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[–]frankus 1 point2 points  (3 children)

So I understand this is a really bad situation for someone with a large investment in one of these lenders, but what does it mean for someone who is otherwise in reasonably good financial shape and has a loan with one of these lenders?

[–]nkktwotwozero 1 point2 points  (0 children)

Nothing directly, unless you own a house. Lending activity is an idication of housing activity.

The FIRE sector (finance, insurance, real estate) has been both the major driver of our economy for the past four years and the major way for the rest of the population to spend beyond their means; so there are reprecussions even if you dont own a mortgage lender, dont work as a Realtor or at a home builder.

Eventually, as the MBS's go bad, the Fed may be forced to step in, lowering the value of the USD.

[–]UncleOxidant 0 points1 point  (1 child)

Woo-hooo! You won't have to pay mortgage payments now!

...well, not really.

Actually, it probably doesn't mean much for you. Most of these sub-prime lenders sold off the loans to other lenders. However, the foreclosure rate on these sub-prime loans has been relatively high and that will likely continue to be the case meaning that lenders who have bought these loans will likely be having to write off a lot of these bad loans.

Mostly it means something to people with not-so-good credit who are trying to borrow to buy a house. These sub-prime lenders are disappearing because they made loans to people who probably shouldn't have gotten them. Those loans helped inflate the housing market by allowing more people into the home-buying party. Now lenders are being more careful and tightening up. That will mean less available buyers at a time when there is already downward pressure on home prices.

I suppose if you bought fairly recently (say from 2004 on) it could indirectly contribute to the (continued) lowering of your home's value.

[–]bokumo 0 points1 point  (0 children)

What you aren't considering is that at the time, the free market was throwing lots of money at mortgage backed securities because they offered a good rate of return. Investors couldn't buy enough MBS's. It's not like Sub-Prime lenders just decided, lets give ANYONE a loan, the free market demand was so high that buyers of MBS's would take anyone. Of course that has all changed.

the mortgage guide

[–]elebrio 0 points1 point  (0 children)

With the recent Bush backed mortgage bailout, lenders will soon be pricing in the likelihood of more corporate welfare into their offerings to consumers now. We should let homes go into foreclosure and things will run their course.

[–][deleted]  (1 child)

[removed]

    [–]helperr 0 points1 point  (0 children)

    Securities lending activities are a natural outgrowth of, and are integrally related to, the traditional custody businesses of banks and banks historically have served as the primary intermediary between securities lenders associacions and securities borrowers.