Yes my original response was sarcastic. And you’ve laid out some decent reasons for stated income loans. However, in the grand scheme of things, stated needs to go away because it is too susceptible to fraud.
Also, I agree with you that a 30% LTV refi to a borrower with a 500 score is much less risky than any 100% LTV loan. I think the high LTV rates is what got us into this whole mess. If borrowers had to put 10% of their own money down on every mortgage, I doubt we would have seen this bubble reach the heights it did.
Unfortunately, the way the system works today (well, as of last Monday anyway), if a borrower can get a 100% LTV mortgage, there are no checks and balances to keep the “V” in “LTV” in check. Appraisers are pushed by everyone to make ridiculously high if not downright fraudulent appraisals, mortgage brokers are shooting themselves in the foot if they question the value of a home and will sometimes commit fraud on the borrower’s application just to make a sale, borrowers just want to get in the house, originators want to make as many loans as possible so that they will have more to quickly package and sell, the hedge funds buying these loans on the back end were borrowing from Citi, JP Morgan, Bear Stearns, and Goddam Sachs at 5% in order to purchase these mortgages that would supposedly yield 7% or greater.
Once the borrower was able to take his skin out of the game and get a 100%+ LTV loan, everyone else was using somebody else’s money and there was no incentive for any body to use common sense. Dang it all.
