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But isn't collateral a tried an tested measure of knowing if you are actually able to repay your debt? Who would know better than the bankers, politicians?
by raducu 6y ago
But isn't collateral a tried an tested measure of knowing if you are actually able to repay your debt?
Who would know better than the bankers, politicians?
- neilwilson 6y agoLending stops when people run out of collateral. It's not the interest rate that determines what people can borrow. It's how much collateral they have. The financial collapse was due to bankers failing to assess collateral with sufficient haircut.
- raducu 6y agoCould you explain your last phrase more concretely? In my country mortgage loans stop when people don't have the downpayment of 5%-15% of the mortgage or when they have already indebted themselves for more than 45% of their income. Other loan types are also capped when you debt level exceeds a certain threshold of your income. This all seems reasonable to me. It also seems reasonable that banks would not issue more debt to people when their collateral value drops in market values, such as housing market bubble bursts.
- raverbashing 6y agoQuite simply this: https://www.investopedia.com/terms/n/nina.asp https://www.investopedia.com/terms/n/nina.asp Banks wanted customers and wanted to fill their goals: "loan X per yr." That's why the mortgage loans went boom.
- raducu 6y agoAren't the NINJA loans an example of why we need more bank regulations and tighter loan cheks instead of making banks hand out even more loans?
- raverbashing 6y agoGovernment bonds/markets are a different story than mortgages. If you own the bank $100k, you have a problem. If you own the bank $100Bi, the bank has a problem.
- jiggunjer 6y agoWhich in turn was because they had no stake in the loan if they sold it on.