Much was made about sub-prime mortgage defaults, aka poor people and their irresponsible borrowing precipitating the 2007-2009 housing and financial crisis. The crisis was in fact closely tied to so called NINJA loans aka no income, no job, no assets, also known as liar loans it allowed people who were extremely unqualified to purchase a home any way. As this process was also part of the originate to syndicate loan model popular at the time because the banks literally made money coming and going and the Mortgage Backed Securities were structured in such a way as to make the inevitable defaults largely the investors problem. Rampant speculation, ridiculous price levels and an inevitable bust was the result. Fast forward to the present and rampant speculation has once again driven prices to ridiculous levels, affordability in some markets is even lower today than it was in 2007. While the composition of the speculation is substantially different this time and includes a lot of foreign all cash buying and the buy to rent institutional investor crowd. The New York Fed recently noted amongst others that sub-prime lending is making a comeback as high Loan to Value ratios are increasingly being paired with low credit scores, the difference this time is that the Fed and its various agencies effectively are the mortgage market meaning taxpayers will be on the hook directly if housing bust 2.0 materializes.
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