Comment by Norm on July 17, 2009 at 10:07am

The capital markets will recover although pinpointing a time frame is difficult. I believe of greater concern is the pending legislation in both the House and the Senate. If approved, the bills will change the landscape of subprime financing as we know it. Here are some of the bills in question:

HR 1640/S 582 – Interest Rate Reduction Act-Amends TILA to prohibit the APR applicable to any consumer credit transaction from exceeding 15% on unpaid balances, inclusive of all finance charges.

HR 2309– The FTC must "consider" adopting rules that would:
• restrict post-sale changes in financing terms;
• give consumers the right to rescind a sales contract within a specified period after receiving the final information regarding the terms of the sale or financing; and
• limit the ability of dealers to receive compensation for arranging financing or assigning a credit contract based on the interest rate, the APR, or the amount financed.

S 255 – Empowering States' Right To Protect Consumers Act of 2009
– Amends TILA to limit the APR applicable to any consumer credit transaction (other than a residential mortgage transaction), including any associated fees, to the maximum rate permitted by the laws of the state in which the consumer resides.
– Would empower the states to set the maximum annual percentage rates applicable to consumer credit transactions.

S 257 – Consumer Credit Fairness Act
– Amends federal bankruptcy law to require the bankruptcy court to disallow any claim arising from a “high cost consumer credit transaction.”
– For secured creditors, the disallowance of the claim will extinguish their lien on the collateral securing the transaction, leaving such creditors with no claim against the bankruptcy estate or
the collateral.

High cost consumer credit transaction: • An extension of credit resulting in a consumer debt with an applicable APR, including related costs and fees, that exceeds, at any time while the credit is outstanding, the lesser of: – the sum of 15% and the yield on U.S. Treasury
securities having a 30-year period of maturity; or – 36%

Comment by Ladrue Jordan on July 17, 2009 at 1:47pm

If legislation becomes too restrictive it will cause more independent car dealers to use one of our favorite pre-repo phrases which is, "How far is it to your nearest bus stop?"

Sometimes, I really wonder if legislators really think propositions through completely, including consequences to the buying public. Another thought is that the legislators are really trying to establish the government as the source of everything and that people don't need to work to provide anything for themselves.

Comment by E. Dwight Cope on July 17, 2009 at 1:59pm

As a special finance lender it is not a pretty picture with the laws they want to pass, wait maybe it is good. The people who still have good credit will still get good rates for what they want to finance. Everybody will else pay through to noise until some bank will talk to them. Before these changes our contracts ranged from 21 to 29% APR, if they past it will be 36% APR. Our goverment taken care of you.

Comment by Steve Rabago on July 17, 2009 at 2:34pm

Dealers are being forced to carry their own paper. This is an effective de-leveraging of the independent dealers. A process not unlike what is happening in other credit markets. Unfortunately most independent dealers do not have the tools to manage loans for re-sale at or near par value. We at ZimpleMoney.com are offering online loan servicing software for independent car dealers. It matches dealer revenue with software costs. We'll aggregate dealer loans for resale to buyers or dealers can sell bulk loans to their regular community banks and credit unions. it is not a perfect world today - we need to get innovative with ideas.

Comment by Norm on July 17, 2009 at 3:38pm

Actually, the rate will be closer to 19.5%. It's the lesser of the two. Unless I'm incorrect on the current 30-year yield. Don't forget that a transaction of that ilk would classify as a high cost transaction which means your claim would not be allowed in BK court. Let's not forget Obama's proposal to create a Consumer Financial Protection Agency which has very broad lanquage regarding financial activity and provides authority for the extension of credit as well as servicing of loans.

Comment by Rob Hagen on July 17, 2009 at 4:31pm

I had no idea the political can of worms I was going to open!!!! LOL... We already have Government Motors, whats next?

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