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United States The Almighty Buck

More Subprime Borrowers Are Missing Loan Payments (wsj.com) 272

Consumers with low credit scores are falling behind on payments for car loans, personal loans and credit cards, a sign that the healthiest consumer lending environment on record in the U.S. is coming to an end. From a report: The share of subprime credit cards and personal loans that are at least 60 days late is rising faster than normal, according to credit-reporting firm Equifax. In March, those delinquencies rose month over month for the eighth time in a row, nearing their prepandemic levels. Rising delinquencies were inevitable following their decline during the pandemic, many lenders and analysts said. Even so, the increase is getting attention from investors partly because the Federal Reserve, facing the highest inflation since the early 1980s, is embarking on what is expected to be the sharpest series of interest-rate rises in years. Higher loan delinquency figures can indicate stress on the part of consumers whose spending is a significant driver of economic activity.

Fears that rising rates will throw the economy into recession have fueled the worst start of the year for stocks in decades. A poor earnings season for major U.S. retail chains has intensified those concerns this week, prompting large declines in major retail shares and sending the Dow Jones Industrial Average to its steepest drop of the year Wednesday. Delinquencies on subprime car loans and leases hit an all-time high in February, based on Equifax's tracking that goes back to 2007. Many people, including those with less-than-perfect credit, paid off debts and built up savings during the pandemic, a surprising outcome considering that lenders at first thought borrowers would default en masse when Covid-19 hit. The government's response, including stimulus payments and child tax credits, boosted many families' financial health.

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More Subprime Borrowers Are Missing Loan Payments

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  • Wait ... What? (Score:4, Insightful)

    by Anonymous Coward on Friday May 20, 2022 @12:23PM (#62552520)

    Consumers with low credit scores are falling behind on payments for car loans, personal loans and credit cards,

    People who have low credit scores -- Because They Don't Pay Their Bills -- are not making payments on their bills.

    Holy Shit. I never saw that coming.

    • Jacked up rent (Score:2, Insightful)

      by KalvinB ( 205500 )

      Landlords are demanding hundreds more per month which leaves less money for low income people to pay off other things.

      • Re:Jacked up rent (Score:5, Informative)

        by DarkOx ( 621550 ) on Friday May 20, 2022 @01:25PM (#62552750) Journal

        landlords are seeing their maintenance costs sky rocket due to inflation, with no clear upper bound. They have just watched the government radically increase their risk profile by introducing the potential for eviction moratoriums that can extend a year or longer, when tenants don't pay.. Meanwhile if they have financed the property themselves with any kind of adjustable rate product the interest they are paying has gone up rather dramatically over a fairly short span of time.

        I for one don't blame them.

        • Re: (Score:3, Insightful)

          by Powercntrl ( 458442 )

          landlords are seeing their maintenance costs sky rocket due to inflation, with no clear upper bound. They have just watched the government radically increase their risk profile by introducing the potential for eviction moratoriums that can extend a year or longer, when tenants don't pay.

          Good. That just means owning a property has reached parity with other investments, where you can sometimes lose your entire investment.

          Houses are for people to live in. I'd like nothing more than to see every landlord forced to generate their income the same way the majority of Americans do: by getting a job and being productive with their own two hands, rather than with their money.

          • Re:Jacked up rent (Score:5, Insightful)

            by hondo77 ( 324058 ) on Friday May 20, 2022 @02:24PM (#62552954) Homepage

            I'd like nothing more than to see every landlord forced to generate their income the same way the majority of Americans do: by getting a job and being productive with their own two hands, rather than with their money.

            Never been a landlord before, eh? So, on the one hand you recognize that a landlord owning a property is an investment. On the other hand, you don't want landlords to make money from that particular type of investment. Dissonance, much?

            • by jmccue ( 834797 )

              After the 2008 housing crash, lots of rental properties were bought up by corporations as investments. So I would love to see these companies crash since they are keeping rents high.

              Now we have issues as described here:

              https://www.theatlantic.com/technology/archive/2019/02/single-family-landlords-wall-street/582394/

          • By definition, for a property to be rented, SOMEONE has to own it. If it's an apartment complex, someone must own that complex. With no owners, there would be no rentals. Your statement indicates a startling lack of, well, half a second of thought.
            • Re: (Score:3, Insightful)

              by Powercntrl ( 458442 )

              If it's an apartment complex, someone must own that complex. With no owners, there would be no rentals.

              Normally when you rent something, it's because you only have a temporary need for it or because you're leveraging someone's greater buying power. You might rent a set of vehicle-specific tools from the auto parts store for a vehicle repair that you'll never have to perform again on that same vehicle. You might rent space in a shopping mall, because constructing your own mall and bringing in all that foot traffic would be prohibitively expensive.

              Housing is a bit of a different beast. Rents can easily cost

          • Re:Jacked up rent (Score:5, Interesting)

            by ScienceBard ( 4995157 ) on Friday May 20, 2022 @03:33PM (#62553174)

            landlords are seeing their maintenance costs sky rocket due to inflation, with no clear upper bound. They have just watched the government radically increase their risk profile by introducing the potential for eviction moratoriums that can extend a year or longer, when tenants don't pay.

            Good. That just means owning a property has reached parity with other investments, where you can sometimes lose your entire investment.

            Houses are for people to live in. I'd like nothing more than to see every landlord forced to generate their income the same way the majority of Americans do: by getting a job and being productive with their own two hands, rather than with their money.

            The vast majority of landlords are individuals renting out between 1 and 4 units. https://www.pewresearch.org/fa... [pewresearch.org]

            Only about half of those landlords report net income... as in, only half even make money on their rentals. My parents have one, my grandparents old house. It's small, and they usually rent it out by word of mouth (it's in the middle of nowhere anyway, advertising is a waste of time). They could sell it, but it's on a large parcel of ag land and it's nice having a building site for storage. At this point capital gains would kill take most of the profit of the sale anyway. From what I can tell this isn't an uncommon situation. A relative dies and you rent the house out until you figure out what to do with it. Or you move, and for tax/convenience reasons it may make more sense to rent your old home out for a period.

            The fantasy of the fat-cat landlord with 100 apartments in the slums who just eats caviar all day is nonsense. Most landlords are small, and make a few grand a year at best. And the only ones that make money are the ones that actively work to make money, as in they do their own maintenance and homecare, as hiring that out kills any profit really fast. And when you factor in vacant time between renters and the very real risk of a renter that simply refuses to pay and is shielded by the legal system, it's a wonder anyone takes the risk of doing it at all. There can be money in it when you finally sell the home if you treat it as a speculative asset, but that's far from guaranteed. Remember that all those tax deductions you get by depreciating the asset you have to pay back when you sell it.

            I once thought I might own a rental as an alternate investment (I'm relatively handy, and a local rental might even be a fun side project), but after what happened with the moratoriums during the pandemic absolutely not. So now, an old house that I might have had the money to buy and fix well enough to rent at a reasonable rate to a lower income family is going to get bought by a company, renovated to justify a high rent, and no longer be available to a low income family. Because one of the easiest ways to "filter out" renters that might be higher risk is to bump the rental out of the low income cost bracket.

            • You might find the land it's sitting on is worth more than the house, that includes underground and above rights you have. For example one of my neighbors has a cell tower on their site. Another an oil well.

            • Re:Jacked up rent (Score:5, Interesting)

              by torkus ( 1133985 ) on Friday May 20, 2022 @06:13PM (#62553516)

              The vast majority of landlords are individuals renting out between 1 and 4 units. https://www.pewresearch.org/fa... [pewresearch.org]

              Only about half of those landlords report net income... as in, only half even make money on their rentals...

              No no no...first off the majority of "landlords" might be individuals, but the majority of *rental units* are owned by businesses. (Look at # of 25+ unit buildings) It's not a fat-cat exactly, but it absolutely is businesses that own the majority of apartments.

              Second - landlords of all sizes write off depreciation and everything else under the sun to avoid paying taxes. They don't report net income but neither does amazon.

              Furthermore, inherited property clears any depreciation and is typically tax free. The only capital gains you'd pay is on appreciation from time of death/inheritance --> time of sale and even THAT assumes you don't use one of several ways to avoid it those taxes.

              Don't get me wrong, the market in many states/cities is incredibly hostile towards landlords and it's awful. It's a major reason why people keep turning apartments into AirBnB's. The difficulty with low-income tenants and low-cost rentals is when things go sideways (and statistically speaking it's far more likely) the LL rarely has any useful recourse. It's overall far lower risk to rent a $2500/mo apartment to someone with 60x income and 750+ credit than 5x $500/mo apartments even if they have 60x income (good luck finding 700+ credit).

              Such is our fucked up world today.

        • And that's not an issue. Maybe it's an issue for small time landlords but the guy who is trying to retire off of one or two properties but for the big guys it's not affecting them into slightest. The lumber prices have come back down and labor prices never really got that high in construction. It's still an overabundance of construction workers because we're still not building all that much. Unlike in 2008 when the builders were going crazy building houses they're just not doing that now. They're making mcm
          • by dgatwood ( 11270 )

            And that's not an issue. Maybe it's an issue for small time landlords but the guy who is trying to retire off of one or two properties but for the big guys it's not affecting them into slightest. The lumber prices have come back down and labor prices never really got that high in construction. It's still an overabundance of construction workers because we're still not building all that much.

            I don't know where there's an overabundance of construction workers; everywhere I'm familiar with, there's a huge shortage. But if that's really true, then those construction workers should consider relocating to places where there are labor shortages.

            Western TN, western KY, and southern Indiana have a huge shortage of construction workers because of two rather large tornadoes that went through downtown Mayfield, KY and Dresden, TN, leveling everything in their path, resulting in an absolutely insane amoun

            • I don't know where there's an overabundance of construction workers; everywhere I'm familiar with, there's a huge shortage. But if that's really true, then those construction workers should consider relocating to places where there are labor shortages.

              Well there's the great migration [youtu.be] so that's already happening.

        • I kept my tenants at the same rate for the next two years as they paid the last two years. And I put in a brand new A/C unit which I paid off in 6 months.

          If maintenance costs are too high, find another job and stop running slums.

        • landlords are seeing their maintenance costs sky rocket due to inflation, with no clear upper bound.

          Great excuse, but the real reason for rocketing rents is that renters are competing with AirBNB tourists for the rental space. In a town like mine, an AirBNB weekend renter can top a working renter's bid for a whole month in the same property. The spare rooms that were once rented to service workers are now operating as unregulated hotels. And local restaurants are closing because they can't get waiters and busboys and cashiers.

    • Holy Shit. I never saw that coming.

      That's because they've given it a confusing name, "subprime". No-one outside of a few economists have ever heard of subprime mortgages and loans, so it came as a complete surprise that they could be toxic.

    • Because They Don't Pay Their Bills

      The unfairness of credit scores is that they treat all reasons for not paying bills equally.

      Spent your car payment at the liquor store? Bad credit.
      Lost your rent money on an ICO? Bad credit.
      Got sick and slammed with doctor bills? Also bad credit.
      Laid off and couldn't find something that paid as well? Bad credit for you!

      It's also a completely bullshit indicator of your ability to pay. My credit has finally improved to the point where I'm getting home mortgage offers. Upon opening the offers (which are

      • Re: (Score:3, Insightful)

        by cayenne8 ( 626475 )

        The unfairness of credit scores is that they treat all reasons for not paying bills equally.

        Well, in general it does treat all reasons the same.

        It means you don't know how to live within your means and save for a rainy day.

        Of course there are outlier catastrophic instances...but that isn't the norm.

        If most people lived well within their means, and had savings to live off of when you hit bumps in the road that life throws at you, in general, you will not miss your bills (largely because you are smart eno

        • It would help significantly if there was a basic-credit-101 class in public high schools, not the macroeconomics or microeconomics I took that means very little for day-to-day living.

      • Re: (Score:2, Insightful)

        by DarkOx ( 621550 )

        A history of past defaults, being presently in arrears on existing liabilities, present income and employment status, as well as the size of existing liabilities, and size of assets are all actually pretty reasonable inputs to making a judgement about your ability/likelihood to pay if additional credit is extended.

        FICO scores are NOT as simple just a tabulation of payments history for that very reason. But yes to some extend the "why" behind whatever events resulted in a poor credit score do get lost. Howev

      • You seem to be confusing fairness of your credit score with fairness of the debt itself. The medical debt may not be fair but it's debt and therefore makes it less likely that you could repay additional loans. The larger issue is that scores are often used incorrectly or not examined in detail. For example, if you pay $2k a month in rent and have never missed or been late, then a mortgage lender or landlord should be required to subtract that amount when considering your application since it's not going to
      • You can't listen to the excuses of every individual when you're dealing with millions. You just can't. And so if the idea of the "credit score" has any validity at all, you have to treat it dispassionately and statistically. No matter what the reason for missing payments, if you let people try to explain it away, they'll do so.

        And make no mistake, something like a credit score is absolutely needed. Even if it's just a sanity check.

        https://www.youtube.com/watch?... [youtube.com] - Bobs RV on the Simpsons

    • The studies with the mice even predicted this. And kept the grant money flowing.
    • by Alworx ( 885008 )

      "those with less-than-perfect credit, paid off debts and built up savings during the pandemic"

      can we therefore deduce that the average subprime borrower simply spends money foolishly and the lockdown stopped them going to the malls to buy junk?

  • c'mon (Score:5, Insightful)

    by Sauce Tin ( 1884020 ) on Friday May 20, 2022 @12:25PM (#62552526)
    And, in a surprise to absolutely nobody, no one learned their lesson after 2008.
    • And, in a surprise to absolutely nobody, no one learned their lesson after 2008.

      Not only were they not punished, but Greed N. Corruption found a whole new low by actually convincing Daddy Government they were Too Big To Fail. They walked away with participation trophies and executive bonuses.

      Perhaps we should be thankful Greed is back to merely peddling in homes. After all, a deadly pandemic that killed millions, made Greed quite richer. I wonder what lesson we'll learn from that...

      • A big part of what happened back then was the Bush Administration's push for minority home ownership. Congress went along and there was a government push to lower lending standards in order for more poor people to own homes. A noble endeavor, but not one rooted in reality.

        This time around, there's been a push for "credit equity and inclusion" all in the name of "anti-racism". It's the exact same issue -- government deciding that people that can't financially afford something should have their financials

        • Apparently it was considered a good idea to tell lenders that judging one's lack of income as a reason to not give credit was "racist".

          Well, if not lending them something they couldn't afford is "racist", then taking back what they're not paying for is practically an act of "terrorism".

          Hell of a race to the bottom of that logic hole. The ass action lawsuit, will be epic.

          • The ass action lawsuit, will be epic.

            Wait...What? How can I get in on this lawsuit? Might be fun!

        • A big part of what happened back then was the Bush Administration's push for minority home ownership. Congress went along and there was a government push to lower lending standards in order for more poor people to own homes. A noble endeavor, but not one rooted in reality.

          This time around, there's been a push for "credit equity and inclusion" all in the name of "anti-racism". It's the exact same issue -- government deciding that people that can't financially afford something should have their financials ignored and be given loans. Apparently it was considered a good idea to tell lenders that judging one's lack of income as a reason to not give credit was "racist".

          And yet, all the losers in our area are not your favorite racial villains.

          But we understand you.

        • by gtall ( 79522 )

          The push for minority home ownership was a minor contributor. The main contributor was that Wall Street, with some help from Fannie Mae and Freddie Mac, found they could securitize loans and sell them to organizations and rich people with big bucks to "invest". The sainted American people got in on the gig by buying second and third homes on very little collateral because the banks played hot potato with the loans; they could always sell them to some entity that would securitze them before passing the potat

      • After all, a deadly pandemic that killed millions, made Greed quite richer. I wonder what lesson we'll learn from that...

        Invest in funeral homes.

  • chapter 11 & 7 car, personal loans, credit cards go way but not you STUDENT LOAN

    • chapter 11...
      I think you meant Chapter 13, unless you think there's a lot business reorganization occurring.
    • chapter 11 & 7 car, personal loans, credit cards go way but not you STUDENT LOAN

      Actually, they way the rewrote the laws years back, you really don't get off Scott free on anything anymore.

      And as for student loans....it was all there on the contracts, you should have read them.

      • And as for student loans....it was all there on the contracts, you should have read them.

        The last cry of the shitlord, before the torches, pitchforks, and guillotines arrive.

        • Comment removed based on user account deletion
          • The question isn't whether the terms were known ahead of time. The question is whether they were fair. And if not, why not? There's no justification for a government-backed loan to be unfair. It seems like the government loves to loan out money, and if you're a corporation you can get away with not paying them back, but if you're an actual person they just fuck you. None of that is just.

        • And as for student loans....it was all there on the contracts, you should have read them.

          The last cry of the shitlord, before the torches, pitchforks, and guillotines arrive.

          That happens from time to time. I'm not certain that after the millenials kill me and everyone else they are blaming for their problems du jour, that the results are going to be any better. Seems after giving them their free education, their next plan is... what?

          And really, this isn't quite a problem of debt. It's a problem of employability. Our local fast food places have a lot of degreed people. But their skillset isn't one that qualifies them for much. Weird, a philosphy major might be working with so

    • Comment removed based on user account deletion
  • The government's response, including stimulus payments and child tax credits, boosted many families' financial health (of the present, potentially screwing over those in the future).

    • If you don't tend to people in the present then that screws over others in the future, too, not to mention those people.

      • by Merk42 ( 1906718 )
        The Government is mostly Boomers, who tend to themselves in the present and screw over others in the future.
  • by Ed Tice ( 3732157 ) on Friday May 20, 2022 @12:41PM (#62552592)
    Thanks to the last housing crisis, when we hear subprime borrower and payments we think about mortgages. But subprime borrowers don't have a lot of mortgages these days and those mortgages are not resold to middle-class investors as packaged securities. It's unfortunate that people are in over their head with debt but it's not the same type of apocalyptic sign.
    • by znrt ( 2424692 )

      if the creditors' default rate increases their profit decreases, and if their profit decreases everybody else is in trouble bc it turns out they own the friggin show, as the last "crisis" made perfectly clear. how apocalyptic do you want it to be?

      • The last crisis started with subprime borrowers failing to make mortgage payments. This caused a massive drop in housing prices, a collapse of the debt market, and a recession. Prime borrowers then failed to make their payments due to a combination of the recession and strategic default (why make payments on a house worth less than what you owe).

        The US mortgage market is ~18T. The used car loan market is about 1.2T. New cars are selling above MSRP. So even if a bunch of used cars get repossessed we

  • And the whole world will soon to be re-learn the famous names of the perfect couple: Fannie Mae & Freddie Mac

    Btw. the Lemming Brothers Bank ;)
    https://www.youtube.com/watch?... [youtube.com]

    ok, I will now start funneling off money from my bank accounts.

  • We've seen this too many times:

    Cheap money
    Debt
    Expensive money
    Ouch!

    My credit score is actually mediocre. Not because I don't pay my bills on time - I do - but because I've never had any big loans (car, mortgage, etc.).

    ...laura

  • "the healthiest consumer lending environment on record in the U.S."

    Healthy lending environments don't end in a crash. What you mean is "most blindly optimistic lending environment".

    And why not? They know that taxpayers will have to fork over the shortfall again.

  • ...seems like it should be embraced as awesome for everybody. Far right conservatives who are aligned with the man should be trumpeting bankruptcy as the tool of choice.

  • Party like it's 2008!

  • Big picture time (Score:5, Insightful)

    by WolfgangVL ( 3494585 ) on Friday May 20, 2022 @02:54PM (#62553062)

    On top of making it cost more money to work than to not work, you off shored the blue-collar jobs, and then you sold an entire generation of kids a middle class dream but delivered debt slavery. You stole away the dream of homeownership, and now you demand ever more profit while paying those actually producing anything less and less for their trouble while at the same time blaming them for the positions your wealth extraction schemes have put them in.

    You just spent 2 years writing business blank checks and you think you can blame workers for inflation. You're trying to gaslight the most educated generation in history, good luck with that. We all saw how you rolled in 2000, 2008, and 2020. We're watching you gobble up our birthrights to rent them back to us. We see you sneer and laugh in the face of climate change. We watch the out-in-the-open political corruption.

    Now you expect us to pay for the fraudulent degree you told us we needed, keep a consumer based economy going, work till we die, AND carry your water while you retire in luxury.

    Keep turning those screws, eaters. You deserve everything you've got coming.

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