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Risky, no-tell loans have hung around
NEW YORK, (UPI) -- The no-tell loans that helped drive the U.S. financial system to the brink of collapse two years ago have not gone away, a private research group said.
CoreLogic said 8 percent of new mortgages as of February were loans given to borrowers who did not document at least part of their financial situations, Forbes magazine reported Thursday.
While no-doc (no document) or low-doc loans were categorically part of the mortgage market collapse, they have some value now said Ashlyn Aiko Nelson, a public policy lecturer at Indiana University.
"The market may have over-corrected a bit by shutting these down entirely," she said.
The benefits to no-doc loans include flexibility for wealthy borrowers who can't document a steady income, but don't mind paying higher rates, Nelson said.
From 2006 through 2007, however, 40 percent of new loans were no-doc, CoreLogic said. Two years later, 39 percent of subprime U.S. loans were listed as delinquent, LPS Applied Analytics reported.
The financial reform bill addresses the issue, requiring borrowers seeking no-doc loans to put 5 percent of the loans value in reserve before the loan is approved.
NEW YORK, (UPI) -- The no-tell loans that helped drive the U.S. financial system to the brink of collapse two years ago have not gone away, a private research group said.
CoreLogic said 8 percent of new mortgages as of February were loans given to borrowers who did not document at least part of their financial situations, Forbes magazine reported Thursday.
While no-doc (no document) or low-doc loans were categorically part of the mortgage market collapse, they have some value now said Ashlyn Aiko Nelson, a public policy lecturer at Indiana University.
"The market may have over-corrected a bit by shutting these down entirely," she said.
The benefits to no-doc loans include flexibility for wealthy borrowers who can't document a steady income, but don't mind paying higher rates, Nelson said.
From 2006 through 2007, however, 40 percent of new loans were no-doc, CoreLogic said. Two years later, 39 percent of subprime U.S. loans were listed as delinquent, LPS Applied Analytics reported.
The financial reform bill addresses the issue, requiring borrowers seeking no-doc loans to put 5 percent of the loans value in reserve before the loan is approved.
