Sunday, September 28, 2008

Warren Buffett's happy housing story

For all the talk about Subprime loans being the problem, we get a story that points out that Subprime loans may not be all that bad afterall. Warren Buffet has found a way to make loans to those with less than perfect credit and not go belly up (while bringing down the global economy. How does he do this you ask? The Berkshire Hathaway subsidiary, Clayton homes makes loans to people who can afford their payments, yes, a revolutionary idea. Clayton also keeps all its loans, it does not sell them, thus when a loan goes bad they feel the pain and thus are more careful upfront in selecting who they should loan to.

This is a simple, but good article that reminds us, it was stupid lending practices, not subprime loans that got us into the mess.

Scott Dauenhauer CFP, MSFP, AIF