Sub-Prime Mortgage Mess” Doesn’t Affect You, Right?

 Wrong! Sounds boring, far-away, vaguely involving someone elses home or money. Someone elses life, not yours. Bet that’s what you think when you hear the phrase “sub-prime mortgage”. If you take time to think about it at all? You just might want to think about it. It’s gonna affect you, in more ways than you know. Certainly more ways than the big banks (or government) are going to say out loud (in public). Everything is going to cost you more! Especially if you use credit (borrow) to buy.
 I spent twenty years as a mortgage banker. Never made a sub-prime loan. Though they existed when I was in the business from the early 1970s into the 90s. In case you don’t know what one is, I’ll give you the short version: It’s a home-loan made to someone you probably wouldn’t lend fifty bucks ‘til payday.
  To expand some, it’s a mortgage loan made by banks or other lenders. Usually through a third-party broker who takes a fat fee (and a powder). Normal home-loans are based on three things: The borrowers ability to re-pay (income and savings), credit history, (how he/she re-paid loans in the past) finally, the property value (present value, Not what it’s “gonna be”). Oh! and equity (down-payment) was required (how quaint).
 A sub-prime loan doesn’t require those things. With the exception of the property value (assumed by all involved to be forever rising). The borrower’s Not required to show he/she can afford the loan (income and savings) has a good credit history (re-paid other loans). All he/she really needs is enough money to pay points ($$$) up front. Who knew you shouldn’t lend money to folks with bad credit, no money down and not enough income?!
 Apparently not those smart (?) folks in the money lending business! All they saw was the points, ($$$ up front) in their pockets. Planning from the git-go that when (not if) the loan went south, they’d simply foreclose (and sell the house at a profit). This worked until “the house” became millions of houses. And values did not (forever) keep rising (as they never do). Well, they do, over many long years. But along the way they sometimes decrease (surprise!). Cyclically, every ten years or so (and when millions of homes are foreclosed).
About now you’re thinkin what my point?! How’s this affect me? After all you own your house, pay your bills and that’s all that matters, right? That’s where the “Wrong” in the first paragraph comes in to play.
 The “sub-prime mess” as it’s called, is only half over folks (banks and talking-heads notwithstanding). Banks have “set aside” (lost, but not subtracted yet) in excess of 100 billion dollars..., so far. I’m betting that over the next year, that’s only half of the total losses coming!
 I won’t even get into auto loans, personal loans, and every other kind of loan made (that will go bad). You didn’t think losing a home affects only a families “home loan” did ya? When the money lost (on all loan types) is finally revealed it’ll affect everyone who borrows money for anything! Cars, credit cards, consolidation loans, All will cost more (and be harder to get).
 You’re thinking fine, I just won’t borrow money for awhile. Well, if you owe money on credit cards, keep an eye on your statements! Over time you may (will) see your rates creeping up. You’re going to pay for the “sub-prime” mess. Credit cards are (just) one area banks can change (up) the rate as you pay back what you (thought) was already a done deal!
 If you always pay on time, more than minimum, generally have “good credit’ you may have “some” influence in keeping your current low (?) rates. But this will be one of the first “line of defense” tactics for lenders losing money in the sub-prime mess. Next will be rising interest rates on any loan for anything you might want to borrow on in the foreseeable future.
 Finally, you’re still gonna pay! Why? Because in every way possible, the big banks will badger your uncle sam (you!) into chipping in to help “resolve the crisis” (save banks from losing money through their own greed and stupidity).
 So you see, you will be affected! By something you weren’t part of (and didn’t even know was going on). If I were you, I’d run right out, get a debt consolidation loan (if you can afford it) pay off all your credit cards and don’t charge (borrow) another dollar.
 I don’t know about you..., I hate when others make money, but I git stuck with the bill!
Cal Teeple, fulltime member of the Observational Cogitation Consortium can often be founds three stools down from you. He may be ignored, accosted or contacted at: twinews@wayneindependent.com.