"redmond can you provide stats on income to house values in the sub prime sector"
Alan,
you need to also realise, subprime was a con, a lot of subprime borrowers should not be on subprime.
I will probbaly get bulls slaging me of now for posting this, but what i am about to post now is real and true.
subprime was invented after the 911 attack on the twin towers.. as you will remember the share market took a beating.
banks saw stocks to be risky as it was vunerable.. so they thought why not push money into housing instead?
so the banks decided to make it really easy to borrow money so people would buy housing with their money.
thats why they started to sell loans where you needed no job, or income, or assets.. there was even joke comercials going around in the US where some guy recives a letter in the post and opens it, as it is addressed to his pet Dog, and the bank was inviting his dog to borrow up to 400K for a home loan!
the banks thought this was safe, as housing only goes up, and so they put a 4 year honey moon period on it to give the housing time to inrease in value, then if the borrower couldnt get their act together in the 4 years they would sell it on them.. with no money lost.
the other edge of this sword was the brokers got big kick backs and incentives for signing people up to these loans. so they started misleading people.. somone like you and I who has a good income and can have a normal loan, they would sell them the subprime one instead.. and not tell them what after 4 years the rate doesnt go to the normal one but a much higher one.. lots of people in the US where schamed this way.
hence why not all subprime loans folded because a lot where high income earners.
again in total this was only 3% of the mortgage market.
the only problem was, 4 years later house prices fell.. and the banks couldnt get their money back when they sold!
the US subprime was not just a poor mans product, normal income earners were also schamed into it (a very large percent of subprime went to people who should not have it)
