Another snippet:
“Some banks doing business nationwide are reporting that close to 80% of loans originated are stated income loans.”
We already know that most stated income loans are “stated” because the borrower is lying about his income. Can you imagine what will happen now that 80% of loans originated are made to borrowers who are not able to make their payments?
“Between 40-50% of all outstanding loans in the United States are owned by the federal government.”
“Consumers have access to loans where a home can be purchased with 0% of a down payment, stated income AND stated assets. This same loan will allow a very low credit score of 620 (680 is average). Lastly this loan program will allow someone to borrow up to $950,000 dollars.”
Without the exotic lending, my predictions for a housing price bust would be 25-30%. But this lending stuff is downright scary.
Now, why do people state their income? Why would anyone put themselves into a situation of a higher mortgage than they could afford?
Let’s get our answer from the pro, SoCalMtgGuy at housingbubblecasualty.com
“Making a low teaser payment for 2, 3 or 5 years only works when prices go up. Many people are going to have that sick feeling in the pit of their stomachs when their teaser ARM adjusts and their property is worth 100k less than they ‘paid’ for it….and there is nothing that the great econoMISSED Leslie Appleton-Young can say to take that feeling away. The thinking was, “Why should I get a fixed rate loan when I can just ’state’ my income, not put any money down, and make 6-figures in appreciation a year?” (SoCalMtgGuy)
