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Peak Insanity: Retail Investors Are Making Direct Subprime Loans In A Reach For Yield

Tyler Durden's picture





 

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

It has come to this. Unable to save enough for retirement with traditional investments, baby boomers in search of yield are becoming their own private Countrywide Financials. They’re loaning cash from their deposit accounts and retirement plans and hoping for a big pay day: specifically large returns that will boost their income and maybe even allow them to pass an inheritance on to their children.

 

It used to be that individual lenders were millionaires who could afford to loan cash and handle the risk of not being paid back. Now middle-income pre-retirees, ranging from chiropractors to professors, are joining their ranks.

 

- From an excellent MarketWatch article:  Want 18% returns? Become a subprime lender

Being a somewhat conscious human being in a world in which our “leaders” have completely lost their minds can be challenging at times. One side effect of this condition is a certain emotional numbness when it comes to reacting to new events occurring in the world around you. It’s simply hard to shock me these days, but every now and then it does happen. The following article published by MarketWatch had me literally shaking my head the entire time. If this isn’t peak insanity, I do not want to know what is. We now have chiropractors and orchestral conductors competing with Blackstone in a crowded, insane trade.

Read it and weep:

Barry Jekowsky wanted to build “legacy wealth” to pass down to his children. But the 58-year-old orchestral conductor, who waved the baton for 24 years at the California Symphony, didn’t trust the stock market’s choppy returns to achieve his goals. And the tiny interest earned by his savings accounts were of no help. Instead, Jekowsky opted for an unlikely course: He became a subprime lender, providing his own cash to home buyers with poor credit and charging interest rates of 10% to 18%. It may sound risky, but “it helps me sleep better at night,” he says. “Where else can you find [these] returns?”

Go ahead and read that twice. Ok, now let’s move on, it gets worse.

It has come to this. Unable to save enough for retirement with traditional investments, baby boomers in search of yield are becoming their own private Countrywide Financials. They’re loaning cash from their deposit accounts and retirement plans and hoping for a big pay day: specifically large returns that will boost their income and maybe even allow them to pass an inheritance on to their children. There is no official data, though it’s estimated that at least 100,000 such lenders exist — and the trend is on the rise, says Larry Muck, chairman of the American Association of Private Lenders, which represents a range of lenders including private-equity firms and individuals who are lending their own cash. “We know the number of people who are doing this is increasing dramatically — over the last year it’s grown exponentially,” he says.

The baby boomers will not rest until they destroy the entire world.

It used to be that individual lenders were millionaires who could afford to loan cash and handle the risk of not being paid back. Now middle-income pre-retirees, ranging from chiropractors to professors, are joining their ranks.

 

The move toward mom-and-pop lending comes in the wake of what experts say is the creation of a perfect storm: Banks are still skittish about lending to home buyers with poor credit. Meanwhile, investors who have endured years of low returns from plain-vanilla investment portfolios are itching for something more.

 

The operations often function like a game of telephone. Subprime home buyers, who know they have no shot at getting a mortgage from a bank, start spreading the word to friends and acquaintances that they are on the lookout for anyone who will lend to them. Eventually, the word reaches someone who is willing to lend his or her cash. Other times, a group of individuals pool their cash together to fund the loan.

A game of telephone…

What all these lenders have in common, however, is their willingness to lend to borrowers with low credit scores. In some cases, they do not even check their scores. They point to examples of otherwise reliable borrowers who fell on hard times during the recession and were unable to keep up with loans. Many say they work with borrowers who intentionally stopped paying mortgages (even though they could afford the payments) when they ended up owing more on the loans than the home was worth.

 

Separately, lenders are supposed to be registered with the state where they are originating loans, but many mom-and-pop loan officers are not, says Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. And since most of these lenders do not originate a large number of loans per year, they are not required to report their activities to the federal government. “It’s a shadow business,” says Cecala.

 

In a sign that the trend may be here to stay, boot camps are training average Joes to become private lenders. Last month, Wealth Classes, a financial-education company based in Walnut Creek, Calif., that launched in 2007, hosted a networking retreat for 250 students who recently became lenders. Many of the company’s students end up lending to subprime borrowers, though others lend to real estate investors who don’t want to wait weeks to get a mortgage from a bank, says George Antone, founder of Wealth Classes. (Private lending transactions typically take about a week or two to go through, while a mortgage from a bank usually requires at least one-month of waiting time.)

 

Randy King, 61, joined Wealth Classes about three years ago when he started using his own cash to fund other people’s mortgages. A former U.S. Air Force servicemember, King, who is based in Colorado Springs, transitioned to buying fixer uppers and selling them and is now a lender for borrowers — many of whom are subprime — who are buying investment properties.

 

Going forward, experts say, it will be difficult to slow down privately funded subprime loans. This funding spreads mostly by word of mouth, so there’s no official advertisement plug that anyone can pull. Consider King. He recently visited his chiropractor who inquired about his lending operations and then asked if he could jump into one of the deals as well. The chiropractor explained where he would get the funds to become a loan officer: He would use some cash he had saved and withdraw equity from his home using a home-equity line of credit.

QE insanity has arrived. Next up silicon bagel implants.

Screen Shot 2013-11-12 at 11.56.17 AM

 

 


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Tue, 11/12/2013 - 23:34 | Link to Comment Hulk
Hulk's picture

SO fucking stupid that I do not even know what to say...

Tue, 11/12/2013 - 23:40 | Link to Comment Decolat
Decolat's picture

I am not shocked by the donut heads, I knew the day would come when retard nation would make silicone freakfuckups like this. Freaks we shall have, during the fall of Rome.

Tue, 11/12/2013 - 23:48 | Link to Comment HulkHogan
HulkHogan's picture

Their foreheads look like pussies.

Tue, 11/12/2013 - 23:50 | Link to Comment smlbizman
smlbizman's picture

i think the donut heads have made better descions then the lenders

Tue, 11/12/2013 - 23:59 | Link to Comment knukles
knukles's picture

This is sure to work out well.

Wed, 11/13/2013 - 00:17 | Link to Comment strannick
strannick's picture

DumbMoney loansharking to deadbeats

Wed, 11/13/2013 - 00:24 | Link to Comment MeMadMax
MeMadMax's picture

Fucking boomers...

Wed, 11/13/2013 - 02:26 | Link to Comment cpzimmon
cpzimmon's picture

I kinda resent the attack on the boomers. Some of us are good people who know that things are shitty, some of us know the difference between right and wrong.

Wed, 11/13/2013 - 03:16 | Link to Comment Deo vindice
Deo vindice's picture

I agree cpz.

All generalizations are dangerous. (even this one)

But to your point, baby boomers also include a lot of preppers and PM holders.

Wed, 11/13/2013 - 03:34 | Link to Comment TruthInSunshine
TruthInSunshine's picture

I almost did this. I had a borrower, named Joe E. Bagadonuts, with a 440 FICO score & a recent bankruptcy.

He wanted to borrow 100k at 17% interest but failed the stress test I subjected him to.

He only lasted 3 1/2 minutes on the tread mill at full speed while I tazed him repeatedly.

I heard he applied for an ObamaLoan recently but is in a very long queue.

Wed, 11/13/2013 - 05:06 | Link to Comment cpzimmon
cpzimmon's picture

Taze? I spent a nickel in segregation in Taze.

Wed, 11/13/2013 - 12:25 | Link to Comment mmanvil74
mmanvil74's picture

There is nothing wrong with this strategy if done right.  At least with this style of lending, the lender can use real human judgement regarding the borrower's ability to pay, instead of the robo-signing computer based algorithms that led to bankruptcy of Countrywide and others.  

If the buyer has a significant downpayment and a job, such subprime loans are probably worth the risk.  As long as your LTV is no more than 70% your loan is pretty well secured, and a lot of these people with bad credit were foreclosed on during the crash and I don't blame them for walking away from a mortgage that is twice their property value.  

Sure there is risk to the lender, but at least you are getting paid to take risk, unlike T-Bills which pay nothing, and less risky than stocks which are at all time highs and might plummet 25% in any given year.  

The smart players who know what they are doing will do well in this sub-prime game.  Just becuase they are "retail" doesn't mean they are fools, fools are those who sit on mutual funds, doing what their investment banker tells them to do. which is hoping for 5% p.a. until another 25% drawdown happens, in which case they should "hold for the long term", 

Wed, 11/13/2013 - 12:48 | Link to Comment Pretty Vacant
Pretty Vacant's picture

As long as your LTV is no more than 70% your loan is pretty well secured

 

Had looked @ some of these deals concerning hard money lending to rehab investors.  No terms were within spitting distance of 70% LTV.  Maybe some SFR private lending hits 70%.  However, if borrower has the cash to have 30% skin in the game they generally do not have sub-prime credit scores.   

Thu, 11/14/2013 - 02:14 | Link to Comment Four chan
Four chan's picture

A foole & his money, 
be soone at debate: 
which after with sorow, 
repents him to late.

 1587:

If they pay a penie or two pence more for the reddinesse of them..let them looke to that, a foole and his money is soone parted.

Wed, 11/13/2013 - 12:48 | Link to Comment Pretty Vacant
Pretty Vacant's picture

-

Wed, 11/13/2013 - 11:49 | Link to Comment Jumbotron
Jumbotron's picture

"But to your point, baby boomers also include a lot of preppers and PM holders."

Yeah....preppers.....people who shoot their toes off and will end up eating their gold when they can't spend it.

Wed, 11/13/2013 - 09:27 | Link to Comment Joe A
Joe A's picture

Well, now you know how your parents felt when they got the blame for everything that was wrong in the world.

Wed, 11/13/2013 - 11:26 | Link to Comment Neo
Neo's picture

briliant.

Wed, 11/13/2013 - 11:41 | Link to Comment 1223pm
1223pm's picture

A silicon dildo on their forehead would have been a better choice.

Wed, 11/13/2013 - 00:53 | Link to Comment midtowng
midtowng's picture

That's exactly what it is. Loanshark rates to desperate people that probably can't pay back the money.

If you aren't prepared to break people's legs then you deserve to lose your money.

Wed, 11/13/2013 - 01:58 | Link to Comment rehypothecator
rehypothecator's picture

There's a business plan in there to loan money (at a decent interest rate, of course) to people with recently-broken legs, so they can afford their medical bills.  

Wed, 11/13/2013 - 09:00 | Link to Comment GMadScientist
GMadScientist's picture

Why not? Assuming their collateral is money good, of course.

Wed, 11/13/2013 - 11:51 | Link to Comment Jumbotron
Jumbotron's picture

Why not? Assuming their collateral is money good, of course.

Right.....I hear the market is hot right now on livers and kidneys.

Wed, 11/13/2013 - 07:31 | Link to Comment Running On Bing...
Running On Bingo Fuel's picture

WTF?
Rent to own or land-contract has been in practice for hundreds of years, maybe longer but I'm too lazy to do the research.

I own the real property until it's paid off. One missed payment and you lose it all. A legal binding agreement enforceable by Judge Judy Cohen or Judge Ira Epstein, or some such.

I assume the risk bro and it's low risk. Pay me.

Over.

Wed, 11/13/2013 - 10:00 | Link to Comment toady
toady's picture

Exactly. This is no different than owning a rental. If the lender doesn't get paid the non-paying party gets evicted.

Sounds like the bankers don't like the little guys horning in on their business.

Why defend the bankers monopoly Tyler?

Wed, 11/13/2013 - 12:34 | Link to Comment Bangin7GramRocks
Bangin7GramRocks's picture

The article didn't say that these fools buy the entire house with cash and thus have collateral. I think many of these penisholes lend money for down payments and to furnish the new squatters paradise. Nuthin' from nuthin is nuthin'.

Wed, 11/13/2013 - 08:09 | Link to Comment StychoKiller
StychoKiller's picture

Yes, "Moral Hazard" has regressed to common loan-sharking.  I wonder if former carpenters can now find "jobs" as "collection agents/repo men..."

Wed, 11/13/2013 - 00:41 | Link to Comment RockyRacoon
RockyRacoon's picture

Why does anyone care what folks do with their own money?  I thought we were all on a sort of Libertarian track here... or not.  Boomers want to destroy the world?  Come on.   If the banksters would pay a decent rate, there would be no market for this loan situation.  Sometimes I just can't believe what I read.

It's their own money.  If they want to flush it down the sewer who are we to criticize?

I kinda like the idea of hundreds of thousands of little private banks undermining the Wall Street scammers.   Give 'em a little bit of their own medicine.

Wed, 11/13/2013 - 01:05 | Link to Comment RichardP
RichardP's picture

Why does anyone care what folks do with their own money?

In keeping with that - how is this any different from the "lender" buying the property outright, and then leasing it to someone with an option to buy?  So long as the lender has obtained title (by themselves or through the borrower) to a house at a fair price, their investment is protected by the value of the property.  That is, if they've put the deal together properly.  That is probably the big if.

In so many words, this is just Americans doing what they do best - being entrepreneurs.

Wed, 11/13/2013 - 03:14 | Link to Comment zhandax
zhandax's picture

I had a client in Detroit 30 years ago who described a sales transaction in which the seller sold and financed the property, and the buyer didn't get title until the loan was paid off.  I think it was some form of land lease, and it may be state specific, but it sounds appropriate for transactions of this nature.

Wed, 11/13/2013 - 06:51 | Link to Comment Big Brother
Big Brother's picture

My parents bought their first house in 1981 through seller-financing, paying 10% for 15 years with no money down.  As many may recall mortgage interest rates in 1981 for a first-time home buyer with 20% was about 18%.

When do the sub-prime credit-card private lenders come out?

Wed, 11/13/2013 - 11:53 | Link to Comment Jumbotron
Jumbotron's picture

"In so many words, this is just Americans doing what they do best - being entrepreneurs."

Tell that to Native Americans.  Manifest Destiny bitchezz.

Wed, 11/13/2013 - 06:52 | Link to Comment starfcker
starfcker's picture

bingo, rocky. who's crying about this? people learn to real world invest, risk vs reward. and borrowers get their loans without filling up databanks and without 20 pages of fine print. and think of the fees you save. it's what made this country great.

Wed, 11/13/2013 - 04:38 | Link to Comment Dr. Sandi
Dr. Sandi's picture

The way this was framed sounds like the ongoing effort to vilify the evil baby boomers. Since 'they' created all this mess as a way to destroy the world, society will not have to honor commitments made to boomers when the financial toilet finally flushes.

Hey assholes, if you want to see what the idiot who is destroying your world looks like, get a mirror. We're fucking things up together whether we are big enough to own the idea or not.

Wed, 11/13/2013 - 06:00 | Link to Comment lewy14
lewy14's picture

Plus one to the Racoon.

There is no principle / agent problem here. People do their own due diligence. They do not securitize, they do not hedge with derivatives. They have skin in the game. There is no "free optionality".

In short none of the problems associated with the sub-prime crisis apply at all.

I know several people who do this and to it well.

It's hard work. Information wants to be free, but information arbitrage remains dear.

Wed, 11/13/2013 - 07:39 | Link to Comment Running On Bing...
Running On Bingo Fuel's picture

Yes, I encourage those who agree, or those sitting on the fence to increment 'Vote up!' by one for the coon.

This is a web destination focused on Libertarianism, specifically dominated by minarchists and a few anarchists who keep things spicy. Let's keep it that way!

Over.

Wed, 11/13/2013 - 08:08 | Link to Comment Bobbyrib
Bobbyrib's picture

Most of are for the free market Rocky, but that doesn't mean we can't make fun of malinvestment caused by ZIRP.

Wed, 11/13/2013 - 12:33 | Link to Comment RockyRacoon
RockyRacoon's picture

It's only malinvestment if you lose your money.  Seems like all's well if a profit is made (or a decent rate of return for taking risk).   Don't assume that all of these contracts are run at a deficit to the lender!

Wed, 11/13/2013 - 11:46 | Link to Comment Jumbotron
Jumbotron's picture

"Why does anyone care what folks do with their own money?  I thought we were all on a sort of Libertarian track here... or not.  Boomers want to destroy the world?  Come on.   If the banksters would pay a decent rate, there would be no market for this loan situation.  Sometimes I just can't believe what I read.

It's their own money.  If they want to flush it down the sewer who are we to criticize?

I kinda like the idea of hundreds of thousands of little private banks undermining the Wall Street scammers.   Give 'em a little bit of their own medicine."

 

You stupid fuck, Rocky.   I'm sorry....I'm trying to limit my comments on this and other sites because I just don't care anymore and words never changed anything.  But sometimes, Cosmic Stupidity forces me back out to address it.

NOBODY OWNS ANYTHING....including most of all, FIAT PAPER !  NOBODY IS A "RUGGED INDIVIDUAL" as that fat fuck drug addict Rush Limbaugh professes.  EVERYBODY AND EVERYBODIES' ACTIONS ARE INTERCONNECTED.....like String Theory in Physics.  If these stupid fucks blow up individually they will affect ME AND YOU !!!  When these fucks whine and moan to their representatives about being destitute over their "individual actions".....and losing their "private" money.....we will take it up the ass.

When they are on the dole because of their "Libertarian" principles....we will all hang together.

Look silly wabbit.....Liberatarianism is just another lie to self delude you all who believe in it that we are NOT born on a Prison Planet where if you didn't have a silver spoon in your mouth when you popped out of your mother's fuck hole.....you're fucked.  AND if you somehow become a "self made man or million (billion)naire you just become just like those sick twisted fucks who are born into the purple.

AND REALLY....YOU COSMICALLY STUPID FUCK !!!????   YOU REALLY ENCOURAGED THESE SHEEPLES TO ACT LIKE BANKSTERS ?????

YOU REALLY THINK THEY WILL UNDERMINE THE BANKSTER CLASS ?????  THEY'RE SITTING BACK LAUGHING AT THESE DUMB SHITS TAKING THE LOSS SO THEY CAN HOOVER UP THEIR HOUSES (both their rental properties AND their personal homes) IN ORDER TO RENT THEM BACK OUT AGAIN AT EXHORBITANT RENTS !

JEEZUS....no wonder you Libertarians never get far......you're too fucking stupid and deluded by your own utopian beliefs.  Not that I believe in Communism or Socialism.  They suck too......but you guys have no viable solutions either.

And encouraging desperate baby boomers who still dream of sitting on their ass drinking Mai Tai's on the beach and leaving "legacy wealth" to their children which encourages their children to sit on their ass is the HEIGHT of Quantum Stupidity.

Grow up.  You were born into fuedalism....you will die a serf.  Accept it.  Better that than dying a rich, psychopath.  Because the rich always die knowing two things......they can't take it with them......and they all will die.  And money can't change that.


Wed, 11/13/2013 - 11:58 | Link to Comment PT
PT's picture

+++++ lots Jumbotron.

Nice rant.  Thanks for  contributing.

Wed, 11/13/2013 - 12:36 | Link to Comment RockyRacoon
RockyRacoon's picture

All the expressive sentiment aside...   It is their own money.   Why do you even care?  How would you like to see an article here at ZH about some of your choices in what you do with what belongs to you?

Wed, 11/13/2013 - 12:55 | Link to Comment Jumbotron
Jumbotron's picture

"All the expressive sentiment aside...   It is their own money.   Why do you even care?  How would you like to see an article here at ZH about some of your choices in what you do with what belongs to you?"

Stupid fuck.  Nobody made the land and it's natural resources.  So nobody owns any of the derivatives from it.  And what we call "wealth" is therefore not owned by anybody as well. 

Wealth today is a string of 0's and 1's in a bank's computer which represents a piece of fiat paper which represents nothing and is backed by nothing but a promise from a lier.  Since you or I or ANYBODY did not MAKE the promise.....you don't own the paper NOR the digital bits it represents.  That promise can be withdrawn at ANY time for ANY reason and replaced  by another promise (lie) with NEW paper which represents LESS of those ephemeral digital bits in your bank account.....if your bank still exists....(which you don't own either).

The land you live own was stolen from Native Americans.  You don't have clear title.  You pay rent to the government every year (property tax) therefore you don't own the land OR the house that's on it.

No wonder you sons of bitches get pulled around by the nose like an ox by your elite masters.  You have no clue to what reality is.

Wed, 11/13/2013 - 11:50 | Link to Comment PT
PT's picture

Re "Why does anyone care what folks do with their own money?" :

Sure, go ahead, ignore what other people do with their money.  It is none of your business.  Except that when bankers lend money to idiots who can't add up, those idiots bid prices up to the point where anyone with a brain cannot afford to buy anything.  And those prices have been too high for at least the last 13 years.  So yeah, go ahead.  Have fun living in your tent while you wait for the fwee markits to re-assert themselves.  Corrupt bankers can lend money to an endless supply of idiots for a lot longer than you can happily wait.  Oh, sorry, you seem quite happy.  Maybe it's just me.  Have fun working "harder" and "smarter" so that you can compete with the mass of idiots who just borrow beyond their means.  I'm quite sure all them foreclosed homes will be put up for cash auction eventually.

Wed, 11/13/2013 - 12:38 | Link to Comment RockyRacoon
RockyRacoon's picture

The article wasn't about bankers.  It was about individuals and small organizations whose members choose to join freely.   Perhaps you should read the article again and see how people were demonized for "wrong" ways to use their own personal property.

Wed, 11/13/2013 - 00:05 | Link to Comment Agent P
Agent P's picture

Lender's Bagels...I just got it.

As for that picture...WTF? 

Wed, 11/13/2013 - 00:20 | Link to Comment IridiumRebel
IridiumRebel's picture

http://m.huffpost.com/us/entry/1916188
Yes. The bagel head people are real. What fuckushima tainted adolescent shithead from Japan thought of this? They need to be kicked off of the earth.

Wed, 11/13/2013 - 11:36 | Link to Comment PT
PT's picture

Sometimes it truly is amazing, to see how much effort a human being will put into warning everyone else that he is an idiot.

Wed, 11/13/2013 - 12:40 | Link to Comment RockyRacoon
RockyRacoon's picture

That's exactly right.  Don't we have enough do-gooders already?  I get really tired of others telling others what they oughta do.   Codependency is alive and well and cultivated by the popular media.   Enough already!

Tue, 11/12/2013 - 23:42 | Link to Comment OldPhart
OldPhart's picture

In the old days, these were known as 'loan sharks'. 

I'm pretty sure that missing a payment would be detrimental to your health.

Wed, 11/13/2013 - 00:12 | Link to Comment asteroids
asteroids's picture

Bingo. Good, honest folks should just go to cash and stop playing. It'll be hard, but the system will correct a lot faster that way. These yoyo's are just as evil as the scum they are emulating. They deserve everything they will get in the long run.

Wed, 11/13/2013 - 00:22 | Link to Comment mayhem_korner
mayhem_korner's picture

Good, honest folks should just go to cash and stop playing

 

Define "cash".

Wed, 11/13/2013 - 00:25 | Link to Comment stacking12321
stacking12321's picture

they may be stupid, but they are not evil.

they have the right to do whatever they want with their money.

what right do you have to tell them who they can loan to, and to call them evil if you disagree with their choices?

it sounds like you are just an emotionally unbalanced person looking for someone to hate.

Wed, 11/13/2013 - 00:55 | Link to Comment midtowng
midtowng's picture

The Bible defines them as evil. That's who.

They are lending at usury rates. 

Wed, 11/13/2013 - 01:38 | Link to Comment Non Passaran
Non Passaran's picture

I thought it's the irresponsible borrowers who are evil - they could borrow at non-usurious rates but they refuse to do that.

Wed, 11/13/2013 - 09:03 | Link to Comment GMadScientist
GMadScientist's picture

No, they can't...sane lenders won't let these assclowns in the door. People don't borrow from the mafia because they want to either.

Wed, 11/13/2013 - 12:13 | Link to Comment PT
PT's picture

Who is worse, the inexperienced borrower or the experienced lender?  Sure, they're both evil and they both need a good smack in the head.  But if you think either of them is not hurting you, especially after having the last 13 years to observe, then you are an idiot, to say the least.  The idiot borrower / evil lender combination pushes up all prices to an artificial high, meaning you have to work harder in order to consume.

How would you like to run a business against the idiot borrower / corrupt banker combination?  All they have to do is copy your business but drop the prices and run at a loss.  You lose customers, go broke, the idiot borrower buys the remains of your business for pennies in the dollar ( who'd buy a 'failed' business? ), and now he has a monopoly he can jack up prices to repay his banker.  Sure, you may feel tempted to restart your business to compete with the new, higher prices.  But with a willing banker at hand, the idiot can just drive you out of business again.  What would a banker really want?  A profitable business that pays a small amount of interest for a few years, or something that brings in interest payments forever?  And don't forget, the banker has ZIRP on his side.

Wed, 11/13/2013 - 03:56 | Link to Comment Urban Redneck
Urban Redneck's picture

Actually it's not usury, except to brats spoiled by the low rate benefits bestowed by Greenspan and Bernanke (bankstas ain't the only beneficiaries).

Furthermore, the interest rate for a single loan includes an allowance for defaults on the aggregate issuance.

High quality SME loans in much of Africa are running north of 10%. These are commercial bank loans to executives who run successful businesses and put together viable expansion plans and can post tangible assets and cash flows as collateral.

If you go out the risk curve to from commercial lending and PE to frontier market VC you're well above a 20% return net of write-offs.

The problem is we live in the age snake oil infomercials and buyers looking for immediate gratification and returns on investment. Subprime lending at the end of a low/zero interest rate cycle is SUICIDAL STUPIDITY. As dumb as most of the bankers in the banking industry are, they understand the basics of risk transference- i.e to Freddie, Fanny, and Uncle Sam's debt serfs. These amateurs are beyond stupid, and Mammon will punish them accordingly.

(Now I have to get back to helping a few friends finalize documentation for a 10M capital raise next quarter, because as a smarter retail investor (and former evil genius banker) I have a more realistic idea of what type of carried interest is likely payoff even in adverse market conditions)

Wed, 11/13/2013 - 06:28 | Link to Comment starfcker
starfcker's picture

midtown, i would agree usery is a sin and just plain exploitation when we're talking about the payday stores and tax refund loans and all that. but pure peer to peer funding was how i got my start, and it took me a long time to build the trust and grow up enough to put together serious proposals that people would fund. i overpaid for money plenty of times, but those were some of the best deals i ever made, and changed my life, quite frankly. 

Wed, 11/13/2013 - 01:57 | Link to Comment RockyRacoon
RockyRacoon's picture

"They deserve everything they will get in the long run."

Yeah, they might actually lose their money, and not be bailed out by you and me.  There's your difference.

That's good ole American risk-taking on a suitable scale.  I say good for 'em.  You can rest assured that they'll be much more diligent about collecting the debt and preventing losses -- unlike our present "banking" system who just look to the Fed and Congress to pay the bill.

Wed, 11/13/2013 - 06:33 | Link to Comment new game
new game's picture

mad max and i have a bank of results - pay or fucking die, payments are made on time!

Wed, 11/13/2013 - 11:57 | Link to Comment Jumbotron
Jumbotron's picture

"Bingo. Good, honest folks should just go to cash and stop playing. It'll be hard, but the system will correct a lot faster that way. These yoyo's are just as evil as the scum they are emulating. They deserve everything they will get in the long run."

 

Asteroid dropping truth like a.....err....well....an ASTEROID !!!    BOOM BITCHEZZ !!!

Wed, 11/13/2013 - 00:09 | Link to Comment aVileRat
aVileRat's picture

Finally logging into post after 4 years of lurking. This, coupled with Comic book writers offering their followers on twitter stock tips in biotech stawks is the most clear sign of a Market Top.

Fucking bring on the crash, nothing can possibly explain away at the Risk Officer or Fed comittee level how this is not the most pure sign of risk-distortion in the last 200 years of economic history. Ninja loans for gambling. Wow, last time I can remember this even being considered was in the last months of the tech bubble and a PHD thesis 10 years ago accounting risk speculators in the Tulip bulb blowup.

 

 

 

Wed, 11/13/2013 - 00:44 | Link to Comment DaveyJones
DaveyJones's picture

welcome

Wed, 11/13/2013 - 08:27 | Link to Comment max2205
max2205's picture

It's called micro loans and it's been done all over the world for at least 30 years....fucking read some books

 

You have reached the end of the internet....go do something worthwhile

Wed, 11/13/2013 - 10:33 | Link to Comment sgorem
sgorem's picture

< does NOT give a flying fuck

< gives a flying fuck


Wed, 11/13/2013 - 12:19 | Link to Comment Harrison
Harrison's picture

Why? You get a security interest on the house, the buyer gets a place to live, and if the buyer doesn't pay you back, you foreclose.

Because these investors are not "too big to fail" and can't afford to sit on the houses for the rest of eternity, they will actually cycle the homes. They make money, the market clears, and there are no shenanigans about MERS or robosigning or failure to keep documents to worry about.

Wed, 11/13/2013 - 15:15 | Link to Comment daveO
daveO's picture

Makes sense from the TBTF Bankers' perspective. You use one of your 'propaganda mouthpieces' in the MSM to print this article. Then you can possibly convince the Ever Gullible Baby Boomer to take the risk off your books by using their deposits to buy up all that inventory. Every time I see an article that says 'Baby Boomer', I think Pavlov's Dog.  

Tue, 11/12/2013 - 23:34 | Link to Comment A Lunatic
A Lunatic's picture

The fool and his money are soon parted........

Wed, 11/13/2013 - 00:06 | Link to Comment Unprepared
Unprepared's picture

The fool and his money... what money?

[accepts both interpretations]

Wed, 11/13/2013 - 05:56 | Link to Comment lance_manion
lance_manion's picture

The modern idiom is 'a fool and YOUR money are soon partying'.

Wed, 11/13/2013 - 09:04 | Link to Comment GMadScientist
GMadScientist's picture

Also true for rich assholes in the wrong part of town.

Tue, 11/12/2013 - 23:35 | Link to Comment Diogenes
Diogenes's picture

I have made loans to borrowers who did not qualify but I have been in real estate investing for 40 years. You have to know what you are doing, and the collateral is more important than the borrower's creditworthiness.

To think of these people jumping into something they don't understand is scary. This cannot end well.

Wed, 11/13/2013 - 07:50 | Link to Comment therover
therover's picture

Dio...you pretty much summed it up. Knowing what you are doing and insuring there is good collateral is key. I am sure based on being in the business for 40 years, you have some stories. 

This is what concerns me - "chiropractor explained where he would get the funds to become a loan officer: He would use some cash he had saved and withdraw equity from his home using a home-equity line of credit."

The guy has no clue if he is taking out a loan on his home, in order to loan out to a person he does not know and who may bolt after a year or two. Hopefully (but probably not) he at least made sure there is good collateral behind the loan. 

Did the chriopractor read a blog on interest arbitrage or something ? 



 

Wed, 11/13/2013 - 15:17 | Link to Comment daveO
daveO's picture

The 'Baby Boomers' are also the ones who bought into the Time Share Market. They will never retire, because most are too brainwashed to ever learn.

Tue, 11/12/2013 - 23:36 | Link to Comment seek
seek's picture

It just shows how desperate for yield they are. I've seen the same thing happen with friend's 75+ parents; because yields are so low their retirement planning/finances are seriously screwed up, and they're burning through capital that was supposed to last to the end of their lives in a matter of a few years. So they go into intense austerity mode to lower the drain on capital, and start doing crazy, crazy things in search for yield. (One friend had to stop their parents from signing on into an outright ponzi.)

This is what you reap when you tamper with price discovery, Mr. Bernanke: poor desperate old people trying to save themselves from homelessness and starvation by taking any gamble.

Tue, 11/12/2013 - 23:50 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

It strikes me that these people were probably defaulters on loans themselves.  It's how they raised their cash.

It hasn't occurred to them that their borrowers are going to default on them AND maybe discover the collateral is worthless.

Wed, 11/13/2013 - 00:15 | Link to Comment willwork4food
willwork4food's picture

How could a house as collateral be worthless? It would be prudent for the private investor to make sure his ducks were in a row should the lender default. Which would include a personal inspection of the neighborhood and dwelling.

Wed, 11/13/2013 - 00:46 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Residential dwelling units never lose value.

Wed, 11/13/2013 - 06:04 | Link to Comment lewy14
lewy14's picture

LTV on these loans is minimal.

No haircut, more like a beheading.

Wed, 11/13/2013 - 07:49 | Link to Comment BlankfeinDiamond
BlankfeinDiamond's picture

Probably true. My friend hasn't paid his mortgage in about two years and he's still living in his upside down home. Meanwhile he's been socking away that $1200 every month that would have gone towards his mortgage. He aint the only one doing it.

Wed, 11/13/2013 - 15:20 | Link to Comment daveO
daveO's picture

So long as, it's actually in his sock drawer.

Wed, 11/13/2013 - 00:33 | Link to Comment Jungle Jim
Jungle Jim's picture

To Seek: Yes, the crazy, desperate gamble I took in 2010 was buying over 1600 ounces of silver. 1100 ounces of which I have been forced to sell (at a huge loss) this year. The remaining ~ 500 ounces will probably not last me until April. Then ... nothing.

Wed, 11/13/2013 - 01:33 | Link to Comment Non Passaran
Non Passaran's picture

What are you doing to spend all that money?

Wed, 11/13/2013 - 03:30 | Link to Comment Deo vindice
Deo vindice's picture

I have seen metals go up - waaaay up, and down - waaaay down. But you should neither buy nor sell when you can't afford to.

Wed, 11/13/2013 - 00:51 | Link to Comment DaveyJones
DaveyJones's picture

my thoughts too. Most people don't have the knowledge the average ZH reader has. I came here to try to cure my ignorance. They have also been repeatedly lied to. The elders are less likely to use (or know how to use) the web which has quickly become one of the last sources of truth. The whole thing is disgusting and criminal  

Wed, 11/13/2013 - 02:00 | Link to Comment RockyRacoon
RockyRacoon's picture

It's also none of our business.  Next thing you'll be wanting laws to "protect" them?  From what? Themselves?

I've had just about enough of that sort of thing.

Wed, 11/13/2013 - 06:06 | Link to Comment lewy14
lewy14's picture

Exactly.

There is a place where the government will protect you. From everything.

It's called a FEMA camp.

Wed, 11/13/2013 - 06:55 | Link to Comment new game
new game's picture

i prefer the wild west set of rules. responsibility for you own actions without a nanny state.

you really can't have it both ways, but this tread points out the problem in spades.

laugh at the loosers, might as well, can't change it and don't want to.

oh and for what it is worth, consider the spending side of the equasion.

that is where the results are. minmalize. live without and reep the rewards of other idiots and the taxes they pay.

i am typing on a free computer w/ 50 of upgrades to make it run fine. flip phone(free from coop recyle bin) w 30/month plan, 150k corolla 5 speed, bike when possible, best food money can buy(spare no expense there - it is my health insurance,plus exercise), no medical insurance expense, cash in cred union bank, pm of 20 percent of wealth, anything else i can share today, hmmm-oh yea thanks for spending with wreakless abandon and paying a disaproportionate share of societies costs as i reep those rewards, free of charge, roads ect. thanks...keep on spending and buying all that bling, needless contraptions you can live without-riding lawn mower for a yard the size of my fingernail. oh thanks to the millions of pickup drivers hauling around air-your gas tax is appreciated. did i forget anything - yea sure; add to list in the form of a response TIA signed frugal fuck.

ps i am spelling challenged:) 

Wed, 11/13/2013 - 09:03 | Link to Comment lewy14
lewy14's picture

You do realize spell-checkers are free, right?

;)

Wed, 11/13/2013 - 14:56 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

A fool and their money is always soon parted. That is the consequence for foolishness in this manner. There is a line though, I like to use drunk driving as example. If I want to drink and drive if I hurt no one or only hurt myself and/or whoever else voluntarily got into the car with me in that state it is no one elses business but what happens when the risk part goes bad and I run a third party over who was not voluntarily involved while driving?

It is never all or nothing that is the point of having laws in the first place to deal with that question. Liberals want no consequences for actions, Libertarians and that is the point of having laws is to ensure moral hazard is enforced when the risk goes bad.

Tue, 11/12/2013 - 23:38 | Link to Comment Offthebeach
Offthebeach's picture

So even the Mafia is squeezed out in the Bernake's New Normal Economy.

Wed, 11/13/2013 - 04:42 | Link to Comment Dr. Sandi
Dr. Sandi's picture

Anybody who was any good at all left the mafia years ago and got into banking.

Tue, 11/12/2013 - 23:39 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Peak insanity? The thing about insanity is that it is self replicating, self sustaining and self affirming. In other words Tyler.......you ain't seen nuttin yet.

Wed, 11/13/2013 - 06:59 | Link to Comment new game
new game's picture

wow, and all this to be rich. peak cog dis!!!!!!!!!!!!!!!

Tue, 11/12/2013 - 23:39 | Link to Comment Bunga Bunga
Bunga Bunga's picture

Don't tell the baby bummers that there is Bitcoin.

Wed, 11/13/2013 - 01:21 | Link to Comment Quus Ant
Quus Ant's picture

It would be a hoot to try to talk my 80 year old grandpa into sinking his savings into Bitcoin.  After he smacked me upside the head and threatened to take a switch to me for throwing my money to the wind he would sit me down to hear for the thousandth time how he lived through the depression.  A cattle rancher and hoarder of terra firma- he would tell me land is the only thing that matters- the only thing that lasts....or something to that effect.... but I think we could come to terms on gold and silver.

Tue, 11/12/2013 - 23:40 | Link to Comment joego1
joego1's picture

Why don't they just buy some property and rent it out?

Wed, 11/13/2013 - 01:30 | Link to Comment Non Passaran
Non Passaran's picture

No way to make that much from rent

Wed, 11/13/2013 - 01:41 | Link to Comment Quus Ant
Quus Ant's picture

And you might get called on to fix a water heater.  Who wants that hastle?  Just send me a check every month.  Then again, can you do direct deposit?  There's always a line at the bank.  Such a hastle.

Tue, 11/12/2013 - 23:41 | Link to Comment Dr. Engali
Dr. Engali's picture

We are greedy and fucked up nation. One would think that retribution for our follies would be quick, but maybe this is our country's own personal hell. Slowly going a little more insane with each passing year.

Wed, 11/13/2013 - 00:11 | Link to Comment Agent P
Agent P's picture

For Boomers, this is likely the hail mary pass at the end of the game.  If it works, riches.  If not, hop on the government dole.  Either way you're taken care of; it's being stuck in the middle that's hard. So fuck it...put your last quarter in the slot and pull the lever. 

Wed, 11/13/2013 - 01:19 | Link to Comment Quus Ant
Quus Ant's picture

get rich or die trying.  Methinks the baby booomers might have taken that whole "greatest generation" thing personally and are hell bent to run the ship aground just to spite their parents. 

Wed, 11/13/2013 - 04:43 | Link to Comment Dr. Sandi
Dr. Sandi's picture

It's a plot, you poor post-pubescent fools.

Wed, 11/13/2013 - 15:25 | Link to Comment daveO
daveO's picture

Till the Petro-Dollar collapses. Then, the insane(baby boomers who fall for this) will starve to death.

Tue, 11/12/2013 - 23:41 | Link to Comment Freedumb
Freedumb's picture

These retail investors might be OK as long as they are learning Step 2 in this vaunted process, which is where you bundle the shitty mortgages with the bare minimum amount of T-bills necessary to get investment grade rating, pack it all into a Bermuda special purpose vehicle and then quickly sell the shares in your Bermuda fund to everyone else on your condo board, taking transaction fees or commissions at every single step, before all your loans go into default and a good length of time after you've gotten on a plane to the Bahamas and changed your name.

Wed, 11/13/2013 - 03:52 | Link to Comment scaleindependent
scaleindependent's picture

But they would suffer the full wrath of a self righteous prosecutorial system that would hunt them down for evil abuses, while those who stole trillions laugh it up.

I'm looking at ya corzine, et al

Tue, 11/12/2013 - 23:43 | Link to Comment I_Am_
I_Am_'s picture

Such or even more predatory lending happens all the time in Asia. If you don't have the muscle you are in grief......

Tue, 11/12/2013 - 23:45 | Link to Comment Seasmoke
Seasmoke's picture

I am going to have to take advantage of some of these loans....I'm willing to pay 22%……… check let's just make it easy and say 25%

Tue, 11/12/2013 - 23:47 | Link to Comment RafterManFMJ
RafterManFMJ's picture

I loaned close to 9 grand to a soft spoken man in Nigeria; he promised 15 percent returns which I thought was reasonable considering the risk.

He's got an Uncle that is actually a tribal King so I know I'm good.

Tue, 11/12/2013 - 23:47 | Link to Comment TruthInSunshine
TruthInSunshine's picture

An issue rarely spoken of in the MSM is that municipalities are in deep trouble because they are simply not able to fund their defined pension plan obligations due to ZIRP, and many are simply not doing so, technically breaking a myriad of laws.

Chicago or a major California city will be the next Detroit partly for this reason. And then the race will be in to file Chapter 9 in a cascade of dominoes (cities in poor financial health - meaning most - are all tracking Detroit's Bankruptcy litigation in preparation for their own filings in the months and years to follow).

Tue, 11/12/2013 - 23:49 | Link to Comment Seasmoke
Seasmoke's picture

Still time left to get your 16¢ on the Dollar.....but better hurry, next stop is 3¢

Wed, 11/13/2013 - 00:05 | Link to Comment the grateful un...
the grateful unemployed's picture

mini in CA caught a break when gov stopped the redevelopment agency scam. now the cities keep their tax money, and they can balance their books. not sure what the rest of the world is doing

Wed, 11/13/2013 - 07:10 | Link to Comment andrewp111
andrewp111's picture

So, just let the Fed buy Munis and everything will be fine. Why do you think Obama wanted Larry Summers instead of Old Yellen?

Tue, 11/12/2013 - 23:47 | Link to Comment all-priced-in
all-priced-in's picture

What is the dent in the forehead?

 

 

Wed, 11/13/2013 - 00:00 | Link to Comment Orly
Wed, 11/13/2013 - 00:14 | Link to Comment prains
prains's picture

it's where you stick your dick for five dolla!

<---owner of a Dick Muffin LOL!!

Wed, 11/13/2013 - 03:26 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Forehead glory holes.

A whole lot of skullfuckery goings on.

Wed, 11/13/2013 - 07:05 | Link to Comment new game
new game's picture

bullseye or point of entry...

Tue, 11/12/2013 - 23:48 | Link to Comment chump666
chump666's picture

Obama!

Tue, 11/12/2013 - 23:49 | Link to Comment 1C3-N1N3
1C3-N1N3's picture

"Larry Muck". That's really all I need to see.

Tue, 11/12/2013 - 23:51 | Link to Comment orez65
orez65's picture

I have four dear friends that have been subprime lenders for a number of years. They urged me to do the same but I declined.

Unfortunately this is what happened to them.

The first couple loaned about $500,000 to seven different borrowers. At first everything was fine. Interest rates in the 10% tp 14% range. Payments on time. After about two years the defaults began. Now three of their seven borrowers are not making payments. Total non performing loans about $225,000.

The second couple is experiencing a similar situation with about $325,000 out of $750,000 loans not performing.

Loaner beware of borrowers bearing gifts!

Wed, 11/13/2013 - 00:09 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Excuse me while I state the obvious without scanning the whole comment thread to see if someone else did --

 

THEY ARE CALLED SUB-PRIME FOR A REASON YOU FUCKING MORONS.

Wed, 11/13/2013 - 11:50 | Link to Comment 1223pm
1223pm's picture

What do you expect from a sub-prime nation?

Wed, 11/13/2013 - 00:14 | Link to Comment pitz
pitz's picture

Of course the borrower generally has better information than the lenders because the borrowers have probably shopped the loan around to every bank in town before stumbling upon your friends to borrow from. 

Wed, 11/13/2013 - 02:47 | Link to Comment Manic by Proxy
Manic by Proxy's picture

Love the euphemism "nonperforming loan". Kind of like when I pay taxes or have money stolen from me (yes, they are one and the same). That is termed "nonperforming income".

Tue, 11/12/2013 - 23:54 | Link to Comment madddmaxxx
madddmaxxx's picture

What could possibly go wrong

Free Money

Tue, 11/12/2013 - 23:59 | Link to Comment the grateful un...
the grateful unemployed's picture

a homeowner could always carry the paper, nothing new about that, but to my way of thinking the paper should be below the current rate, in order to gain a better sale price. if the market goes up, and A sells the property in 5 years, you get your full asking price, after only five years of discounted interest. if the value drops and A gives up the property comes back to, you collected rent. but mostly you want your buyer to have a good chance to keep the property. i mean whats the point of getting load shark rates for a year or two and then going through the foreclosure thing? people are not just greedy, they're stupid

Wed, 11/13/2013 - 00:05 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

Do they still have those online loan sites where people try to raise a certain amount of capital for whatever reason (pay bills, start a biz, etc.) from strangers, promising to pay back with interest by a certain time?

I forget what they're called...

Wed, 11/13/2013 - 00:09 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

prosper.com... that's what I was thinking of

Yep, still around

Wed, 11/13/2013 - 00:11 | Link to Comment IllusionOfChoice
IllusionOfChoice's picture

Peer to peer lending is what you're looking for. Lending Club and Prosper are the big ones.

Wed, 11/13/2013 - 00:47 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

Thanks, I almost got into that shit years ago..

But I couldn't decide if I wanted to lend or borrow, so just said eff it & forgot about it...

Wed, 11/13/2013 - 01:07 | Link to Comment Amagnonx
Amagnonx's picture

I think Ripple might be the next big thing in this space.

Wed, 11/13/2013 - 00:08 | Link to Comment lolmao500
lolmao500's picture

In other news... what's up in the WH?

Tonight POTUS met w/sr. civilian defense & military leaders - including all of his Combatant Commanders - at the WH

Then you got this :

http://www.timesofisrael.com/new-iran-sanctions-will-lead-to-war-white-h...

New Iran sanctions will lead to war, White House warns Administration ups efforts to prevent Congress from passing new penalties against Tehran that could put kibosh on nuclear deal

That's the goal! DUH!

 

Wed, 11/13/2013 - 04:48 | Link to Comment Dr. Sandi
Dr. Sandi's picture

BO was just asking them all a simple question:

"Will you willingly order your troops to fire on American civilians?"

Those who don't show enough 'team spirit' will be removed from command for expense account irregularities, unapproved personal trips or gambling on cockfighting.

Wed, 11/13/2013 - 00:10 | Link to Comment IllusionOfChoice
IllusionOfChoice's picture

Lending Club gives me similar angst. But where else are we to get yield with the stock market riding a precipice?

To be fair, at least at Lending Club you have easy diversification and a bit of data with which to make the call and I like to think it's actually doing a good turn to people trying to get out of the habit of using credit card debt.

At the end of the day, this is still all the Fed's fault not letting us take home a reasonable above inflation return letting money sit safely in CDs.

Wed, 11/13/2013 - 00:13 | Link to Comment pitz
pitz's picture

Why would someone want to compete against Bernanke and the TBTFs in this already extremely over-served business? 

Wed, 11/13/2013 - 00:13 | Link to Comment mayhem_korner
mayhem_korner's picture

a group of individuals pool their cash together to fund the loan.

 

Let's get this straight: while the central bank is removing these loans off of the balance sheets of the TBTF lending institutions en masse (like Newman cleaning up the muffin stumps), these Joes are going all in on the same bet. 

Has risk ever been more mispriced in the history of mankind?  But at least they've diversified by pooling their cash... /s

Wed, 11/13/2013 - 00:25 | Link to Comment kchrisc
kchrisc's picture

This is going to end like the bus and train collision in "the Fugitive."

Wed, 11/13/2013 - 00:31 | Link to Comment Yenbot
Yenbot's picture

There is an Alternative, you know. Wanna see it?

Wed, 11/13/2013 - 01:00 | Link to Comment Cabreado
Cabreado's picture

So then, Mike, you're saying that subprime lending is a "boomer" thing?

Said with sincerity -- be careful; you are starting to flail around.

Wed, 11/13/2013 - 00:53 | Link to Comment chindit13
chindit13's picture

The baby boomers will not rest until they destroy the entire world

No, these people are exercising their right to do what the heck they want with their own money.  It may well be foolish, but the world they are going to destroy, if any, is their own.  They are not going to get bailed out, and the worst burden they are likely to become to society is that they might someday go on the dole.  Besides that, 100K of them in a nation of 316 million is a rounding error.  I wouldn't do it, but if someone else chooses to do so, so be it.

Would Mike have the government step in to regulate against people making personal choices about what to do with their own money?  What's next, Mike?  Are you going to rant against crowd-funding, because most start-ups fail?  Everything is and should remain the purview of the banks and PE firms?

Material must have been thin today.

Wed, 11/13/2013 - 01:22 | Link to Comment Non Passaran
Non Passaran's picture

+1279

> Material must have been thin today.

Yes, this article is not up to Mike's standard and reminds me of GW's crap (but thankfully isn't that bad).
Most of the content was taken from MarketWatch. Not good!

Related to TFA, I can't believe how careless those lenders are. How the fuck can one expect to have his money back knowing it's been lent out at a 10+% interest rate??

Wed, 11/13/2013 - 11:27 | Link to Comment Diogenes
Diogenes's picture

I will happily lend you $100,000 @ 8% to buy a house if I know the house is worth more than $125,000 and I have the right to foreclose if you miss 1 payment.

You will sign the papers, prepared by my lawyer,  in the presence of my lawyer and you will pay all legal expenses including registering the mortgage at the court house.

Not everyone qualifies for such generous terms. I can also do a land contract at slightly higher rates if you don't have 20% down and an acceptable  credit rating.

I definitely recommend you borrow from a bank if you qualify. They will give you a much better deal than I will.

By the way when I started buying real estate in the seventies and eighties I paid 8%, 10%, 12% and even more.

Wed, 11/13/2013 - 00:55 | Link to Comment Yen Cross
Yen Cross's picture

   Good Lord, the legal costs of working through one of these back room deals when the borrower defaults will chew through any equity/collateral in a heart beat...

Wed, 11/13/2013 - 02:04 | Link to Comment prains
prains's picture

That's why this entire fucked up scheme will never work.......ask yourself....would you lend that kind of money to your family?...anyone with a brain would say NO! 

Wed, 11/13/2013 - 09:26 | Link to Comment moonstears
moonstears's picture

"would you lend that kind of money to your family?...anyone with a brain would say NO!"

$$ given to family is always, always a "gift" when all's said and done. 

Wed, 11/13/2013 - 15:37 | Link to Comment daveO
daveO's picture

From my own experience, it's many times a gift from the 'State-Educated' judge, of my money, to the deadbeat. You're usually screwed before you ever get to the court house.

Wed, 11/13/2013 - 07:04 | Link to Comment andrewp111
andrewp111's picture

Sending over punks with crowbars, and forcing the defaulters to engage in prostitution is a lot easier.

Wed, 11/13/2013 - 01:04 | Link to Comment TyrannoSoros Wrecks
TyrannoSoros Wrecks's picture

They used to call this LOANSHARKING. And its nothing new, just the demographics of the loan sharks have changed apparently.
Do the lendees sign over the house as collateral, or do the sharks just send their unemployed kids over with baseball bats to collect?

Do NOT follow this link or you will be banned from the site!