Insanity Continues

The insanity continues in the auto and home lending business.  In other words, we have not learned absolutely anything from the 2008 financial debacle in sub-prime auto loans and home loans.  Why do I state this?  Well, let's look at today's sub-prime auto loans.  You can now get a 97-month sub-prime auto loan if you have bad credit.  The average loan to value on vehicle sale to individuals that have bad credit is 114.5%.  And, car loans to individuals with bad credit have doubled since 2009 to reach over $18 billion.

Now, let's look at the current sub-prime mortgage area.  You say, "Who in their right mind would again be pushing sub-prime mortgages?"  Oh, that is an easy question to answer.  The Government, of course, or more specifically the Federal Housing Administration (FHA).  FHA recently went so far as to cut to one year from three how long borrowers must wait after losing a home to foreclosure or a short sale before qualifying for a new mortgage.  Further, FHA states that lenders are to ignore all the talk about large down payments, and ensuring mortgage borrowers’ ability to repay on loan applications.

Does anyone really believe that things are different this time around from 2008?  I guess they do, because the insanity of the past continues into 2013.