I see. Makes sense from an economic POV, but you would then wonder who would accept a subprime instrument for (presumably) speculative/short-term gain.
100% LTV? What responsible, publically-traded institution would write such a thing?
In short, such a thing is plausible, but not as intuitively-tangible as you might believe. There are many competing sharks in the water. Lending is an easy buck for those with liquidity, and a few foreigners are dipping their toes into the US lending market, regardless of our monetarism. Still, I'll keep an open mind. Great article.
>>100% LTV? What responsible, publically-traded institution would write such a thing? <<
Heck, with a FICO of 640 you can borrow 125%. Throw in an adjustable rate or interest only and you get serious over exposure to housing fluctuations.
Or people with worse credit responding to ads like this
>>100% LTV HOME EQUITY LINE OF CREDIT
with NO INCOME VERIFICATION!
100% LTV (loan to value) line of credit with no income verification, no asset verification, no docs, no ratios, and no hassles.
Please Apply On-Line Right Now For Fast Approval!<<
You don't get a loan like that without a catch.
The borrowers should have understood they were taking a risk and the lenders certainly did.