Chapter 1670: Cause of crisis (2/10)

At this time, the market of the mortgage finance company in the country has already shown some crises, but they have all been resolved by the political axe of the country. How did they resolve it? Very simple, adjust the interest rate.
Since last year, the Fed has continuously adjusted interest rates and kept rising. From one percent, it rose to 5.5%.
As interest rates rise, it means that the income of these mortgage finance companies has risen, and the bank’s mortgage income has risen, but the pressure on those who repay the loans has increased several times.
The interest rate of the loan is normally higher than the deposit rate, which is also one of the main sources of bank income, absorbing deposits and lending.
And what does it mean by rising interest rates? It means that those who could have repaid their mortgages normally can't afford it now.
The involvement of those mortgage finance companies has given many people the opportunity to buy a house, so that they can borrow money to buy a house even if their creditworthiness is not enough and their repayment ability is worrying.
There is also a model in which the principal repaid every month is the same, but the interest is adjusted as the bank adjusts.
Then, when the interest rate of the bank is raised several times, the interest that many people have to repay is also raised several times, which greatly increases their burden.
Some people who could afford the loan can't afford it now. Once house prices rose at a rapid rate, even if these people could not afford the loan, the company could auction the house without losing money, and the customer would not lose money.
However, the rate of increase in house prices is not rising at a rapid rate of interest, which means that customers are losing money now, and mortgage finance companies are losing money.
It is also in this case that the country’s political axe decided to let the Fed cut interest rates. Although the Fed is not a political axe, there is still some influence.
Unfortunately, all this is late, and many loans have become bad debts.
As a second-class subprime loan company in the United States, New Century Financial Corporation has issued too many loans. And in order to promote efficiency, they have granted loans to many people who did not meet the requirements at all, and some of the collateral has even been repeatedly mortgaged.
Many people's income situation should not be successful at all. You earn a thousand dollars a month, and you have to pay more than 900 dollars. It seems that there is still wealth, but normal loans require income to double the repayment amount. The above is safer. And the rest of the money must be enough for the other person to live.
How do you live for a few dozen dollars a month? Not to mention that it is a highly developed country in the country of rice. Even in some countries with economies in general, it is not enough, and prices are there.
And many people still don't have the money. The new century financial company has thought of a "good way", that is, changing the loan model. The loan method can be re-selected and the repayment method naturally changes. In this case, it can solve the problem that many people have difficulty repaying.
But this is only a temporary solution to the symptoms, and even belongs to drinking and quenching thirst. The result of this is that the financial companies in the new century have more losses.
The New Century Financial Company is also a very fast-growing company. It was established in 1995 and went public in 1997. The Asian financial turmoil in 1998 affected the world, especially the collapse of the real estate bubble in Asia, which has once again hit the country.
But at that time, the financial company of the new century was not large, and it successfully avoided this risk, and in the following, it developed more rapidly.
When Xiaobu 10 got out of this housing plan, most of the real estate finance companies got a rapid development, and the stock prices of many companies also rose rapidly.
However, in 2002, Feng Yu triggered the network bubble in the country, especially exposing the false accounting methods of companies such as WorldCom and Enron, which caused the entire stock market and even the global stock market to be hit hard. Did not slow down.
At that time, the new century financial company developed even faster. However, at the same time, the two-room group also broke the false accounting scandal.
But what's interesting is that the scandal of the two-room group is not that they have falsely reported profits, but they have reported profits!
At that time, the profit of real estate was very high, and the two-room group also made a lot of money. However, the two companies reported many profits in order to pay less and pay less taxes.
This has given many people a signal. Now the real estate finance industry is making too much money. After making a profit, it still earns so much. So more and more people, began to enter the real estate finance field, want to make more money.
It was also at this time that the stock price of the new century financial company was inevitably affected, but the decision makers of the company believed that the market underestimated their stock price, and then they joined several companies with the same subprime loan. They have become real estate investment trust companies, hoping to attract more investors with higher dividends.
Simply put, this new century financial company does not have much money at all.
However, they are daring to lend, and the review is extremely low. Even the review is a cut-off, and the amount of money they lend is rapidly expanding and superficially prosperous.
Bank lending is when you go to the bank to handle it, and most of them need to queue up and review what is very complicated. But at New World Financial, these processes are not needed at all.
They all use brokers, and even many brokers do not even have offices in their own offices. As long as they have a phone call, the brokers will come to the door, and they will be more intimate than the bank.
The New Century Financial Company, too, has grown rapidly to become the second-best subprime mortgage company in the United States. Over a decade, the company's market value has soared from one million dollars to more than three billion dollars!
This company is also very relaxed for brokers. Many brokers have paid vacations for up to six months, and even include many executives.
Under such operations, the hidden dangers of the new century financial companies are also growing, and many people are simply cheating, and the company's bad debts and bad debts are also increasing.
The company's financial auditing company has already discovered these problems, but they have always chosen to squat. Once the shareholders know that the company has lost so much, the company is finished.
This kind of financial loan company should have sufficient cash reserves, but this company does not. So as long as the message is released, the result is doomed.
Feng Yu looked at the information Ralph handed him. He didn't expect the company to lose more money than he had imagined. And not only the new century financial company, the same company, there are many, it is almost the same situation.
Feng Yu put the information down: "Ralph, tell them that the plan can begin!"
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