The economic meltdown in America that began in the fall of 2007 went sideways in a series of domino-like events. Before the crash, word on the street spread quickly as a real-estate buying frenzy took flight; the mantra “Get it while you can” went viral, and those who otherwise would not qualify for a loan, took full advantage. Sadly, after a few years, things went from bad to worse as untold numbers of Americans started losing their homes to foreclosure.
As a result, banking practices dubbed “foreclosure-gate” and “fraudclosure” were put under the microscope. On the front end, Americans learned that realtors had been racking up huge commissions and under-the-table lender bonuses while many back-end mortgage brokers turned a blind eye to underwriting documentation showing inflated income levels, fake home appraisals, etc.
The rest is history.
Eventually, a larger deception was exposed; the financial industry well-understood there would be a high percentage of sub-prime-loan defaults and that they would profit in either case. Despite this growing awareness that sub-prime loans were another profit center for the financial sector and not the little guy, nothing but the names have changed! Wall Street bankers carry on and the government still permits sub-prime loans, only instead, now as auto loans. The title of an October 7, 2014 article says it all, “The new sub-prime is in auto loans: One third of all new auto loans are of the sub-prime variety.” Repossessions, the article said, are up 70 percent.
“What is telling here is that much of this debt growth has occurred under the umbrella of recovery. If things are going so well, then why are so many loans being made to those with bad credit?”
Good point! Almost exactly four years ago on ABC News Today, the then Secretary of Housing and Urban Development, Shaun Donovan, said (referring to housing foreclosures) that there does not seem to be any “underlying systemic problems,” while referring to his review of foreclosure-documentation-issues concerning specific lenders and banks who might not have followed the rules. Yet his “bad apple” approach could not be farther from the truth. The growth of sub-prime auto loans along with the inevitable rise in repossessions is nothing more than the last gasps of a broken debt-burdened financial system: a vampire-like, self-serving attempt to survive at the expense of its victims.
Baby Boomers find themselves in the most vulnerable position for taking on new debt given all they lost in the 2007-8 economic debacle and the dwindling time they have to replace it. The best advice, for all in this economy is to get out of debt and increase your number of revenue streams. That is, unless you want to become another New-Normal statistic. It is all about getting re-inspired by finding and implementing age-appropriate cash-flow activities to ensure later-years financial well-being. Reinspirement™ not retirement, is the key to the economic times we live in.