We are in maybe the 3rd inning of the housing crash...
“Out of 100 loans, more than 90 of the applications overstated the borrower’s income at least a little. More strikingly, more than three out of five overstated it by at least 50 percent. This isn’t a few people fibbing a little. This was the whole system breaking down.”
Yet we are supposed to bail these people and banks out???? I don’t think so!
There is a solid reason why for years the standard was:
20% down (maybe 15%, rarely 10%)
30 year fixed rate mortgage (and if you could afford a 15 year mortgage, go for it!)
Similarly, for years to get a credit card you actually had to have a really good credit rating.
These examples are why it’s not nice to fool Mother Nature.
The most utilized product in my portfolio was Countrywide's "Fast & Easy". It was pretty much a No Income, No Asset verification loan. There really was no reason to go with a different product for the people who qualified for it. It was simpler, easier, quicker, and the rate was the same, and sometimes better than a comparable full doc loan.
Its basic guidelines were a 720 middle score or better and at least 10% down, or an LTV of no greater than 90% on a refinance.
Unlike a lot of the liar loans, with the F&E, you had to have solid credit and at least 10% skin in the game. The liar loans that are going bad are the ones that had lower credit requirements and would go to 100%.
I would be interested in how the Countrywide F&E loans are performing. I suspect they are not suffering from late payments and foreclosure at near the rate the other liar loans are.
Great article - however I made the mistake of reading the reader comments - nobody got the message or wanted to get the message - they just wanted to blame some institution. I played by the rules, rented until the market was right & still bought a smaller house than people I know who make less than I do. I don’t feel sorry for anyone caught up in this. It’s really simple economics.
This is easily solvable the gubberment just needs to print more cash. They do it all the time. That way we will all be debt free. Pay off all loans. If our gubberment can do it for foreign countries and the world bank they can surely do it for their own citizens