Subprime by itself was not the reason for this. FMHA rural program has always been a success and will be as long as they control what goes on with these loans. They make sure the appraisal is in line and the application process is checked and rechecked. The loans are also not sold off which is half the problem. These people originating these loans do not have to worry about collecting so they do not care if the appraisal or income is correct. They just want to get paid. Look at the auto business. Subprime banks almost went under in the 90s. The few that were strict on qualifications made it while the others were screwed by dealers and went under. After the housing crisis the very same people that crushed housing went into the subprime auto business. This is why autos are bringing twice the amount of money than they should. Just like housing they are financing way to much money on these cars and if there is another recession this bubble will also burst and your car will be worth about half of what it is now. They are also bundling the car notes. They figure making money on the percentage of defaults.If only 25 perent go bad they will still have a pretty good return. Whether it is homes or autos when you have a huge influx of inexperienced and desperate buyers people are going to take advantage and they have. They will pay what ever they are told to. In houses they are writing bogus appraisals and autos they are requiring dealers pay 1k fee for doing the loan and then financing 110 percent of NADA or Kelly blue book which is already about 2k more than the true black book dealers go by. This put the car 4 to 6k above what the car is worth. Either way we are ending up with a mountain of homes and cars where the owner owes 40 percent more than they are worth while the people in the industry make out like bandits.
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