More Good Recession News- GMAC Is Back Baby!

Mike Finley

Good news and a good step in the right direction that will benefit us all!

Bodger

This is good. Hopefully it will start the trend of lending again and get some money flowing into the various markets. We need to see another dozen cases like this where credit and confidence get restored.

I saw a statistic posted yesterday that the average home in So CA has dropped in value over 25%. I hope to hell that turns around soon.

ruskent

Great.


I am honestly for all these bail outs if they acctually work! This little thing here should work.

Instead of just giving company money they need to figure out how to have the companies increase their sales.

dougchips

Great news! Even better would be 5 year no interest on home improvement loans :-)

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Wolfgang

Hopefully it will help. As far as home prices in So. Cal., I'm not so sure. I'm no real estate expert but I remember seeing a "flip show" about some trashed house in Watts that was purchased for $400K and put on the market for over $600K and it was less than 1K sq ft.. To me thats totally outrageous. Maybe my perception of Watts is all wrong. Here in the MidWest thats a $75-85K house all day long. I know...location, location, location.

I'm in a 2300 sq ft house, 3BR, 2FB, on two landscaped acres. I'd love to package it up, take to So. Cal and sell it. I'd be set for retirement.

For the most part in my area the housing values have stayed the same and we havent been too affected by the recession. New home starts and sales have dropped some, but the remodel end has stayed the same if not grown a little.

Bodger

I am TOTALLY confused by those Flip This House type programs. I've seen episodes where they show dollar amounts for extras the flipper decided to add during construction. Things like load bearing walls being replaced with post and beams to open up the floor plan, and it will say: Added cost for this, $1,395 and the like. Always seems ridiculously low.
That must have been a show at least two years old or more. 1000 sf in Watts, bought for $400K and listed for $600K. Even two years ago that would be a stretch. But who knows, prices were so out of hand out here a while back, people were offering 15% over asking price on a house that was already $100K too high in my opinion.

jamestrd

so they are going to loan more to riskier borrowers?

isnt that what got everyone into this mess to begin with?

some will neevr learn..theres a reason fro credit ratings and criterias for lending.

a 621 is below average, below fair and their scores are that way because of lateness, defaults, delinquncies and borrowing what they CAN't afford.
spending more than they can make and maintain..

oh yea, thats the answer

rbsremodeling

It becomes a numbers game. They now have more people to loan/sell cars to that where previously left out of the equation.

They will factor in what percentage of those that probably wont pay.

The math is still in favor of giving the loans to the lesser credit worthy buyers based on the numbers

4mil additional buyers
20% will not pay or default on their loans 800k

That still leaves 3.2 mil buyers that follow through on there payments in the grand scheme the math works in their favor

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Bodger

That's true, 621 means that there is something hinky about their credit and payment history.
I wonder if there is a break-down of the types of accounts that were paid late by the majority of people in that "fair" FICO score band. If, on average they were late with credit cards, but not car payements or vice versa.
Or if the mortgage and car got paid but everything else went delinquent or what.
It would be interesting to know if the car loan lenders would even look at that info and use it as they evaluate the borrower, or if they go strictly by the FICO scores.
Makes me wonder if a loan applicant had a score of 650, and the only bad mark on their credit was a vehicle re-po, would they still get the loan.
I suppose not and that's probably a dumb question, but as far as the credit markets have gone in the past few years, way worse than that has been going on.
If loosening up the credit markets in any industry only serves to create more bad paper, then that would mean we're throwing good money after bad with these bail-outs.
I hope that isn't the case.

Mike Finley

A FICO score is not the end all instrument for lending.

GMAC is lowering the FICO score of the applicant who might qualify, not WILL qualify.

Basically what it meant before was if you FICO was below 700 you couldn't even qualify to submit.

Lowering that number to 621 simply means more can submit without being instantly denied. It does not mean that with a score of 622 you instantly get a car loan.

The FICO gets you in, but it doesn't guarnatee a loan, there are lots of other factors to be considered such as debt to income, time on the job, stability of how long you have lived somewhere, homeowner, apt renter, down payment amount, past GMAC loans, ability to pay, the amount to carry on the loan, are you trying to buy at 3000 under sticker or are you buying at sticker and carrying $4000 of inequity from your trade in on top of the new loan.

Lot more to it James than just a show me your FICO score and you're in the club.

Bodger

Makes sense. Credit card companies have been rolling in dough for decades based on formulas like that. The cardholders that don't pay or BK out are just considered cost of doing business.

Magnettica

Mike, I appreciate your explanation, and it makes total sense, but I agree with James. Loosening up loaning practices is exactly what got us into the housing mess and it'll happen again if this is GM's way of getting out of the dumper. And if people who get these loans to buy these cars don't keep up with their payments we'll all be paying for that at twice the rate we are now since the gov't used our money to bailout GM in the first place. This is not a good idea.

Bodger

But then it begs the question of how do we recover? If Rory's statistics are the model, then it will jump start lending and end up to be profitable overall, even with the expected percentage of defaults.
If the lending practices remain as tight as GMAC had them prior to to relaxing them somewhat, it obviously means less loans, less cars sold, and the credit market continues on with its stranglehold.

So what is the solution? If it's good money after bad, then it's just adding to the problem and will discourage any further bail-outs, which it should. But if it's profitable even with the inevitable defaults, isn't this the only way out?

MALCO.New.York

If one sees this as a "Good Thing", then one has missed the bigger picture.

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SelfContract

Bail out is good. This year all Big Three executives still get their million dollars bonus (from uncle Sam) no matter what... while their employees still sitting home, picketing, or more laid-off...etc..

hbelectric

Lending money to buy American goods, is better than people borrowing money to buy useless chinese made sh%t. I'm not even sure why the hell it matters if consumers are spending, they are just buying imported products, how does that help out anything? Sure a few corporations line their greedy pockets full of cash, while they pay some worthless slob minimun wage to sell their sh%t. Yeah economy!

jamestrd

"Lot more to it James than just a show me your FICO score and you're in the club."


yes I'm aware Mike and thank you for the lesson.

if you re read my post, i said , .
"theres a reason for credit ratings and criterias for lending"
someone with a 621 is at that level for 3 main reasons, lates/delinqunecies, carrying too much debt, and too many lines available.

guaranteed this is what you will see on a 621 based credit report..

the FICO score does say it all..it is a riskier loan, plain and simple..does it mean they will default? no
it means they have a higher probability to default.

Bodger

What IS the bigger picture? If they don't slack up a bit on the lending we're better off? I'm asking, not arguing it either way, I'd just like the perspective on the bigger picture that makes this a bad thing.

Jdove

The reason politicians are so determined to keep passing economic stimulus packages and bailouts is because 70% of our GDP(Gross Domestic Product-the total market value of how much goods and services are produced in one country) is made up of consumer spending. Simply stated, almost 2/3 of our economy is made up of Americans buying Asian and other imported goods. If we don't go out and purchase these goods our economy won't grow.

We have become a Consuming nation who rarely produces anything to export to the rest of the world. In fact the only things of magnitude that we do export are Entertainment(Hollywood, Sports) and Boeing airplanes(which are now starting to be sub-contracted to a French manufacturing company).

MALCO.New.York

GM is now "Part of the Government".

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