No Income, No Job and No Assets – You are Approved

I remember refinancing my mortgage about four years ago.  The process went much smoother than I expected.  In previous refinancings, I typically met face to face with the broker, filled out a long application and provided my tax records.  However, this time I simply called the broker and closed 30 days later.  No meeting.  No application. No tax records.  I had used this broker before, so I assumed that my records were on file.  However, this blew me away – no appraisal.  Well at least not a traditional appraisal. 

About three weeks into the process, I began wondering when would the appraisal be scheduled.  A few more days went by.  Then the broker called saying that we needed to close by Friday in order to lock-in the rate.  I said that’s fine, but what about the appraisal.  He said that’s taken care of – we did a drive-by.  I have heard of drive-bys and it is typically not something you want to be a part of.  However, this was the good kind.

I was pleased not having to jump through the hoops, but I had no idea this simply was the new norm.  I had a solid job, had lived in the house for awhile, so I was a safe bet.  We are finding out now that it didn’t matter if the bet was safe or not.

Some of these subprime lenders deserve to go under.  I can’t believe that a lender had the gall to advertise the following product:

“NINJA” loan — NINJA standing for “No Income, No Job and No Assets.”


Source: RGE Monitor

Which of these products do you think makes sense?

(a) The “balloon mortgage,” in which the borrower pays only interest for 10 years before a big lump-sum payment is due.

(b) The “liar loan,” in which the borrower is asked merely to state his annual income, without presenting any documentation.

(c) The “option ARM” loan, in which the borrower can pay less than the agreed-upon interest and principal payment, simply by adding to the outstanding balance of the loan.

(d) The “piggyback loan,” in which a combination of a first and second mortgage eliminates the need for any down payment.

(e) The “teaser loan,” which qualifies a borrower for a loan based on an artificially low initial interest rate, even though he or she doesn’t have sufficient income to make the monthly payments when the interest rate is reset in two years.

(f) The “stretch loan,” in which the borrower has to commit more than 50 percent of gross income to make the monthly payments.

(g) All of the above.

If you answered (g), congratulations! Not only do you qualify for a job as a mortgage banker, but you may also have a future as a Wall Street investment banker and a bank regulator.

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