Posted on 08/21/2019 8:25:03 AM PDT by Mariner
The risky mortgage is making a comeback.
More than a decade after home loans triggered the worst financial crisis in a generation, the strict lending requirements put in place during its aftermath are starting to erode. Home buyers with low credit scores or high debt levels as well as those lacking traditional employment are finding it easier to get credit.
The loans have been rebranded. Largely gone are the monikers subprime and Alt-A, a type of mortgage that earned the nickname “liar loan” because so many borrowers faked their income and assets. Now they are called non-qualified, or non-QM, because they don’t comply with postcrisis standards set by the Consumer Financial Protection Bureau for preventing borrowers from getting loans they can’t afford.
Borrowers took out $45 billion of these unconventional loans in 2018, the most in a decade, and origination is on track to rise again in 2019, according to Inside Mortgage Finance, an industry research group. Such mortgages aren’t guaranteed by government agencies and typically charge higher interest rates than conventional loans.
(Excerpt) Read more at wsj.com ...
When the taxpayer bailed out this corrupt market the last time, we purchased the right to dictate the structure of mortgages.
They have been advertising Liar Loans on the Radio in Los Angeles for the last 2 years, has the WSJ been sleeping? or getting in on the action before it all blows up again?
This is to bring the millenials into the housing market.
The ones up to their eyeballs in debt already.
The homebuilder/real estate lobby in action.
If the banks were too big to fail last time, they are too big to fail this time. A lot of banking people apparently made a lot of money last time. They are just doing the same thing and getting the same results. Who is the fool I ask?
“Who is the fool I ask?”
Those of us who vote for Republicans and Democrats.
D*** Leftists. They are trying to crash the economy again
> many borrowers faked their income and assets <
The borrowers weren’t the only liars. The banks were liars too.
A guy I know owns an old house worth (according to a realtor) around $120,000. Well, he applied for a loan against the house, and the bank told him the house was worth $200,000! My friend knew that wasn’t correct, but he borrowed money based on that figure anyway.
He’s struggling to make the loan payments. So now he’s thinking about just walking away from the house. He screwed up. But so did the bank.
This is the problem with keeping interest rates so low.
The only people who should be on the hook for these bad loans are the people making them to non-qualifying buyers.
[Well, he applied for a loan against the house, and the bank told him the house was worth $200,000! My friend knew that wasn’t correct, but he borrowed money based on that figure anyway.
He’s struggling to make the loan payments. ]
> Assuming this was a home equity loan, couldn’t he have borrowed less than the bank was willing to lend him? <
Absolutely. But my friend had - and has - some serious financial problems. The bank offered him a much bigger loan than he expected, and he took it. That’s the way daydreamers operate. Now he regrets it. And if he walks away from the house, the bank will regret it too.
[And if he walks away from the house, the bank will regret it too.]
https://www.bills.com/mortgage/is-my-heloc-a-recourse-or-non-recourse-loan-in-california
There was a story going around Seattle just before the last collapse: I guy had such bad credit that no landlord would rent to him, so he had to buy a house instead.
Thanks for that link. I’ll pass it along.
These loans are still significantly better than the types of loans made in the last cycle. These at least require hard equity. The last cycle not only did they not require equity, they frequently were 1 month ARMs or negative amortization loans with balloons, etc. A small % of the total loan market of these won’t hurt but its worth keeping an eye on.
“The U.S. government has created several programs aimed at helping borrowers in financial trouble avoid foreclosure, stay in their homes, and make their mortgage payments more affordable. Some use a catch-all term, “Obama mortgage” to describe one or more of these programs.”
Wasn’t it Clinton and Reno who caused the first meltdown in the housing market? I know...let’s blame Trump for this problem.
Refuse a loan to a black person and you are a racist.
Make a loan to pay a black person that they can’t repay and you are a predatory lender.
See how that works?
Banks take fat commissions and peddle these bogus loans to retirees as “safe fixed income” investments.
I am going to go home tonight and watch the movie “The Big Short”
Great movie.
Unless you lived it.
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