My understanding is that traditionally stated income loans were only for the self-employed. Their loan approval however depended on their assets. Today’s no-doc loan doesn’t require proof of assets, right?
The source of the problem is the global liquidity and that investors were seeking higher returns when global interest rates were so low. The Fed often puzzled about the low risk premia demanded by investors. If investors had demanded a proper risk premium, shouldn’t they have demanded at least 3-5% above the market rate for anyone with 0% down and no documented income? The investors who took on these loans deserve what comes their way. I only feel sorry for the unsuspecting homeowners, many of whom still believe we have only a 20% drop.
