Wednesday, October 1, 2008

The NINJAs outsmarted Wall Street? Yeah, Sure

The credit crunch is beginning. What was consider a right during the housing boom
is now returning to a privilege. What were we thinking?!? Lets take a look at from the Real Estate Glossary at some of the loans commonly used during the great housing bubble -

  • Neg-Am (Negative Amortization, a.k.a. “Option ARMS”): Exotic mortgage loan product even more toxic than an I/O, in that the homedebtor falls even further into debt each month. Ending up upside-down is virtually guaranteed unless prices appreciate very quickly.
  • No-Doc (aka “Stated Income”, “NINA”): Exotic mortgage loan product designed to get around federal/state lending requirements with regard to LTV ratio and borrower credit-worthiness, by allowing the borrower to declare “stated income/assets” without proof.
  • Stated-Outcome (aka “Liar-Loan”): A No-Doc loan where the lender deliberately inflates the buyer’s income to whatever level is needed to “qualify” them for the loan amount.
  • NINJA (No Income, No Job, no Assets): Variants include “NINA”. Also see “NAAVLP”, “No-Doc”, “Alligator” and “Stated Outcome”.

Bad credit, no job, no income, no assets - and our best and our brightest on Wall Street and in Washington DC saw no problems allowing this to continue for years. After all house price would only go one way.

But hey, here is an idea - maybe if we give them $700 billion they can fix everything. Yeah, sure, that's the ticket.

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