Credit risk has also increased, perhaps most notably in non-prime RMBS where low-doc
loans are increasingly common.
On February 2, 2016, the Wall Street Journal reported that "low-doc
" mortgage loans are making a comeback, the same non-income verifying process that, when abused, "helped fuel a tidal wave of defaults" in the 2008 crisis.
Just as mortgage lenders got into trouble with no-doc, low-doc
loans, there is a concern government student loan requirements aren't strict enough.
Many experts blame the securitization of low-doc
loans--the very instruments Paul helped pioneer--as one of the causes of the Great Recession, but Paul doesn't agree.
And, they can no longer offer so-called "no-doc" or "low-doc
" loans to homebuyers, which require little or no documentation.
This includes the information memorandum and high-level data relating to the asset pools underpinning the securities, such as the share of prime domestic full-doc and low-doc
Since this is low-doc
financing with no credit pulled or reported, most LeverageLines are available for drawing within two weeks.
Never mind that the government-created Fannie Mae and Freddie Mac--which agencies banks confidently and accurately expected would buy up their many shaky low-doc
, no-doc, and "liar" loans--were not built by Adam Smith's invisible hand.
(88) Fannie stopped acquiring low-doc
or no-doc loans in 1990.
You take an alt-A loan or low-doc
or no-doc loan, and there is no documentation of the borrower's income--then you can't necessarily get full goals credit for any of the goals that are income-based.
Figure 4 shows a sharp increase in the share of low-doc
loans in post-2004 Alt-A originations.
Limited documentation loans, also known as stated or "low-doc
loans," were introduced to reduce costs and hasten loan closings.