I was listening to the radio yesterday and I was listening to an investment show. The announcer was talking about mortgages and I heard him mention a NINJA loan.
It stands for “No Income No Job or Asset” verification! If that isn’t a liar loan I don’t know what is. You basically show up at the bank(or mortgage broker’s office) and say I have a job and assets to qualify for this loan to buy a house but I don’t want to show you anything. Just take my word for it!
Talk about easy money and excess liquidity! No wonder there has been such a boom in the real estate prices in some parts of the country. I wouldn’t be surprised if these loans end in tears for someone people.
Seems like there’s a lot of easy money chasing global investments. The Swiss and Japanese carry trades (where borrowers could borrow money under 2% in these currencies and invest them in something else, say a US T bill yielding 5%, and pocket the difference) has created a lot of excess liquidity that is chasing investments all over the place.
Some people think that asset prices have now become a function of liquidity and are no longer a fucntion of value.
I wouldn’t be surprized if the subprime meltdown caused coastal property prices to drop 40-50% from the peaks.