Are liar Loans Making A Come Back?
These mortgages, which are given to borrowers that can’t fully document their income, helped fuel a tidal wave of defaults during the housing crisis and subsequently fell out of favour. Now, big money managers including Neuberger Berman, Pacific Investment Management Co. and an affiliate of Blackstone Group LP are lobbying lenders to make more of these “Alt-A” loans—or even buying loan-origination companies to control more of the supply themselves—according to people familiar with the matter.
Years of easy-money policies by central banks and ultralow interest rates are pushing investors to seek out riskier assets with higher yields, such as these Alt-A loans. Many of these loans come with interest rates as high as 8%, compared with an average of about 3.8% for a typical 30-year fixed-rate mortgage. While such relatively high rates for Alt-A loans are attractive to investors, they have proved prohibitive to many would-be borrowers. Full Story
Dodd-Frank Under Attack
Without repealing Dodd-Frank, a variation of the “liar loans” programs are making a comeback; one can only imagine how this market will explode once they make it even easier to get such loans. Investment houses will buy up loan origination companies with cheap money as they seek new ways to make money in an extremely low rate environment which are set to turn negative in the years to come.
When you are a big corporation, and you have access to cheap money, all sorts of mischievous thoughts are likely to occur, and mischief usually pays much better than honesty and hard work. Hence, expect a lot of mischief from Wall Street in the years to come.
Mortgages Akin To Liar Loans making a comeback
More than a decade after the 2008 financial crisis, the mortgage lending market nationwide—and in Baton Rouge—is reopening to risky, or unconventional, borrowers, as strict lending requirements put in place after the crisis begin to loosen. Home buyers lacking traditional employment, as well as those with low credit scores or high debt, are now finding it easier to obtain credit, The Wall Street Journal reports.
Lenders are seeing an uptick in what’s called non-qualified mortgages, or non-QM, which don’t meet the postcrisis standards set by the Consumer Financial Protection Bureau for qualified mortgages. Borrowers took out $45 billion of these unconventional loans in 2018, WSJ reports, and such loans are on track to rise again in 2019.
Baton Rouge mortgage lenders say they, too, are seeing an increase in the non-QM market, though these unconventional loans do not make up a large portion of their business.
“As a percentage of our overall business, it’s not substantial, but comparing last year to this year, we’ve seen a significant increase,” says GMFS Mortgage President Tee Brown. “(Non-QM) made up maybe two percent of our business last year and five percent this year. It’s definitely growing.” Full Story