For months now I've been following the story of the troubled
subprime mortgage loan markets. I am not really old enough to remember the
Savings and Loan scandals which led to the collapse of the
Savings and Loan institutions that had mushroomed across the United States in the 70's and 80's. After all, I was busy drinking and chasing girls through college at the
University of Kansas and the
University of Michigan Law School.
However, I am enough of a student and reader to vaguely recall
that there were some really loose lending criteria, some eager
to please appraisers, and the usual cast of greedy developers and
businessmen to cause quite a banking scandal during those years.
At
the risk of mixing metaphors, does anyone else get the sense that
the music has stopped in the subprime mortgage markets? Exhibit
#1,
New Century Financial announced that the
Feds have informed the company that a criminal inquiry, yes criminal, into its accounting and trading in its securities has been launched. Say goodbye to New Century, they are toast. Exhibit #2,
Fremont General announced
it would no longer sell subprime residential loans and is seeking
to sell that part of its business. The buyer should expect to price
any acquistion of Fremont with healthy litigation numbers.
The good
news is that in 10 years, there will be a newer, more creative
way to finance the American dream.
Wall Street will always find a way to put people in loans. So don't fret, if you missed the borrowing boat this time, you'll get another shot soon enough. Your credit won't matter after the quant guys figure out a way around the regulation that is sure to come now that the music has stopped in the subprime mortgage markets.
©2007
Angel Reyes
Read more articles by Angel Reyes at
AngelReyesBlog.com.