They’re Back..! Subprime Loans, Cars, this time instead of houses. Defaults Are Soaring

❝ It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud…Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017.

A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide.

❝ Subprime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great Recession, business has exploded. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were, topping average pre-crisis levels, according to Wells Fargo…

❝ Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines.

Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s Investors Service. The largest portion were for Chrysler vehicles.

Some of their dealers, meantime, gamed the loan application process so low-income borrowers could drive off in new cars…

❝ Through it all, Wall Street’s appetite for high-yield investments has kept the loans — and the bonds — coming…Reid Bigland, Chrysler’s U.S. sales chief, said Santander has been a “good partner.”

Typically, you look to see which regulators have had staff cut by the sleaziest members of Congress. That’s where the money-grubbers most inclined to fraud are focused. Nowadays, with today’s version of the Republican Party in slim control of both houses of Congress – with the pimp-in-chief in the White House – you can be assured the beat goes on!

Honda’s $25 million settlement illustrates gutless government in action


Someone explain to Honda those aren’t American flags

American Honda Finance Corp. agreed to pay as much as $25 million to settle discriminatory lending allegations as the U.S. has stepped up its scrutiny of car loans, the third-largest source of household debt.

The Honda unit that finances auto loans in the U.S. will offer $24 million in relief to borrowers who were allegedly overcharged by dealers since 2011, according to a settlement Tuesday with the Justice Department and the Consumer Financial Protection Bureau. An additional $1 million will be spent on consumer education programs.

The federal government in recent years has secured large discriminatory lending payments from mortgage companies, including a $335 million settlement with Countrywide Financial Corp., and has now turned its attention to auto loans. As part of the settlement, Honda said it would limit the amount a dealer could markup the interest rate of the loan.

As our government has demonstrated time and again, you can lie, cheat and steal – and if you’re a big bank, you get a sizable fine. I guess that’s repayment to the state, somehow. No one does any time. None of the creeps who signed-off on screwing American citizens pay any penalty. Shareholders get the fine subtracted from any dividends they may have expected.

Toyota Motor Credit Corp. and JPMorgan Chase & Co. have each disclosed government investigations of discriminatory pricing related to loans.

Vanita Gupta said the Justice Department’s investigation of the auto-lending industry is continuing. Auto loans are the third-largest source of household debt after mortgages and student loans…

U.S. authorities allege that Honda violated fair-lending laws by allowing dealers to charge higher interest rates on loans sought by African-American, Hispanic and Asian borrowers.

The average African-American borrower paid about $250 more for the loan than a white borrower, the Justice Department ad the CFPB said in its complaint. Hispanics paid $200 more while Asian and Pacific Islander borrowers paid $150 more during the term of the loan, the U.S. said.

And that’s the flip side of bigoted business practices in 21st Century America. Corporate barons only have to look to the Republican Party and the gerrymandering done since the 2010 census to think to themselves – hey, these creeps are publicly redefining voting districts to discriminate against Black folks, poor white folks, students and seniors – why can’t I do the same thing?

Our creepiest politicians combine the theft of voting rights with lies about non-existent voter fraud to assemble a life’s worth of deceit and discrimination equal to anything since the days of Jim Crow – and our courts will fart around for decades without doing a thing. Plus, they have the example of the Supreme Court before them saying – it’s all right, racism doesn’t exist in our plastic TV-land anymore.

Why shouldn’t Honda try to get away with stealing? Our politicians, our government says it’s OK.