleashed tons of stimulus spending over the last year. Against a recessionary backdrop, it's no surprise that tax revenue has plummeted while fiscal deficits have soared. -
It Was a Wonderful Life – And Then Came Securitization
Massachusetts Land Court judge Keith C. Long recently ruled that foreclosure sales of two properties with securitized mortgages were invalid, a decision that ties up thousands of Massachusetts real-estate transactions.
If nothing else, this landmark court case should make one thing very clear: Securitization - the product of the finest brains of Wall Street for more than two decades - doesn't work as advertised.
Historically, mortgage loans were made by small local institutions, which knew the borrowers personally and took the credit risk themselves.
