Indeed, in 1995, just as he was getting into the thick of the spread of
low-doc loans, he founded Headlands Foundation, a nonprofit charity, in order, he said, to do things right.
In both cases, the share of
low-doc loans increased over the years, as shown in Figure 6.
Competition for subprime loan clients induced lenders to relax underwriting criteria and offer
low-doc subprime loans.
The mortgage industry's acceptance of risk in the form of
low-doc no-doc and subprime housing loans, the securities industry's acceptance of the risk represented by the bundling of these loans into vast mortgage-backed debt obligations, along with their further acceptance of the risk represented by exotic, leveraged derivatives based on these same securities, has led to a meltdown of historic proportions.
Defined in its most simple terms, the subprime crisis refers to the overselling of housing to people who could not afford the house and/or interest rate, achieved by means of initial teaser rates followed by significant rate rises after a brief "honeymoon" period, often perpetrated through "
low-doc" or "no-doc" loans or through actual mortgage fraud.
Lending practices such as
low-doc and no-doc loans (where the borrower certifies their own capacity to pay) and asset-based lending enable loans to be provided with the creditor making few or no independent enquiries into the borrower's ability to repay.
A sampling of more specific forms includes alien employment certification,
LOW-DOC application, company profile, and Freedom of Information Act request.
These innovative mortgages include adjustable-rate loans with deeply discounted initial rates, with monthly payments even lower than accrued interest (generating increases in loan balances), with relatively high loan-to-value and debt-to-income ratios, and with little or no documentation of a borrower's assets, employment, and income ("
low-doc" or "no-doc" loans).
If you need a little more--say, $20,000-$100,000--check into bank loans, credit lines from banks, the SBA
Low-Doc program, strategic partners and other sources.
With a simplified application process, a loan for as little as $500 can be acquired through OWBO's
low-doc loan program.
Significant
Low-Doc Composition: Low-documentation loans (80.6%) and specialist lending comprise a major proportion of the portfolio.
Significant
Low-Doc Composition: Low-documentation loans (77.3%) and specialist lending comprise a major proportion of the portfolio.
