subprime lending= second chance lending

• some people wonder what actually went wrong and caused the financial meltdown of the greatest economic power on earth.we heard about it,read about it yet still wondering why and will it ever reach our shore.


• let's imagine this,a group of people needs money and went to a bank to borrow money without collateral.the only collateral is their ability to pay,which is not guaranteed at all.who on earth can be sure of their ability to earn or pay in the future.....however this bank needs to show on their report that business is good so the bank granted the wishes of these people and praying hard they would not default even the bank themselves know that these people may end up not paying.and the bank went to the extend of lending to those on the verge of bankruptcy.imagine many banks provide the same to many people.they even have the so called 'NINJA' loan (No Income No Job Asset). that is one of sub prime lending.it is of course covers wider scope.it is basically in forms of mortgages,auto loans and credit cards.it also gave birth to many other financial products called mortgage backed securities,bond and other investment vehicles.Once rated good for fixed income investments now became junks.
  
• now remember the CTOS face off with one certain Dato who condemn CTOS for giving problem to common people in obtaining loans from banks in malaysia.in the land of the great,most people can obtain loans from the banks even if you have bad records...financially,even if you are not a good paymaster.when you do not have money,you can easily refinance you properties.you can have house of cards as well,CREDIT CARD.(crisis due to it is next, after subprime mortgages).


• in my humble opinion,even though CTOS has been giving pain in the butt for many people nevertheless it also helps banks filter out potential non-performing loan.


• we have seen the sub prime motgages crisis which led to the fall of Freddie Mac Fannie Mae,AIG,Lehman and many more.at this moment Citigroup is following the trail....