At this time, the U.S. mortgage finance market has already shown some crises, but they have all been resolved by the U.S. government. How did they resolve it? Very simple, adjust the interest rate.
Since last year, the Federal Reserve has continuously adjusted interest rates and kept rising. It increased from 1% to 5.5%.
The rise in interest rates means that the income of these mortgage finance companies has increased, and the mortgage income of banks has increased, but the pressure on those who repay their loans has increased several times.
The interest rate on loans is normally higher than the interest rate on deposits, which is also one of the main sources of bank income, absorbing deposits and lending.
And what does rising interest rates mean? This means that people who could have repaid their mortgages normally can no longer do so.
The intervention of those mortgage finance companies has given many Americans the opportunity to buy houses, allowing them to get loans to buy houses even if their credit is not enough and their repayment ability is worrying.
There is another model, that is, the principal repaid every month is the same, but the interest is adjusted according to the bank's adjustment.
So when the bank's interest rates have been raised several times, the interest that many people have to repay has also been raised several times, which has greatly increased their burden.
Some people who could afford to repay their loans in the past cannot afford to do so now. In the past, when house prices rose rapidly, even if these people could not repay their loans, the company could still auction the houses without losing money, and neither would the customers.
But now, housing prices are not rising as fast as interest rates, which means that customers are now losing money, and mortgage finance companies are also losing money.
It was also under this circumstance that the US government decided to ask the Federal Reserve to cut interest rates. Although the Federal Reserve is not a political axe, it still has a certain influence.
Unfortunately, it was too late, and many loans have become bad debts.
As the second largest subprime loan company in the United States, New Century Financial Corporation has issued too many loans. And in order to promote efficiency, they issued loans to many people who did not meet the regulations at all, and some of the mortgages were even repeated mortgages.
The income situation of many people is such that they should not be able to get a loan at all. If you earn a thousand US dollars a month and have to repay more than 900 US dollars, you may seem wealthy, but for a normal loan, your income must be more than twice the repayment amount. The above is safer. And the remaining money must be enough for the other person's life.
How do you live with a few dozen dollars left a month? Not to mention in countries with a highly developed economy like the United States, even in some countries with average economies, they are not enough, and prices are just there.
As many people still cannot pay, New Century Financial Company has thought of a "good way", which is to change the loan model. You can reselect the loan method, and the repayment method will naturally change. In this way, the problem of repayment difficulties for many people can be solved.
But this is only treating the symptoms, not the root cause, and even drinking poison to quench thirst. The result of this is that New Century Financial Company suffered even more losses.
New Century Financial Company is also a very fast-growing company. It was established in 1995 and went public in 1997. The Asian financial crisis in 1998 affected the world, especially the collapse of the real estate bubble in Asia, which also hit the United States again.
However, New Century Financial Company was not large at that time and successfully avoided this risk, and subsequently developed even faster.
After Xiao Bu Shi came up with this housing plan, most real estate finance companies developed rapidly, and the stock prices of many companies also rose rapidly.
But in 2002, Feng Yu triggered the Internet bubble in the United States in advance. In particular, he exposed the false accounting methods of WorldCom, Enron and other companies, causing the entire American stock market and even the global stock market to be hit hard. It hasn't gotten better in years.
At that time, New Century Financial Company was developing even faster. But at the same time, the Fannie and Freddie Group also broke out in the false accounting scandal.
But what is interesting is that the scandal of Fannie and Freddie Group was not that they exaggerated their profits, but that they concealed their profits!
At that time, real estate profits were very high, and Fannie and Freddie Group also made a lot of money. However, these two companies concealed a lot of profits in order to pay less, pay less taxes and other reasons.
This sends a signal to many people that the real estate finance industry is too profitable now. After concealing profits, they are still making so much money. As a result, more and more people are beginning to enter the field of real estate finance, hoping to make more money.
It was also at this time that the stock price of New Century Financial Corporation was inevitably affected and fell. However, the decision-makers of this company believed that the market had underestimated their stock price, and then they teamed up with several companies with the same subprime loans to let They turned into a real estate investment trust company, hoping to attract more investors with higher dividends.
To put it simply, this New Century Financial Company does not have much money at all.
But they dared to lend money, and the review intensity was extremely low. Even the review was just a formality, allowing the amount of loans they loaned to expand rapidly, and they seemed to be very prosperous.
To get a bank loan, you have to go to the bank to apply for it, and most of the time you have to queue up and have to review it, which is very complicated. But at New World Financial Corporation, these processes are not required at all.
They all use brokers, and many brokers don't even have offices. They work from their own homes. With just a phone call, the brokers will come to your door to provide services. They are meticulous and look much more considerate than banks.
This is how New Century Financial Company rapidly grew to become the second-largest subprime mortgage loan company in the United States. In just over ten years, the company's market value soared from one million U.S. dollars to more than three billion U.S. dollars!
This company is also very lenient with agents. Many agents can take paid leave for up to half a year, including many senior executives.
Under this kind of operation, the hidden dangers of New Century Financial Company are getting bigger and bigger. Many people simply cheat and get loans, and the company's bad debts and bad debts are also increasing.
This company's financial audit firm has already discovered these problems, but they have always chosen to hide them. Once investors know that the company has lost so much money, the company will be doomed.
This kind of financial loan company should have sufficient cash reserves, but this company does not have it at all. So as long as this news is released, the result is destined.
Feng Yu looked at the information that Ralph handed him, but he didn't expect that the company had lost more money than he had imagined. And it’s not just New Century Financial Company, there are many other companies of the same type, all in the same situation.
Feng Yu put down the information: "Ralph, tell them that the plan can begin!"
…
PS: The title of the previous chapter is wrong and the content has been modified. Don’t worry, just reload. I have already asked Pooh to help modify the chapter name (to be continued.)
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