“NINJA” Loans (No Income, No Job, No Assets)
March 3rd, 2008Via: Telegraph:
It is now pretty well established, too, that these loans tended to go not merely to the poorest families, but, in general, were marketed at America’s black and Hispanic populations. They were the most likely to take on the so-called “ninja” loans (no income, no job, no assets). According to one real estate broker in Oakland, all some credulous households were told was: “firma, fecha” – Spanish for “signature, date.”
One family – the husband is a janitor, the wife a cleaner – bought their two bedroom bungalow in Oakland for $420,000 in 2005. Now their mortgage rate has reset and it is on the market for $119,000. It probably won’t fetch the list price.
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Over in Detroit there are now more than a handful of properties on the market at $100 (and no, that’s not a misprint – just search through property website realtor.com to see).
These kind of properties are all being sold by a very specific section of society – the so-called sub-prime buyers with poor credit records – or as Heidi puts it dolefully “It’s just the junk that’s coming back onto the market.”
However this is unlikely to remain the case. As unemployment rises – and it already is, sharply – more middle class families will find themselves out of a job and possibly having to sell. Experts also fear that whereas the so-called teaser rate problem is generally limited to working class families, a different mortgage-related issue could be about to strike the white-collar community.
Millions of relatively well-off families took out adjustable-rate mortgages that allow borrowers to pay so little each month that the amount owed actually increases over time rather than being eroded away. Industry insiders fear that with property prices falling, these families will find themselves facing record levels of negative equity, which may trigger a second tide of defaults.
