‘Liar Loans’ Make a Comeback
July 9th, 2010As I was reading this, I kept thinking, “Who’s going to buy these loans?” The answer, at least according to this, is nobody. The companies are going to hold these loans on their books:
The banks extending these loans are small community and regional outfits attracted to their relatively high interest rates (anything from 25 basis to 200 basis points over a conventional loan’s interest rate). The lenders intend to keep the loans in their portfolios rather than securitize them.
Good luck with that as interest rates rise.
My guess is that this will cause the FDIC to blow up faster than it would have otherwise.
Now, for a bit of comic relief, check out the Wall Street Funding of America homepage. Here’s what it looked like as this post went up:
Wall Street Funding of America
I know. You’re laughing and thinking to yourself, “No, it can’t be.”
But that’s really it.
Via: ABC News:
Forbes has learned that banks are quietly reestablishing the no-doc and low-doc mortgage market. In fact, low-doc loans accounted for 8% of newly originated loan pools as of this February, FirstAmerican Corelogic reports.
Wall Street Funding of America, a mortgage lender based in Santa Ana, Calif., was recently circulating offers to make low-doc loans to borrowers with credit scores as low as 660 on the Fair Isaac Corp. (FICO) scale, as long as the borrower was self-employed, seeking no more than 60% of the value of a home and had six months of mortgage payments in reserve. The lender was offering interest rates 1.5 to 2 percentage points over the going rate on conventional mortgages. A borrower with a credit score over 720 might get a slightly better rate, perhaps just 1.25 percentage points over.
On June 23 Wall Street Funding’s fliers caught the attention of Zillow.com blogger Justin McHood. Forbes’ calls to Wall Street Funding were not returned. (We’ll update you if they are.)
In New York City mortgage broker GuardHill Financial tells Forbes that it is making no-doc loans on behalf of four of the 50 lending mortgage lenders it represents (whose names GuardHill declines to disclose). Perhaps $100 million of the $2 billion in loans GuardHill handles this year will be low-doc, says Dave Dessner, its sales director. The banks extending these loans are small community and regional outfits attracted to their relatively high interest rates (anything from 25 basis to 200 basis points over a conventional loan’s interest rate). The lenders intend to keep the loans in their portfolios rather than securitize them.
