Perfection of Rebirth

Chapter 606 The Omen of the Subprime Mortgage Crisis

Lister, a black man born in the slums of New York, started working after graduating from high school in 2000.

There is a saying: If you love her, send her to America; if you hate her, send her to America too.

Due to his low education and no family background, Liszt could only work as a temporary worker.

Go to be a courier today, and work at a construction site tomorrow.

Fortunately, when he graduated, the construction industry was still relatively prosperous, and Liszt could earn some money from time to time.

In 2002, after working for two years, Liszt had less than two thousand dollars in his bank card.

At this time, he made a decision that would affect his whole life: he bought a $[-] house in the suburbs of New York with zero down payment.

Originally, based on his credit situation, it was difficult to apply for a zero down payment to buy a house.

But his neighbor Jack happened to work in a subprime loan finance company, and learned that as long as he took out a loan from their company, he could also buy a house with zero down payment, but the interest rate was slightly higher.

Fed up with the dilapidated houses in the slums, Liszt bought a house with zero down payment as soon as he gritted his teeth.

Anyway, you can apply for a long repayment period for housing loans in the United States, and you only need to pay a few hundred dollars a month.

Just when he finished the formalities and moved into the new house with some worn-out furniture, the market price of the $10 house was already $12.

Then, by the end of 2003, it had changed from $10 to $20.

Liszt made another major decision: sell the house, buy three houses with a total market value of nearly 5 US dollars with a down payment ratio of 20% to 80%, and repay the loan for a new pickup truck.

When Lister returns to the slums in his new pickup truck, he's instantly a celebrity on the block.

This kind of life lasted for more than two years. By 2005, with the continuous rise of housing prices in New York, the market value of Lister's house had reached 150 million US dollars.

Liszt, who had tasted the sweetness, sold the three houses again and replaced them with two luxury houses in Manhattan. At the same time, he also replaced the pickup truck with the latest Cadillac Escalade.

Although he is burdened with a loan of several million dollars, the monthly repayment amount has exceeded Liszt's income.

But thinking that housing prices would continue to rise, Liszt second-mortgaged one of the houses to another subprime mortgage company, and the money obtained was used to repay the loan.

However, flowers do not last a hundred days, and people do not last forever!
Since the beginning of 2006, the momentum of housing prices has been very good at the beginning, and Liszt has been calculating how much his net worth has risen every day.

Soon, however, home prices across the United States began to fall.

The second-mortgage financial company began to urge Liszt to repay the loan. Where did Liszt get the money to pay back?
Then the house was taken away and auctioned off!
It would be fine if the house price didn’t fall, and there would still be money left after the auction, but now the house price has fallen below my purchase price.

No matter where they are, ordinary people buy houses at the price of ups and downs!
The more it falls, the less people buy it.

The less people buy it, the faster it will fall.

Without the money for the second mortgage, Liszt couldn't pay the mortgage for the rest of the house.

A few months later, Liszt moved back to the slums, and the former mansion belonged to the bank!

Nanke Yimeng, this is roughly Liszt's experience in the past few years!

This decline, in fact, has already laid the groundwork for the rapid development in the front.

In the five years before 2006, due to the continued prosperity of the US housing market and the low level of US interest rates in previous years, the US subprime mortgage market developed rapidly.

With the cooling of the US housing market, especially the increase of short-term interest rates, the repayment rates of subprime mortgages have also risen sharply, and the repayment burden of home buyers has greatly increased.

At the same time, the recent continued cooling of the housing market has also made it difficult for homebuyers to sell or refinance their homes through mortgages.

This situation directly caused a large number of subprime mortgage borrowers to fail to repay their loans on schedule, which in turn triggered the "subprime mortgage crisis".

The subprime mortgage crisis, the previous housing prices were too high, which made it difficult to recover the funds lent by banks in the short term, and because those people used houses as mortgages when they could not repay, most of the houses were piled up in the hands of banks and could only be processed at low prices , so house prices in 2006 fell even faster.

Since 2006, a unique landscape beside American streets has been more and more real estate advertisements.

Price cuts, gift certificates, house sellers have tried their best, but there are still very few buyers.

In the capital, Washington, many newly completed real estate properties can only be advertised as "temporary lease" after the sales are not smooth.

The continued decline in house prices made the Americans who were excited to buy houses at a high price "caught"; then they were also caught by American mortgage companies, especially the risky subprime mortgage financing companies.

April 2007, 4, the day Jiang Hui arrived in New York.

New Century Financial Corporation, the second largest subprime mortgage provider in the United States, declared bankruptcy.

The subprime mortgage company, which had assets of more than US$2007 billion in early 17, shrank to less than US$5500 million in just three months.

The next day, Jiang Hui, who had just finished his jet lag, turned on CNN and saw that they were disclosing:
Throughout 2006, subprime loans in the United States reached 6400 billion U.S. dollars, about twice as much as three years ago.

Subprime mortgages account for 20% of the total size of the national housing loan market in the United States, and the total value of bonds mortgaged by subprime mortgages in the hands of financial companies and hedge funds has reached 1 trillion US dollars.

It needs to be explained here that in the United States, the so-called subprime mortgages are loans issued to borrowers with low credit.

Unlike ordinary mortgage loans, the simple process of subprime mortgage loans is as follows: people with low credit obtain loans from subprime lenders; The claims are repackaged into bonds and issued in the capital market.

Compared with the "preferential grade" loans for high-credit customers, subprime loans have high interest rates and high returns, but also high risks.

But in the past few years, when the US housing market was booming, people all hoped to buy a house to realize asset appreciation.

Mortgage companies are also willing to issue subprime loans to achieve high returns.Some sub-prime loan finance companies have even lowered the "threshold" due to the trend of interests, and introduced loan methods such as "zero down payment" and "zero documents" to attract lenders, resulting in increasing business risks.

The United States has also seen that the rapid rise of housing prices is not normal. In order to curb this situation, the Federal Reserve has raised interest rates 17 times in a row in the past five years, raising the benchmark interest rate from 1% to 5.25%.

The sharp rise in interest rates has increased the mortgage repayment burden of home buyers, and mortgage defaults continue to appear, which in turn hastened the bursting of the US housing market bubble.

The subprime mortgage crisis in the United States began to ferment rapidly and tended to spread.

The rain is coming from the wind!
However, for Guanghui Group, this may mean that a harvest season is coming!

(End of this chapter)