Housing Bubble Glossary Favorites

Yet another great post from Irvine Housing Blog. This one is called Housing Bubble Glossary. Although he took it from another source I think his modifications make it better than the original.

Here are some of my favorite terms:

• Bagholder – A homeowner unable or unwilling to sell a property that is declining in value.
• Flip – a Property purchased to resell quickly for a profit. Flippers are derided for bidding up house prices and preventing normal families from purchasing houses for reasonable prices while often adding no value to the property.
• Floplord – A speculator who cannot sell his flip for either the wishing-price (greed,) or enough to cover the existing mortgage (need,) so finds himself in the position of becoming an unintentional landlord.
• Homedebtor – A homeowner who is overextended with a mortgage they cannot afford often due to their own desires for more home or more spending money.
• Jingle Mail – Term coined by early bubble prognosticator Bill Fleckenstein, referring to homeowners who have “mailed in the keys because they can’t make the payments and no longer have any equity in their homes.”
• Knife Catcher – A buyer during the decline attempting to time the bottom and catch a price reversal. Since prices generally decline for long periods in a real estate slump, there are many buyers who buy too early and pay too much thus causing financial injury.
• Liar Loans – Also known as stated-income loans. A type of loan used when a borrower could not qualify for a loan based on their real income.
• Loanowner or Loanership – Terms used to convey the reality of home ownership for overextended homedebtors who are in essence renting from the lender. A related expression is “Equity is fantasy and debt is real.”
• MEW – Mortgage Equity Withdrawal – Any form of increased property debt. This can result from direct cash borrowing through refinancing or home equity lines of credit (HELOC,) or it can result from loan terms with negative amortization. MEW fueled a great deal of consumer spending during the housing bubble.
• Serial Refinancer – A Homedebtor relying on mortgage refinancing to maintain artificially low debt service payments or fuel a lifestyle of consumption.
• Suicide loan – Also known as Option ARM or Negative Amortization loan. A type of loan where the principal grows with each payment.

Here is the link to the original.

I should have some more MEWs, Flips and serials refinancers to post this week.

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.