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Posted: 9:23 PM Aug 18, 2008
'Liar Loans' Threaten To Prolong Mortgage Crisis
The nation's struggling housing market is getting hit with a second wave of losses as homeowners with mortgages called "liar loans" default in record numbers.
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** FILE ** In this May 9, 2008 file photo. a foreclosure sign stands outside a home in Denver. The optimism that surrounds a new president taking office cannot resurrect home values overnight, and presidents have no direct ability to reduce rising mortgage rates. Nevertheless, Democrat Barack Obama and Republican John McCain both promise help for homeowners facing foreclosure. (AP Photo/David Zalubowski, File)
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UNDATED (AP) -- The nation's struggling housing market is getting hit with a second wave of losses as homeowners with mortgages called "liar loans" default in record numbers.
Liar loans are mortgages approved without requiring proof of the borrower's income or assets. The worst of them have the nickname of "ninja loans." That's short for no income, no job and no assets.
In some parts of the country, the loans are threatening to drag out the mortgage crisis for another two years.
Many homeowners with liar loans are stuck. They can't refinance because housing prices in some markets have tanked. And lenders now demand full documentation of income and assets.
Moody's Economy.com reports losses on the liar loans could top 100 billion dollars. That's on top of 400 billion in expected subprime loan losses.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
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