Especially his view of how the loans will affect the broader market:
Last month, the New York Times ran an article revealing that subprime loans (loans made to people who under normal circumstances could not qualify for a loan) now make up more than a quarter of the total mortgage market. The study suggests that these “risky lending practices could lead to the worst foreclosure crisis in the modern mortgage market,” and that 2.2 million borrowers who have taken subprime loans since 1998 are “likely to lose their homes.” According to Peter Schiff of Euro Pacific Capital, “the idea that subprime foreclosures will not affect the broader market is absurd.”
I know the New York Times article has been quoted here already, but there really is no denying the numbers. He goes on to highlight the number of "liar loans" out there. It's truly astounding just how loose the lending industry has gotten:
Then there are all the “liars’ loans”—loans that require little or no documentation to confirm the borrower’s actual income—which have also become very popular over the past few years. Dan Dorfman reports that while in 1998, liars’ loans composed a disturbing 24 percent of all mortgage originations, in 2006, they shot up to an incredible 62 percent of mortgage originations.
The problem with these low-documentation loans is that most home buyers lie about their incomes. Consequently, an increasing proportion of homeowners are living in homes they do not realistically have enough money for.
According to a recent survey, “90 percent of the income statements [on these types of mortgage applications] were exaggerated by 5 percent or more, while almost 60 percent of the stated amounts were exaggerated by more than 50 percent” (ibid.; emphasis ours).
