Of course you are correct. They weren’t intended to be outright LIAR loans though that is what they became, and I’d say exclusively for some mortgage originators.
They wouldn’t be able to do a full doc loan if their life depended on it…
There is a legit purpose for these loans. I agree with you about them being crud.. The 100% stated still exists with a high enough score, but nothing like it was.
Plenty of owner occupied loans were done stated. LOTS of people have $200K in equity today because they went stated in 2002-03.. Non owner high LTV are never as easy.
What’s unfair to me is although everything to a lender is risk & reward, they still look at credit score first. Some people have a really crappy credit score but piles of equity.
Even with a 500 score, If you own your home outright and want to borrow 30% of the value to get cash out, pay off debt and raise your score, about the only option you have is hard money lender, with rates starting at over 10% and a prepay penalty.
But with a 750 score, you can get 100% financing.
In reality, which loan is riskier, regardless of score ?
Personally, I thought the local market was getting a bit frothy in 2002-2003, and it doubled from there.
It CAN’T be my decision who should APPLY for a loan. The lender’s don’t make it our business to follow people around snooping. They are in the business of lending money, and should have risk factors built in.
If a Wal-Mart worker wants to claim $10,000 a month income,
even with an 800 score, I don’t know if lender will approve it or not.
I think that your original question had some scepticism/sarcasm behind it, and I don’t think that my reply was what you expected, if you expected a reply at all.
I don’t blame you. The industry was mostly people with get rich quick mentalities, with no business background, just out to make money. Most people still get screwed on at least one part of their loan. Losers got rich. They don’t know what the word integrity means. Some of these people are gone. They weren’t ever in it for the customer. The industry deserves the reputation that it has.
Even if you were violated on a $300K mortgage and the house went up to $700K, nobody seem to care.
Some day traders of the 90’s became loan originators, and are gone. Not sure what they are doing now, perhaps selling used cars. There are definitely people that are losing their homes today because they are in a crappy loan due to unethical advice from a slimeball.
As in anything, people fall for misleading ads, pitches, scams and tricks. They don’t take the time to learn or understand their options. They trust friends, family or relatives that don’t have to earn their business, and it’s all about what is probably the largest financial decision of their lives.
For $500 to review other loan docs and make sure people understand what they are getting into, some people laugh, yet many have made mistakes that have cost them tens of thousands of dollars.
Many well educated people have been fooled by a mortgage.
I just tell people the truth.
