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GM Ramps Up Risky Subprime Auto Loans

Born Free said:
Interesting, subprime loans are a very good risk, says the GM spokesman. Lets work this out, subprime = a very good risk. Now they are not subprime or they are not a very good risk. Which is it.
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You have to consider the risk AND the reward. GM is no doubt getting a higher interest rate as a result of the lower credit ratings. Payday loan joints make short-term loans to the riskiest folks imagineable ... and they make boat loads of money because they charge so much for the service.
 
Bronson said:
Amazon.com: Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon (9780805091205): Gretchen Morgenson, Joshua Rosner: Books
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Many factors led to the real estate crash and all subprime loans are not created equal. A properly underwritten subprime loan is just as sensible as a properly underwritten standard loan. The problem in the real estate crisis was that lenders stopped applying sound underwriting principles. They didn't really care if the mortgages went bad because they were dicing them up and getting them off their books as fast as they could write them.
 
MaggieD said:
I have mixed feelings about this. A score of 600, as an example, isn't terrible/awful/never-gunna-pay-ya-back-bad. So I wonder how low they go. I understand that some lenders install kill switches in their cars and if a payment's a certain amount late late, they will activate the switch by satellite and the car's a no-go.

People need cars. Once people get too far into a hole, they can never climb out. While I have no sympathy for serial defaulters, it would seem that people need second chances at least as much as the banks loaning to them.

So, in short, I think there's more to the story.
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I am not a serial defaulter. My ethics tell me to pay my bills, which I do. However, I did have an incident with Bank of America a while back. They raised my interest rate from 12.9 to 29.9. No problem yet. They have the right to charge whatever they want, and I have the right to choose whether or not to accept that rate. However, what the douche bags also did was to apply that 29.9 rate on everything that I had already charged when it was still 12.9. They also increased my monthly payment. That was pure, unadulterated theft on the part of Bank of America. I made calls and they pretty much told me tough ****. That's when I decided they were right, and defaulted on the payments I owed. When they called me, I pretty much told them the same thing they told me earlier..... tough ****. As a result, my credit is ruined, but I knew that would happen when I made my decision to screw them back and screw them harder than they screwed me. It's OK. I paid off everything else, and even after the 7 years goes by, and I can get credit again, I will not do it. I don't need them. In fact, Bank of America and your other banksters need us more than we need them. This whole episode taught me a lesson that I had not learned before in my entire 60+ years of existence on this planet. You can do quite well without the banksters. Just be prudent in your own spending, and if something costs a lot of money, just save up for it. There is no reason in the world to become a slave to the greed of banksters, and be victimized as a result. In 3 more months, I will have the last of my debt paid off (my car), and at that time I will be able to say that I am my own man, and I owe nobody anything. It is going to stay that way too. **** the banks.
 
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AdamT said:
You have to consider the risk AND the reward. GM is no doubt getting a higher interest rate as a result of the lower credit ratings. Payday loan joints make short-term loans to the riskiest folks imagineable ... and they make boat loads of money because they charge so much for the service.
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I recall you mentioned that Europe should not be imposing austerity measures but instead keep pumping money into the economy. In order to do that they have to borrow. Now take Spain paying over 7% in interest. Nobody will lend to Greece no matter what the interest rate is. So yes GM is getting a higher interest rate due to the added risk, the problem is GM is doing this to boost sales thus the underwriting standards you speak of may very well be absent. Meaning sales come first over quality buyers with good credit, so they have lowered their standard to who knows what. In the real estate market you did not have to have a job, credit or money to get a loan. I'm not suggesting GM is doing that bad, but when you have sales as a priority and you use loose credit to achieve those sale, you are desperate and on the brink. That also means all else has failed to boost sales for GM so they resort to the most risky of attempts to get sales up.

Further look at GM's stock price, it was right at $40 a share in January 2011, today it's at $19, half of where it was 17 months ago. This confirms to me GM is desperate for sales and are now loaning to anybody and everybody to get sales up at the risk of their lending arm.

By the way do you ever think we'll get our money ever paid back from GM? We do own I think like 26% of GM, which is now worth half of what it was 17 months ago.
 
danarhea said:
I am not a serial defaulter. My ethics tell me to pay my bills, which I do. However, I did have an incident with Bank of America a while back. They raised my interest rate from 12.9 to 29.9. No problem yet. They have the right to charge whatever they want, and I have the right to choose whether or not to accept that rate. However, what the douche bags also did was to apply that 29.9 rate on everything that I had already charged when it was still 12.9. They also increased my monthly payment. That was pure, unadulterated theft on the part of Bank of America. I made calls and they pretty much told me tough ****. That's when I decided they were right, and defaulted on the payments I owed. When they called me, I pretty much told them the same thing they told me earlier..... tough ****. As a result, my credit is ruined, but I knew that would happen when I made my decision to screw them back and screw them harder than they screwed me. It's OK. I paid off everything else, and even after the 7 years goes by, and I can get credit again, I will not do it. I don't need them. In fact, Bank of America and your other banksters need us more than we need them. This whole episode taught me a lesson that I had not learned before in my entire 60+ years of existence on this planet. You can do quite well without the banksters. Just be prudent in your own spending, and if something costs a lot of money, just save up for it. There is no reason in the world to become a slave to the greed of banksters, and be victimized as a result. In 3 more months, I will have the last of my debt paid off (my car), and at that time I will be able to say that I am my own man, and I owe nobody anything. It is going to stay that way too. **** the banks.
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Very smart. And I'm glad you've seen the light. ;) Anyone who carries a credit card balance from month to month is asking for trouble. There are certain times we need to pay for things over time, but people charging their groceries? Their gas? (And not paying them off every month.) Their vacations, and not paying them off in a year? They're just living beyond their means.
 
MaggieD said:
Very smart. And I'm glad you've seen the light. ;) Anyone who carries a credit card balance from month to month is asking for trouble. There are certain times we need to pay for things over time, but people charging their groceries? Their gas? (And not paying them off every month.) Their vacations, and not paying them off in a year? They're just living beyond their means.
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You HAVE to let SOME of the dept from credit carry over per month, in order to build credit. And without credit, most will NEVER be able to own a house. Honestly. How is someone paying, on average, 800-1200 month rent, going to ALSO be able to save up 140-200K, to purchase a house? Or even 15K for a car?


I understand the sentiment of danarhea's post about being dept free, and not needing the banksters...but that's a sentiment from the view point of someone who ALREADY OWNS these things he needs. Someone who's 25 isn't going to be in that same situation.

And as long as the banksters own the majority of the property and capital, THEY are the gate keepers of who get's to get what they need.
 
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On another note...just look at this beauty...
 
Someone sign me up for a sub prime loan for THAT.

I'd probably have to sell the current vette...which....I don't know if I could bring myself to do it....put lot of work into that old girl...
 
Born Free said:
People need cars, why? Do we not have public transportation? Sub-prime loans, put the housing market upside down. Now GM after going broke once, wants to do it again by giving away cars that won't be paid. And worse yet it's the tax payer who ends up paying for it in the end as we already did once. Maybe your OK with that but I'm not.
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Yes, people need cars. No, a lot of places do not have public transportation (pubtrans) or enough of it to move people from home to work and back. Due to districting, there are also a lot of manufactures and other businesses that are miles from the nearest housing. Not to mention, that even in areas with decent pubtrans, homes are often far away from the stations and parking is limited and expensive at some of the garages for parking at the pubtrans stations. True, it is less than if they actually drove, assuming they can actually find parking on a given day. Most larger towns or even cities do not have money to put into full pubtrans and it is not profitable enough for private venture to get into it. And, like me, some people live in rural areas where there will probably never be pubtrans.

Cars are not like homes. Cars, except certain ones at 20 or so years old, never increase in value. They are not an investment like a home is. Also, many of those sub-prime applicants are not sub-prime through any actions of their own (other than using credit cards and consumer credit to begin with). They made payments, but had interests increase, limits lowered, causing the to show over-limit thus raising their interest even higher. Privacy laws also now "protect" the buyer from disclosing income and out-payments, thus limiting the financing institution to rely on these credit score companies. If I have made payments on time, haven't went over my limit, I could have a very high score and still have the new loan go over what I would actually be able to pay. These type of laws and practices don't protect anyone, but they do ensure the credit agencies make a nice profit. Also, take it from me, if you rarely use credit, have no credit cards and pay everything but your house off early everytime, the credit companies don't much like you either.

Homes and cars are pretty much the only credit items that can come close to being considered necessary. As to why these companies charge higher rates to those who are supposedly, at least according to their score, less able to pay, simple, it is higher risks, they want more back to take that risk.
 
By the way, anyone here a loan officer who deals in subprime loans? I would like to take out a loan in the amount necessary to seize full control of GM.
 
I always wondered what would happen if I went to bank for a business loan with a fully drawn out business plan to start my own bank.
 
Born Free said:
I recall you mentioned that Europe should not be imposing austerity measures but instead keep pumping money into the economy. In order to do that they have to borrow. Now take Spain paying over 7% in interest. Nobody will lend to Greece no matter what the interest rate is. So yes GM is getting a higher interest rate due to the added risk, the problem is GM is doing this to boost sales thus the underwriting standards you speak of may very well be absent.
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Your whole case is built on baseless speculation (bold type). But it's very poor speculation as it would not benefit GM to boost sales by writing bad loans.
 
AdamT said:
Your whole case is built on baseless speculation (bold type). But it's very poor speculation as it would not benefit GM to boost sales by writing bad loans.
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Especially when new cars lose $5,000 or more of their value the minute they are sold and drive off the lot.
 
Lokiate said:
Meh, the muscle car will never be what it once was. Besides, the Corvette has always been more of a mid-life crisis car to me. If I want expensive speed and performance, I'll get an Aston Martin.
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You kidding? The Z06 is the best performance deal running. Don't get me wrong...Astons are, and always have been beautiful. Moderately fast, too. But very expensive. 130k, I think, for a base db9. Z06, which is far and away faster, is almost half that, though I'll wager the Aston is a lot nicer to drive, on a daily basis...though, with the new magnetic shocks, I can't STRESS how great the new chevs ride.
 
KevinKohler said:
You kidding? The Z06 is the best performance deal running. Don't get me wrong...Astons are, and always have been beautiful. Moderately fast, too. But very expensive. 130k, I think, for a base db9. Z06, which is far and away faster, is almost half that, though I'll wager the Aston is a lot nicer to drive, on a daily basis...though, with the new magnetic shocks, I can't STRESS how great the new chevs ride.
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LS7 is a hell of a motor, though for around 100k a GTR would be preferable over both for pure driveability. AWD, Launch Control, Fantastic brake set up, 500 plus hp.. One of the few modern cars I'd actually spend serious money on.
 
Hare said:
LS7 is a hell of a motor, though for around 100k a GTR would be preferable over both for pure driveability. AWD, Launch Control, Fantastic brake set up, 500 plus hp.. One of the few modern cars I'd actually spend serious money on.
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I'd never own one...not because it's a bad car, but because it's too complex. I like cars that I can fix my self, for the most part. For pure enjoyment in the real world, though? GTR is probably hard to impossible to beat.
 
KevinKohler said:
I'd never own one...not because it's a bad car, but because it's too complex. I like cars that I can fix my self, for the most part. For pure enjoyment in the real world, though? GTR is probably hard to impossible to beat.
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Frankly, except for the need for a warranty, I would stay completely away from newer cars. It may cost a bit, and some won't agree that it is worth that cost, but I prefer transferring a lot of modern technology onto older vehicles. Sure, it's going to cost me a little over $4k to put a decent sequential fuel injection system onto my current project, a '71 Chevelle (I would go for direct injection, but haven't found anyone that produces the system and heads aftermarket for a 454), but I will have complete control of the system (once I learn the software) and I won't need all those special tools and testing equipment to use and troubleshoot it. If I wanted a 'vette, I would go for a late 70s early 80s (80-82) model, they look cooler and for less than half the cost of a Z06, I can add the drivability and end up with one that is faster, better handling, more fuel efficient and would kick the ass of any new one or a GTR. Because I don't have to deal with EPA restrictions, other than cats on post '76 models before the introduction of OBD-I, I can do a lot more with it than anyone ever legally could with the new ones.
 
KevinKohler said:
You HAVE to let SOME of the dept from credit carry over per month, in order to build credit. And without credit, most will NEVER be able to own a house. Honestly. How is someone paying, on average, 800-1200 month rent, going to ALSO be able to save up 140-200K, to purchase a house? Or even 15K for a car?
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No, actually you don't have to carry over to build credit. There is nothing more reflective of good use of credit than paying off the balance every month. Who has to save up $140K to purchase a house? If you're paying $800-$1200 a month rent, you've pretty much got the monthly house payment covered and then some -- you're just throwing it away on rent. Mortgage Calculator just gave me the monthly principal/interest/1.25% real estate taxes/private mortgage amount for $130,000 (assuming $10K down on a $140K house). It's $620.00 a month. It's not very smart to pay 15% interest on a credit card while saving for a house and earning practically zero on that money you're setting aside. No. If you are carrying a balance for anything other than emergency purposes? You're throwing money down the toilet.

And as long as the banksters own the majority of the property and capital, THEY are the gate keepers of who get's to get what they need.
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Interest rates for home mortgages are the lowest I've seen in my lifetime. Banks are happy to lend it to credit-worthy buyers. Don't waste money (15% interest or more) carrying a balance on your cards. Live beneath your means. Pay off your credit cards. Save for a downpayment and buy a home to lock in that 30-year rate. You will never be sorry.

If people have parents who are doing well, they should be asking to borrow the downstroke from them. Offer them 5% on their money and they'll jump at it...if they perceive you as a man of your word. Don't have parents in that situation? Ask another relative. If they have faith in you, they will lend it. They're getting less than 1% on their money in the bank right now and would jump at the chance to earn 5%. If they perceive you as a man of your word. ;)

Edit: To all -- did you know that, when you carry a balance, you are charged interest on current purchases from the time you make them??
 
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My son just went thru a period of getting calls related to his oldest child's brain tumor issues, LSS once he got a lawyer the insurance company decided to cave in and pay his daughter's bills....
But in the interim, he just told them to do whatever they wanted, he was NOT paying bills now that the insurance company should have paid last year, and will probably pay next year. He was told by a friend that if he did pay, he would have a hard time getting the money back, and that future creditors don't look at unpaid medical bills as harshly as they do for unpaid credit card bills, car payments, etc.
For young people starting out, tho, the credit card is a useful tool, and at the same time a financial trap.
Having more car and/or house than you need is a trap. Trying to have all the things right now that Mom and Dad have accumulated over 25-30 years is a trap. Trying to impress your friends is a trap.
Once you start borrowing for un-needed items, you start to lose control of your future.
OTOH, it IS good for the nation's economics, just not YOUR economics..
The smart thing will almost always be to save for what you want and then pay cash, and ask for a cash discount....
 
UtahBill said:
My son just went thru a period of getting calls related to his oldest child's brain tumor issues, LSS once he got a lawyer the insurance company decided to cave in and pay his daughter's bills....
But in the interim, he just told them to do whatever they wanted, he was NOT paying bills now that the insurance company should have paid last year, and will probably pay next year. He was told by a friend that if he did pay, he would have a hard time getting the money back, and that future creditors don't look at unpaid medical bills as harshly as they do for unpaid credit card bills, car payments, etc.
For young people starting out, tho, the credit card is a useful tool, and at the same time a financial trap.
Having more car and/or house than you need is a trap. Trying to have all the things right now that Mom and Dad have accumulated over 25-30 years is a trap. Trying to impress your friends is a trap.
Once you start borrowing for un-needed items, you start to lose control of your future.
OTOH, it IS good for the nation's economics, just not YOUR economics..
The smart thing will almost always be to save for what you want and then pay cash, and ask for a cash discount....
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My daughter is just that way. She wants everything all at once. I can't make her understand that it takes years and years to build up some of the things we've got.
 
KevinKohler said:
You HAVE to let SOME of the dept from credit carry over per month, in order to build credit. And without credit, most will NEVER be able to own a house. Honestly. How is someone paying, on average, 800-1200 month rent, going to ALSO be able to save up 140-200K, to purchase a house? Or even 15K for a car?


I understand the sentiment of danarhea's post about being dept free, and not needing the banksters...but that's a sentiment from the view point of someone who ALREADY OWNS these things he needs. Someone who's 25 isn't going to be in that same situation.

And as long as the banksters own the majority of the property and capital, THEY are the gate keepers of who get's to get what they need.
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no, you don't have to carry an unpaid balance....that isn't the only thing they look at. We have always paid off the credit card bill as soon as it arrives. Income vs. outgo to prove you can make the payments is the big issue with the banks, along with not having late payments on your record.

Had a realtor, long time ago, tell my wife that interest paid on a mortgage is a tax credit, not just a deduction from taxable income. The guy was trying to get his broker's license, and had failed several times. I wonder why? He didn't even understand the difference between a deduction and a credit.
He was trying to tell us that we NEED the tax deduction. Truth is, if you have the money to pay off the mortgage, you are far better off to do so. The interest paid is deductible, but only a percentage of it comes back. THE REST IS GONE, to the banks.
Yes, you will pay a bit more in taxes, but the net result will be a lot more money in your pocket, and a lot less in the banks pocket.
So, if you ask the bankers what to do, guess what THEIR response will be?
 
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