Tags: subprime | loans | financial | auto

NYT: Subprime Loans Rear Their Ugly Heads Again

By    |   Friday, 12 September 2014 01:06 PM

Remember the subprime mortgage loans that helped spark the 2008-09 financial crisis?

They may be gone for a while, but other areas of the subprime lending market, particularly auto loans, have begun to look worrisome, The New York Times reports.

"We're five years into the new cycle, so you've got to imagine that there are excesses cropping up," William Ryan of Portales Partners research firm told the paper.

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The auto sector has in some measure taken over from the housing sector as a prime driver of economic growth.

"Automobile production and subsequent sales have become a leading barometer of growth in this part of the economic cycle," Jim Vogel, an interest rates strategist at FTN Financial, told The Times.

Deep-subprime auto loans, those made to people with credit scores below 550, soared 13 percent in the second quarter from the year-earlier period, according to Experian.

"But history shows that a splurge on subprime lending nearly always leads to a crippling cascade of problems," writes Times reporter Peter Eavis.

Meanwhile, banks and other lenders issued 3.7 million credit cards to subprime borrowers in the first quarter, 39 percent more than a year ago, according to data provided to The Wall Street Journal by Equifax. That's the highest total since 2008.

"Lenders in general have really saturated the higher-credit-quality market," Randy Hopper, vice president of consumer lending at Navy Federal Credit Union, the country's largest, told the paper.

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Remember the subprime mortgage loans that helped spark the 2008-09 financial crisis?
subprime, loans, financial, auto
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2014-06-12
Friday, 12 September 2014 01:06 PM
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