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Real estate news in San Antonio.

‘Subprime for Dummies’ and naive investors


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As the national housing and credit crisis goes on and on — with billions of dollars being written off each quarter — have you ever wondered how the industry experts did not see this coming?

How about: Why would someone assume that a bundle of subprime loans, which usually means the loans are of lower credit quality, would not have a higher-than-average default rate? Or that they would not be more susceptible to economic shifts?

A new, hilarious slideshow that explains its genesis is making the rounds of the industry and was forwarded to the Express-News by a local broker. In joke format, the slide show titled “Subprime for Dummies” offers a scathing indictment of the mortgage industry. It claims that brokers made false promises that “value will always go up” to justify loans that required no down payment and no documentation (also called “Liar’s Loans.”) The investment brokers knew the loans were shaky and still used the loans as collateral for other investments that would make them money.

And they hid the whole mess in companies that were not based in the U.S. and thus not subject to the expected transparency of most other company investments.

It’s enlightening.

Watch the show here. But be warned that near the end investors get really angry &mdash to the point of cussing &mdash when they learn that their investments are junk.

Aïssatou Sidimé

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