Liar Loans Face the Truth
Sure, it’s probably too little, too late. But blownmortgage.com reports that insurers are finally saying no to Liar Loans, which are mortgages that allowed borrowers to state their income and assets without any proof to back it up. Shockingly, many people inflated the numbers, often with the help of their brokers, and lenders looked the other way. Now that insurers don’t want to touch them, the loans are probably gone for good, with a few exceptions.
The shame of it is that liar loans, before they were abused during the housing boom, served a purpose. They allowed people who were self-employed or who earned income in non-traditional ways to qualify for mortgages. It’s only when the lending industry decided to market them to borrowers for no other reason than it meant more volume and profit, did the loans get twisted and exploited. They became a major factor in the mortgage meltdown because they tanked so quickly.
So now a self-employed, first-time homebuyer will have a harder and more expensive time getting a mortgage. Another instance in this housing mess where the people who didn’t play the game are paying the price.