No one ever seems to mention that a lot of times these idiot borrowers COULD afford their mortgages when they got them, but then proceeded to go out and buy a new car with a $600 monthly payment, then maybe even a 2nd car after that, because the auto companies will make loans to just about anybody, due to the fact that it's fairly easy to take a car back if the borrower doesn't pay.
However, when times get tough, the idiot borrowers would rather have their sweet ride than pay their mortgage. I don't know how many times I've seen a borrower with large past due balances on their mortgage but those suv payments are right on time.
....but...now they're discovering that these car loans (that were packaged up like mortgages and sold) are going bust as well. While it is true the car, like the home, can be repossessed--the car loan, like the home loan, is also way, way underwater.
Remember when the automobile dealerships were advertising "Do you still owe money on your old car--no problem, we can help you with that!" What they did was roll the unpaid portion of the loan on the old car into the loan for the new car. So the $7,000 the owner owed on the 2003 Honda Civic was rolled into the new loan for the $32,000 2005 Dodge Durango (with leather interior and side stripe). The $39,000 loan was then packaged up with others and sold off to the Teacher's Union Pension Fund.
Now the Durango owner has stopped payment on a $39,000 loan for a truck that is worth (if they're lucky) about $15K. It doesn't make a heck of a lot of sense to keep paying for that loan--better to give the keys to the repo guys and go out and buy a beater, or a $15K used Durango.
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