Is a Credit Crisis the Best or Worst Time to Start a Lending Site?

Yahoo! Finance User - Tuesday October 21, 2008 03:07PM EDT No, Not a DJ....DJ stands for Dow Jones. I'm an economist. Your agruement is inherently flawed. Here's why - You ASSUME that borrowers are informed and intelligent about lending. They are NOT. They need guidance, and who will give them that guidance when they shop online? No one, or worse, someone who THINKS they know lending. Next, you are incorrect about Wall Street buying Wholesale Mortgage lenders to remove the middlweman. They bought those lenders to have access to the Mortgage market because a LAW change allowed them to do so - THINK: Deregulation Credit windows were not driven open by lenders. What happened was another LEGAL deregulation that allowed for home loans to be granted on lower credit qualifications - given to lenders by Congress. Next, we had a massive lowering of interest rates and the creation of something called ZERO DOWN loans. The low interest rates also made ARM loans very fashionable, especially if you were speculating on properties, and not living there as a primary residence. Lastly, Lenders went to congress to ask that lending requirements for the lenders (Leveraged Loans) be reduced from $10 in loans for every $1 dollar of deposits, to $40 in loans for every $1 in deposits. What happens online is that people NEED guidance when they take out a loan and they don't get it. Granted, some borrowers were being abused by lenders simply looking to make a buck and were steered into a bad loan structure. I agree that is bad. Why would you assume that just because a large corporation isn't making the loan it will be better for the borrower? The individual making the online loan isn't selling a property on land contract where a personal lender has a vested interest. He's just another lender looking to make money from lending his money to someone who needs it. He IS THE SALESPERSON and the LENDER! Sounds like double dipping the system - ie. larger cut of the pie for the lender! If it sounds too good to be true, it usually is.

oops, my appologies for the multiple posts of same comments. Bad PC, bad! LOL

Ah a Frenchman .... this is what I can say about the French. A group of Americans, retired teachers, recently went to France on a tour. Robert Whiting, an elderly gentleman of 83, arrived in Paris by plane. At French Customs, he took longer than the irritated customs inspector would have liked. 'You have been to France before, monsieur?' the customs officer asked sarcastically. Mr. Whiting replies that, 'Yes,' he had been to France previously. 'Then you should know enough to have your passport ready.' The American said, 'The last time I was here, I didn't have to show it.' 'Impossible. Americans are no better than anyone else - they always have to show their passport on arrival in France!' The American senior citizen gave the Frenchman a long hard look. Then he quietly explained, 'Well, when I came ashore at Omaha Beach, on D-Day in '44 to help liberate this country, I couldn't find any Frenchmen to show it to. As I recall, no one was interested in my passport, then.' You could have heard a pin drop.

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some nowadays guys as been chating here and there,no work for them to do and no where to go and they need someone to assist them in any circumstances pls we need your help.

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The economy is going down the toilet bowl. Based on fundamentals, a repetition if not worse of the 1930's is quite possible if not quite probable. Start new lending? You must be kidding. A kamikaze venture.

DJ Marv - My appologies - great points.... so how do we fix it? Credit has to be available and borrowers need to be educated on how to properly use credit. Is there a way to offer credit to people who have proven they know how to pay their bills on time a low cost alternative (mind you it's not loans at prime - but lower than credit cards). It is my understanding many of the P2P loans are debt consolidation people getting out from under credit card debt. I like the idea of people being able to consolidate debt, start a business, pay for dental work etc.... using people who invest in their needs and make a return on the investment. I like it better than investing in 100 yr old institutions where I thought my money wouldn't go from 40$ per share to 2$ per share. Thanks NCC - I hate hearing about how bad things are, how everyone is a thief yet not discussing real solutions

DJ Marv - I am not an economist just someone trying to think through this process, I know enough about the lending industry to be dangerous without the knowledge of the crooked law changes that made this mess possible. One additional thing I wanted to comment on, you asked "Why would you assume that just because a large corporation isn't making the loan it will be better for the borrower?" I feel as though if the banks were smarter than everyone else - we wouldn't have created these bogus CDO's structure. I feel as though everyone "saw this coming" because lenders were doing 100% LTV loans, ARM loans, Interest only loans, pick a payment loans etc... I feel like I bought into some bonds rated by some economists at Moodys and S&P - these pools were reviewed by lenders, rated by these agencies and these bonds lost their tail feathers..... I have made some P2P loans and for 16 months - I have done very well. I have had a couple defaults - but I only had 75.00 in each loan and had several payments on each before the defaults. So overall the $5k I threw into these transactions have done well. The borrowers I loaned the money to thanked me - not complained or said they didn't know what they are doing. Like I said - I am not an economist - but just trying to learn what I can on this industry.

The market simply accepts as inevitable the presidency of communist sympatizer BO and reacts to it accordingly. Just wait until the insurance company, where your employer or your union invested your pension plan, goes belly up. That will be nice CHANGE for you social-idiots.