Are you familiar with the phrase “subprime loan”? It means a loan to someone who “may have a difficulty of paying it back”. Thus, a loan that has a really high risk of default.
Underrating the risks on mortgages and/or lying about the risks to the investors is one of the primary causes behind the 2008 financial collapse in the US, triggered by the burst of the housing bubble. That is the crisis that shook the whole world economy, made investors re-evaluate their investments and could even be blamed partly for the current crisis in Europe.
I would expect that after such a huge slap to the face with a big, juicy, stinky, rotting trout would make financial institutions evaluate their new loans and other connected services that could all face a much higher risk exposure than they have been thinking before the crisis crashed into the Wall Street.
Back in december, when i was in quite a financial crisis myself and had trouble funding my earlier expenses that got due on my credit card, following some strange idea i decided to apply for a credit card at another company. My old one had a limit of 100 thousand yen, and i thought i only got it because it’s in some way connected to the university (back during my first year in Japan i applied for a credit card and was rejected).
As i wrote above, i was expecting banks to look deeper into the financial status of the applicants, i didn’t expect them to actually issue me a credit card with a limit of 300 thousand yen, which is roughly double my gross monthly incomes.
The mail with the card in it arrived just the other day. Financial sector, i am disappointed. (But thanks anyway.)