# Why is there still subprime lending in Ireland?



## Jonathan.OB (15 Oct 2008)

This bothers me greatly. 

I worked in several mortgage brokers over the past number of year and eventually lost my appetite and faith in the business because of the underhanded tactics being used by brokers and banks alike, effectively conning people into borrowing above their means. 

Some of you may have seen the PrimeTime programme on the "mis-selling of financial products" a few months back. The programme revealed the various 'tricks' used by brokers operating in the subprime wing of one of the largest mortgage brokers in Ireland and the initial response was one of shock and anger. 

However, it seems to me that the reckless activities of brokers and the muted outcry is caused has been forgotten about. With the Irish Economy now in recession and the world's financial systems in disarray, I believe it's high time we look at all aspects of our lending system and the various practices from all parties that have and will further contribute to the deflating of the property market. 

I no longer work in the mortgage industry, but always keep watch over significant developments that might be reported on. One such was the court order hearings for foreclosures on Monday just gone. I believe 50 cases were heard resulting in 6 repossession orders and the remainder given further time. Of the 50, a large majority were charged from the largest subprime lender in Ireland, who shall remain nameless for now and this didn't surprise me in the least, as I have had first hand experience of the reckless, irresponsible lending policies they had adopted since launching their "sup-prime" product several years ago. Whilst I have no doubt that this bank in question have since tightened their lending policies and have restricted their "fishing" of the market to the least vulnerable, I do not agree with the business model, full stop. Sub Prime lending does not work, regardless of the differences between the unbelievably carefree, high risk practices of the American SubPrimes and the Irish lenders so-called measured, careful approach.

To put it in simple terms - debt should not be solved and diluted with further debt & increases in interest rates for homeowners. To put it politely, I have seen families get screwed over by banks and brokers alike and the severe consequences have yet to be felt. 

I would like to hear of people's experience with brokers and banks who you may have acted without caution and proper judgement. It would be better again if people would like to talk about their experiences with subprime lenders. 

I have no personal vendetta here and don't wish any broker or bank-worker out of a job. But when I received a phone call at 9pm one Friday night back in June from a sobbing client, who had been wrongly advised to take out a subprime mortgage previously and since had accumulated insurmountable debts and the countless problems associated, I could not let this pass. 

J


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## Jonathan.OB (15 Oct 2008)

And, of course, if anyone is looking for advice or have question on any problems they may be encountering with brokers/subprime lenders/banks, hopefully we can solve them together. 

Ta


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## Maximus152 (15 Oct 2008)

One simple question I keep hearing the word subprime this that and so on, what exactly in simple terms are we talking about here. I understand whats going on here with regard to liquidity ratios and banks over lending along with credit crunch... 


Rgd's
M


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## Maximus152 (15 Oct 2008)

Its okay I worked it out, was nt sure but its basically lending monies to ppl who cant afford it... or 100% mortgage from a broker who should nt be giving you a mortage in 1st place!!


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## Elainee40 (15 Oct 2008)

i have a "sub Prime" Mortgage, have it since sept 07.
Partner had credit problems with credit cards 4 years ago and was on his icb.
we are on a rate of 8.44% which im currently trying to re-mortgage at the moment.
We were informed last week that they wont be passing on the ECB rate cut to us.
We have had 8 increases since we took out the mortgage


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## jhegarty (15 Oct 2008)

Maximus152 said:


> Its okay I worked it out, was nt sure but its basically lending monies to ppl who cant afford it... or 100% mortgage from a broker who should nt be giving you a mortage in 1st place!!




Not really 100% correct. It's a mortgage for someone who the banks won't touch. 

Could be , they can't afford it , they have a bad credit history but can afford it , their income can't be proves (people working off the books,etc)...


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## sfag (15 Oct 2008)

You dont say who the biggest sub prime lender is but I can take a guess. Long before the crisis one particular building society above all others was quick to repossess. You see they stood only to gain because prices only went up. In these circumstances there was equity in the asset loaned against almost immediately. These houses then became the possession of the lender who always seemed to sell it on at just above the loan amount. Strange that. With that background you can see whay it never mattered if the borrower could meet their repayments - lots of people won - the lender and brokers, but not the borrower. 
Absolute sharks and worthy of retrospective investigation


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## Maximus152 (15 Oct 2008)

Could be , they can't afford it , they have a bad credit history but can afford it , their income can't be proves (people working off the books,etc)...[/quote]

Okay fair enough. Cheers.


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## Brendan Burgess (15 Oct 2008)

Sub-prime lending is fine in theory. Some people who have bad credit records but who can afford to buy a house should be able to buy a house.

The Irish Nationwide was the first sub-prime lender in Ireland. They charged a higher interest rate and people were glad to get the loans. Most of their customers managed to sort out their finances and moved to other banks or negotiated better deals with the Irish Nationwide. 

The problem was that if you fell into arrears with the Irish Nationwide, it was impossible to get out. They charged 20% penalty interest on arrears. Worse than that, they actually calculated the arrears incorrectly although they dispute this. They also passed on only half of the interest rate cuts. 

They have been replaced in the public disaffection by Smart Mortgages. I have no first hand experience of them, but they do seem to be in the courts a lot. 

The Financial Regulator needs to develop a code of practice specifically for Sub-prime and they need to enforce it.  Then it would fill an important gap in the lending environment.

Brendan


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## Pixied (15 Oct 2008)

The new government 'Home choice loan' scheme announced in the budget is sub prime lending. 

One of the conditions of acceptance is that you have already been refused a mortgage by a bank! As well as earn over 40k and other conditions. 

For proof on this see: 

The answer to your question as to why there is still subprime lending in Ireland? 

Well in this case, it's because it will bail the developers out of trouble. I'm all for responsible lending and people getting a hand but this type of loan scheme is irresponsible and an outrage to the everyday person.

By the way, did I mention the above scheme applies to 'new builds' only? (Cough).


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## Jonathan.OB (16 Oct 2008)

I agree with Brendan, in that there should be facilities for those who may have ran into trouble or found themselves in unfortunate circumstances, but this should be contained within a mainstream lender's business. 

The likes of Start Mortgages and Springboard Mortgages have been vehicles used by investors to squeeze higher returns from their bond investments. 

I don't have too much time to say all I want to, but at the weekend I'll express more views. 

Great reponses so far though. 

Pixied, thanks for the link, will investigate further now. 

J


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## Bronte (16 Oct 2008)

Maybe the government should insist that those who borrowed on subprime mortgage rates and struggled to meet repayments be reduced to normal rates to see if they can get out of trouble.  It is entirely possible that some/many people paying 8% or 9 % would be able to cope with 5% or 6%.  This could be part of the price of the government bailing out the banks.


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## jpd (16 Oct 2008)

Bronte said:


> This could be part of the price of the *government *bailing out the banks.



You mean the taxpayers ie you and me and ...

I have been prudent and not overborrowed but now I am being penalised and being forced to help those you have not been as prudent as I was. I am all for helping those in need  but at what stage do adult people have to take responsability for their own actions ? We are not dealing with 7 year old kids here.


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## Elainee40 (16 Oct 2008)

jpd said:


> You mean the taxpayers ie you and me and ...
> 
> I have been prudent and not overborrowed but now I am being penalised and being forced to help those you have not been as prudent as I was. I am all for helping those in need but at what stage do adult people have to take responsability for their own actions ? We are not dealing with 7 year old kids here.


 
Not everyone overborrowed to get behind on payments eg credit cards from years ago.

Some people have legit reasons why they fall behind on things, like 6 months in hospital, and no income to pay bills.

Granted some people dont take Responsability for there actions but not everyone should be classed in the same means


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## NorfBank (16 Oct 2008)

Bronte said:


> Maybe the government should insist that those who borrowed on subprime mortgage rates and struggled to meet repayments be reduced to normal rates to see if they can get out of trouble.  It is entirely possible that some/many people paying 8% or 9 % would be able to cope with 5% or 6%.  This could be part of the price of the government bailing out the banks.



Maybe the sub prime mortgage lenders should be investigated to see to what extent the loans they offered were predatory and the ones that were found to be predatory could be declared void. This will never happen of course but it should. 

About 5 years ago I worked (for 2 weeks) for a broker that "specialised" in sub prime lending. Some of the practices there were depraved, there is no other way to describe it. It was a case of "helping" the client to get the maximum amount of a mortgage possible without the client really realising what they were getting themselves in for.

To defend the decent brokers out there, some people who go down the sub prime route will not listen to reason either. Most simply didn't understand how interest rates worked, they just knew there was money in the house and there was a way of getting this money from the house in order to keep up with the Jones' and change the car/go on holiday/get decking.

Personally I do not deal with sub prime mortgages because you know at some stage whatever advice you have given will end up biting you on the behind as you may be made to shoulder some of the blame if a repossession occurs regardless of whether the client signed a statement of suitability (rare in sub prime case in my limited experience) or not.

In relation to the new government initiative, does anyone know if the applicants will actually have their credit checked or if the government really is becoming a sub prime lender?


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## Mumha (16 Oct 2008)

Pixied said:


> The new government 'Home choice loan' scheme announced in the budget is sub prime lending.
> 
> One of the conditions of acceptance is that you have already been refused a mortgage by a bank! As well as earn over 40k and other conditions.
> 
> ...


 
If I understand this homechoiceloan thing correctly, it too could be a ticking timebomb for many touching it. Is this correct ?

- Single person earning say, €41,000 buys a new build for €280,000 at 7 times their salary, and can just about afford the mortgage.

- Let's say in 2 years (while the 2nd hand market has almost certainly been dropping in the meantime), he has to sell because for whatever reason he can no longer afford to pay his mortgage.

- The problem now is he borrowed €280,000 but 2 years have passed where the house (which is now a 2nd hand house) is in considerable further negative equity.

- He is goosed for life, while the property developer is sitting under a palm tree in the sun having offloaded the otherwise empty property and banked the profit.

- If I am correct, this is outrageous and even worse that the Government are backing it. A scandal in the making.

- *Wouldn't the guy be better off just continuing to save until the market bottoms out ?*


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## Pauliwalnuts (17 Oct 2008)

I think you've just hit the nail directly on the head right there my friend !!


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## Pixied (17 Oct 2008)

I concur.

A complete scandal and the nail in question is the one in Fianna Fails coffin.


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## Mumha (17 Oct 2008)

But we are now into Friday, and even though I get it, this is not news anywhere, even though it does look to be a scandal of some proportion. This may not be exposed until 1000s are caught in the trap.


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## mh76 (17 Oct 2008)

jpd said:


> You mean the taxpayers ie you and me and ...
> 
> I have been prudent and not overborrowed but now I am being penalised and being forced to help those you have not been as prudent as I was. I am all for helping those in need but at what stage do adult people have to take responsability for their own actions ? We are not dealing with 7 year old kids here.


 
Have to agree with JPD, I work in the industry and have lost count of the number of times I've seen credit card statements in the '000's...never mind car loans, personal loans, Hire Purchases for TV's and Sofa's.  At some point people have to take responsibility for their own spending - the concept of saving for luxuries like TV's and holidays is alien to a lot of people. 

I think greed is the driver...on the part of the individual, the brokers, the bank, the developers...


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## mainasia (21 Oct 2008)

The media have been very slow to pick up on this, particularly the VERY OBVIOUS SCAM that it is only provided to new builds. I mean no matter about the sub-prime bit and the pointlessness of the whole scheme, but the requirement for new builds is in there and there is hardly a peep. Are the sheeple really so gullible?


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## PM1234 (22 Oct 2008)

Subprime has its advantages and faults.

There are many people who can't get a mortgage due to a bad credit history rating in the past and can afford a property. There are many people who have a bad credit history and cannot afford a property.   

When someone is looking for a mortgage, they usually approach a main high street lender first. If the high street lender declines their application and tells them the reason why (which usually happens), it is the borrowers decision to look elsewhere. The attitude of 'I'll get that house come hell or high water' is that of the would be borrower. 

When we read posts from readers who are refused a credit card from a high street bank, looking for directions to money lenders, there is an outpouring from people telling them to have sense and save. Is it really so different?

It comes down to individuals having to take responsibility for their borrowings.

That said, my sympathy is for those who fell into repayment problems for reasons beyond their control.


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## NorthDrum (22 Oct 2008)

mainasia said:


> The media have been very slow to pick up on this, particularly the VERY OBVIOUS SCAM that it is only provided to new builds. I mean no matter about the sub-prime bit and the pointlessness of the whole scheme, but the requirement for new builds is in there and there is hardly a peep. Are the sheeple really so gullible?



Before I say anything, Im agreeing in principle with alot thats being said here but want to point out a few things.

1. If banks werent bailed out we would all be screwed and would have an awful lot more to give out about.

Lesson learned? why are our government reactive as opposed to pro-active? Well we, as a society do the exact same.

Everybody has the answers to the problems we have today that would of helped us yesterday. I can tell you tonights lotto numbers tomorrow morning!!!

2. It actually benefits the economy more if first time buyers are in essence limited to buying newly built houses.

People keep focusing on the bailout of the banks or the bailout of the builders without taking into account of the bigger picture. Rightly or wrongly our whole economy has been built on the pigsback of builders and banks and has fallen by the same hands of these "professionals".

2nd hand house buying would not benefit the economy as much as new house purchases. New house purchases means that builders can give the banks back some of the money they owe them, banks have less exposure to property markets, which means less bad debts and hopefully confidence globally in Irish Banks. I could go on but I hope this gets some thinking on a differant slant to the whole "bailing out" headline that the press are beating us all to death with!!

3. The sooner Joe Duffy's shows and those alike are put out to graze the better. Im all for freedom of speech but its filtered propaganda, designed to upset as many people as possible for ratings. These shows only ever air what they want us to hear. 

Lastly, on a grander scale you have to realise that everything the government is doing right now is about trying the get the economy moving again. There is no room for them to "Bailout" certain sections of the privaleged industrys for anything other then boosting the economy. Please, Dont read the rag papers or listen to radio shows to get your facts or knowledge on such complex subjects.


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## Mumha (26 Oct 2008)

NorthDrum said:


> Before I say anything, Im agreeing in principle with alot thats being said here but want to point out a few things.
> 
> 1. If banks werent bailed out we would all be screwed and would have an awful lot more to give out about.
> 
> ...


 
NorthDrum,

To answer your points,

1) The Government haven't "bailed" the banks out, YET. They've issued a guarantee to cover all deposits and all loans, but no money has changed hands. We are being softened up in the media by people saying we will have to use the Pensions Reserve Fund to prop up/invest in the banks. Seeing as how the British governments bail out doesn't appear to have had much effect, you'd wonder what the PRF money would do, apart from letting the developers off the hook.

2)  This crisis has been built on a bed of dishonesty and to leave it go on will just perpetuate the dishonesty. Poor saps on 40K a year who have been turned down by Banks and Building societies will be fixed up with a loan for a new house that is currently overvalued and will probably drop another 30% in value to its true realistic price over the coming 18-24 months. That is dishonest, unfair and against all the principles of a true free market. I can see these people sueing the government for allowing them to get into this sub-prime situation. The government that should be protecting them, instead they are protecting the bankers & developers who should be allowed to go to the wall, if that is what is necessary.

3) Thank God for Uncle Joe. Yes he is sensationalist but without him and his like we would be nowhere, thanks to a lapdog mentality in the meeja generally.

4) If only it were true that the government were only doing everything to get the economy moving again... it is all about protecting their cronies and party contributors. However, as a country we are headed down a road that not even Bertie could protect them.


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## NorthDrum (29 Oct 2008)

Mumha said:


> NorthDrum,
> 
> To answer your points,



Hi Mumha,

1. I have said in other threads that this is not a bailout. I use the term as it seems to be the one that has stuck with people that easily explains what I am discussing. Its Joe Duffy and his kind that are only heightening peoples ignorance or lack of understanding to the problem at hand.

2. My points were in no way excusing what has happened or what has been done to rectify it. All I am doing is trying to get people to realise that this HAS to be done for all our sakes. How we got here isnt as important now, as how we fix things up.

3,Uncle Joe is just as bad (if not worse) as the general media. Its common knowledge that he only airs views that concur with either the shows theme or the arguement he is getting across. He is just as dishonest as anybody in all this mess.

4. Again I wasnt saying that the government doesnt have its own interests at heart but that a large part of what they are doing is for the good of us all (no matter what the media or Sir Joe say).

Mumha, personally I agree with pretty much everything you say, but I am just making a point that alot of whats happened had to happen. I love the fact that we live in a democracy where you can openly criticise our establishment, but the likes of Joe Duffy are just the extreme opposite to the lies we get off Politicians or big organisations. Hes like the Michael Moore of media in this country and about as biased as they come.


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## Mumha (30 Oct 2008)

NorthDrum said:


> Hi Mumha,
> 
> 1. I have said in other threads that this is not a bailout. I use the term as it seems to be the one that has stuck with people that easily explains what I am discussing. Its Joe Duffy and his kind that are only heightening peoples ignorance or lack of understanding to the problem at hand.
> 
> ...


 
Michael Moore !!!    That's a good one ! Ironic that I should be defending Uncle Joe, but you'd wonder would we have been given any explanations at all but for him and others.

True, a lot of whats happened had to happen, but my point is that allowing a property bubble to be created was something that need not occurred in the first place (i.e. a bed of dishonesty). And it is not as if FF didn't have the opportunity to take corrective action years ago, but they listened to their developer buddies instead of independent sources. It is the height of idiocy to believe that we could never have a property crash like the UK and the US (to name but a few). 

How we got here is vital, not only to remember for the future, but to hold those responsible, to account for the sins of the past. 

Getting out of this mess is now beyond us because FF didn't take the action that was obvious even to the likes of me, we now will depend on a rejuvenated world economy to lift all boats rather than an Irish government. That may take quite a while.


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## NorthDrum (30 Oct 2008)

Mumha said:


> Michael Moore !!!    That's a good one ! Ironic that I should be defending Uncle Joe, but you'd wonder would we have been given any explanations at all but for him and others.
> 
> True, a lot of whats happened had to happen, but my point is that allowing a property bubble to be created was something that need not occurred in the first place (i.e. a bed of dishonesty). And it is not as if FF didn't have the opportunity to take corrective action years ago, but they listened to their developer buddies instead of independent sources. It is the height of idiocy to believe that we could never have a property crash like the UK and the US (to name but a few).
> 
> ...



Agreed. 

Dont get me started on money thats been wasted in the last 15 years on dodgy constructed tunnels, tribunels, stadiums never built, roads not built big enough (that are now being dug up!) . . . . . . .


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## quarterfloun (30 Oct 2008)

Whilst the concensus of these posts agree that people should be responsible for their personal finances we should therefore take a long look at Fianna Fail as they were (and still are) custodians of the finances of Ireland. How could they not see a 6 billion hole in the economy - blinkered by the opportunity of winning another election perhaps? Therefore Sub Prime lending and anything else that could keep their gravy train going was and never will be legislated against.


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## lumpty (18 Nov 2008)

Elainee40 said:


> i have a "sub Prime" Mortgage, have it since sept 07.
> Partner had credit problems with credit cards 4 years ago and was on his icb.
> we are on a rate of 8.44% which im currently trying to re-mortgage at the moment.
> We were informed last week that they wont be passing on the ECB rate cut to us.
> We have had 8 increases since we took out the mortgage


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## lumpty (18 Nov 2008)

Getting out of subprime is not easy but its worth a try...if you have cleaned up your icb report and maintained a good pay history and house has good ltv then you have a chance...you need to demonstrate income that can afford the required mortgage, clean bank statments(for at least 3 months) and reasonable explaination for why you went subprime in the first place...good luck with your attempts


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## MortgageGuy (28 Nov 2008)

if there is still a market for subprime lending why shouldn't it exist? it is too simplistic to merely believe that 'all subprime lending is bad' there are people using those loans for whom there has been beneficial effects


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## webtax (29 Nov 2008)

Is it really such hell on earth for a family to have to rent a property? The house is still a house whether you are paying the bank or a landlord. The unease about landlords dates back to famine times and we need to move past it. A mortgage of €200k at 8% sub-prime would cost €16k in interest alone, while a similiar property could be rented for a yield of 4% or €8k.

If a person really wants their own home they should build up a savings record of 5 years while renting to prove to the bank that they are credit worthy - why are they in such a rush to hand €1,000s extra over to a sub-prime lender?


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## z109 (29 Nov 2008)

NorthDrum said:


> 2. It actually benefits the economy more if first time buyers are in essence limited to buying newly built houses.
> 
> People keep focusing on the bailout of the banks or the bailout of the builders without taking into account of the bigger picture. Rightly or wrongly our whole economy has been built on the pigsback of builders and banks and has fallen by the same hands of these "professionals".
> 
> 2nd hand house buying would not benefit the economy as much as new house purchases. New house purchases means that builders can give the banks back some of the money they owe them, banks have less exposure to property markets, which means less bad debts and hopefully confidence globally in Irish Banks. I could go on but I hope this gets some thinking on a differant slant to the whole "bailing out" headline that the press are beating us all to death with!!


To continue your logic, every house should be knocked down as soon as it is sold. If you only allow FTBs to buy new houses, then there is no-one to buy second level houses - the previous level FTBs who bought those entry-level houses will be unable to sell them and so will be stuck where they are. Eventually the property market will grind to a halt. House prices will reduce to site value.

I think its a great idea! (And no, I'm not being sarcastic).

On the other hand, what happens when a second-hand house gets sold:
- the mortgage on it gets paid off
- the person buys another house either trading up or trading down
- in the case of trading down, the overall debt of the economy is reduced and some of the asset value of property is released as cash to promote useful economic activity.

So, you tell me the difference between money from a new house sale, or money from a second-hand house sale.


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## VOR (1 Dec 2008)

[broken link removed]

The above article is long but worth the read. It is frightening how stupid a great deal of Wall Street actually was when it came to sub prime. I use the quote below as an example:
_"He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says."_


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## foghorn (2 Dec 2008)

NorthDrum said:


> 2. It actually benefits the economy more if first time buyers are in essence limited to buying newly built houses.
> 
> 3. The sooner Joe Duffy's shows and those alike are put out to graze the better. Im all for freedom of speech but its filtered propaganda, designed to upset as many people as possible for ratings. These shows only ever air what they want us to hear.
> 
> Dont read the rag papers or listen to radio shows to get your facts or knowledge on such complex subjects.


 
You are Charliemacck, and I claim my five pounds.


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## VOR (2 Dec 2008)

Foghorn - You have lost me and I suspect many others. Can you please explain.


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## foghorn (3 Dec 2008)

VOR said:


> Foghorn - You have lost me and I suspect many others. Can you please explain.


 
Sorry, I had thought that AAM's resident super-bull was more famous:


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## Bronte (4 Dec 2008)

Foghorn I also do not understand your last two posts.


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## obama (11 Dec 2008)

JOB, 

I see GE have left the market. There is no real choice of subprime lenders left.

However of the two players left in the market, I think there will be plenty of business for them once they can acquire sizeable funding lines.


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