The Wall Street Journal has its ear to the ground for signs of bubble-era lending, and it’s come up with a few.
There’s the woman who got a Capital One solicitation even though the company sued her four years ago for not paying her card.
Fannie Mae is offering certain mortgages with down payments of $1,000 or 1 percent, whichever is greater. Thankfully, it’s a smallish program, but it’s still incredibly risky—especially when the housing market is in another leg down. If the price falls at all after closing, the homeowner will be underwater. Another way to think of the risk involved there is that Fannie is offering 100-to-one leverage (at minimum) on those notes. Wall Street’s leverage in the pre-crash days was in the twenty-five to thirty-three-to-one range.
The Journal also has evidence that subprime lending, while still down from 2007 levels, is creeping back:
Subprime auto lender AmeriCredit Corp. recently told investors that loan originations could total as much as $900 million for the fiscal fourth quarter ended June 30, up from $175 million a year earlier. Loan volume remains well below peak levels.
The paper also reports that banks are again waving money in the faces of people who are broke:
Malissa Peloquin, 40, of Bolingbrook, Ill., said she has received six credit-card offers since she and her husband emerged from bankruptcy in June. She still owes more than $73,000 in student loans.
“All these offers say…’You qualify,’ ” she said. “No, I don’t.”
Again, during the bubble, lenders put massive amounts of cash in people’s laps and dared them to take it, often with the promise of riches to be gained by flipping the house.
The Journal also digs out an eye-raising quote from the credit bureaus:
“Everyone is looking a little to the edges of their current underwriting landscape,” said Steven Wagner, president of Experian’s Consumer Information Services unit.
The WSJ is sharp to be on the lookout for softening lending standards, especially in the face of an economy again on the downhill slope. And on a technical level, stories like this often go too much toward the anecdote-heavy side or toward the numbers-heavy one. This has a nice mix of reporting.
Good work.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.