Posted on 03/15/2007 12:58:07 AM PDT by Graybeard58
As the search begins for answers amid the wreckage of the multibillion-dollar subprime mortgage business collapse, “liar loans” are likely to loom large.”
A vast industry of mortgage factories churning out loans for buyers with poor credit mushroomed during the booming housing market in recent years.
That industry helped make homeownership possible for people who might not have been able to buy in the past. But it also fueled the growth of “stated income” loans requiring no W2 or other proof of income..
Those mortgages have become so frequently abused in Boston and across the country that they are now often referred to as “liar loans.” Under such deals, the income of low-income borrowers is often grossly inflated, qualifying a buyer for an expensive home or condo that in reality they could not afford.
Jamaica Plain nonprofit Ensuring Stability through Action in our Community (EASC) estimates as many as 120 home buyers facing foreclosure, which the agency has worked for over the last year, had mortgage deals that involved “liar loans.”
Most of them simply don’t have the income to pay these loans, even with assistance. “We see a lot of money coming out of communities sucked out by these fraudulent mortgages,” said Robert Pulster, ESAC’s executive director.
Many of the now beleagured home buyers the agency sees were conned into buying homes they could not afford by fast-talking mortgage brokers, who often earn thousands in fees from these deals. Activists say the brokers, taking advantage of financially naive buyers, often filled out the paperwork and pulled job titles and salaries out of thin air.
Providing the money was a host of subprime mortgage lenders eager to keep the loans flowing. In one case ESAC is dealing with, a Dorchester woman on Section 8 rental assistance, who had been paying $200 a month in rent, was put into a $350,000 mortgage. Her income was listed as $72,000, when in fact she made half that, documents reviewed by the Herald show.
“It is part of the general loosening of underwriting standards by lenders so they can keep the Wall Street money coming in,” said Eric Stein of the Center for Responsible lending, a nonprofit think tank.
Liar loans, studies have found, have been widespread throughout the subprime mortgage business. One study by a mortgage industry group found that 90 percen of so-called stated-income loans involved income that was exaggerated, often grossly, Stein noted.
In the Jamaica Plain offices of ESAC, foreclosure counselors are sorting through a stack of liar loans.
“The employer written down (on one application) was a consulting firm in Billerica, said ESAC counselor Steve Bennett. “The client didn’t even know where Billerica was.”
MSM shure jumped on subprime demanding laws and regulations be passed right now!!
And the liar loans (subprime) are not even the biggest problem.
They represent only the smaller part of americas 7.800 billion housing market.
While they often get foul the people who are actually paying them allready pay quite high rates of interest.
If loans in general get more expensive then the cheap prime loans that don't run fixed rate for the whole time will surprise their holders with brutal raises of interests. They will then not even be able to sell the house to get rid of their loan. CAn't sell, can't pay, can't refinance.
This lock ups could hit every fith loan taker.
In this lies potential for a true economic crisis.
"Victims" because they couldn't speak the language is the actual story here...
TS for them.
Consequently, Blarney Frank N. Stein is demanding legislation to protect Americans...
In this lies potential for a true economic crisis.
I think there are states that don't allow the type of loans that cause such problems. I think Wisconsin has laws in place that don't allow such scams. But not sure.
Who's the biggest scam artist?
Uncle Sam.
Kids in college are given "financial aid" in the for of federally backed student loans - some over $20,000 per year. They are easy to get. No income required. And there are legions of undergraduates that are borrowing the max every year. It is not unusual these days to see kids graduating with a measley BA or BS and with $75-100K in debt. And, none of it can be discharged in bankruptcy. So, these kids will be paying for the rest of their lives. Victims?
Exactly. The people are portrayed as being mentally retarded. B.S.
Well if you've got a passionate printer as a fed jockey that's what happens - capital vagabounding.
"Liar loans" ("no income verification" mortgages) were originally a good idea when they were introduced by Citicorp(?) back in the late '80s. They were designed for self-employed people with good credit who had a difficult time qualifying for mortgages when underwriters had to rely on income tax returns for calculating income/debt ratios.
The more recent practice of offering "no income verification" mortgages to people with shaky credit was a disaster waiting to happen. Well, it is happening. Surprise, surprise.
Well, does character count yet, or must we wait a bit longer?
Lost another one to Di-Tech.
Guess it's like being conned into running up a hughe credit card debt while buying non necessities or gong on expensive vactions.
Everyone is a victim. Nobody is responsible for their own actions.
Victims? You want victims? Wait until the value of houses owned by those with good credit ratings start sinking like a stone.
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