A recent sample of 100 stated income loans which were compared to IRS records (which is allowed through IRS forms 4506, but hardly done) found that 90% of the income was exaggerated by 5% or more. MORE DISTURBINGLY, ALMOST 60% OF THE STATED AMOUNTS WERE EXAGGERATED BY MORE THAN 50%. These results suggest that the stated income loans deserves the nickname used by many in the industry, the “liar’s loan.”

1. 37.2% of non-agency mortgage backed securities were no document loans in 2005 .
2. 49.3% of ARMS with interest only features originated in 2004 lacked full documentation.
3. As of September 2005, Adjustable rate Mortgages (ARMs) accounted for roughly 70% of the prime mortgage products originated and securitized and 80% of the subprime sector.
4. In 2006 97.5% of borrowers are likely to face a payment shock of at least 25% and 75% of borrowers could face a shock of 50% or more. These changes neglect additional shocks that would result from the repayment of principal because of current interest only payments!
5. Payments will increase on 41% of the outstanding subprime loans in 2006 alone.
6. As of March 22, 2006 53.1% of interest only ARMS had a prepayment penalty.
7. 70% of borrowers with Option ARMs (Arms that allow negative amortization) are currently making minimum payments.
8. In 2004 $600 BILLION of consumers’ spending power was from borrowing against home values. That is double the value of President Bush’s tax cuts, as estimated by Brooking Institution scholar Peter Orzag.
9. 2nd homes accounted for 14% of new mortgages in 2004; in 2000 it was only 7%. Mr. Greenspan said that the fact that someone can sell a 2nd home without moving, “suggests that speculative activity may have had a greater role in generating the recent increases than it customarily has had in the past.”
10. Residential housing now makes up 16 percent, or $1.9 trillion, of the gross domestic product and is the economy's largest single sector, slightly bigger than the industries and services that supply health care.
11. In 2005 the FBI convicted only 170 people nationally for mortgage fraud. In 2004 that number was 172 people. According to the FBI the hot spots for Mortgage Fraud activity in 2004 (per capita) were: California, Nevada, Utah, Arizona, Colorado, Missouri, Illinois, Maryland, Georgia, and Florida.
12. In the San Francisco Bay Area alone, almost 75% of mortgage loans taken out last year (2005) allowed borrowers to delay the payment of principle. Negatively amortized loans jumped to 29% of the Bay Area mortgage market from less than 10% in 2004.
13. Employment in housing and related industries accounted for about 43% of the increase in private sector payrolls since the economic recovery began in November 2001. The number of job losses could be significant given the role the hosuing sector has played in the current recovery .
14. The following chart shows the percentage of Bay Area loans that wer

Lama,

Thank you!

What is the source for the information you posted?

bailey, according to Ben's blog prices there have dropped 183%.

Get with it, sonny.

patrick, Think about what you're suggesting!

Mr. Campbell,
The source was a letter written to
Steven Krystofiak, President of the Mortgage Brokers Association for Responsible Lending.
I exchanged emails with him after he posted elsewhere (I believe we posted on the now infamous Toddi Gutner piece where she touted a voodoo scientist Michael Youngblood who predicted FL real estate would surge another 47% or so in 2007.
Check out the article. It will come up if you use the two names in a search. I posted some simple technical analysis there (I'm pretty simple).
Here are his footnotes:
http://www.mari-inc.com/pdfs/mba/MBA8thCaseRpt.pdf, page 15 of adobe document, July 17th, 2006.

What else is new? ARMs Dominate Subprime Mix, INSIDE B&C LENDING (Bethesda, MD), Jan. 20, 2006, at 4.

Observed by The Center for Responsible Lending.

2006 Global Structured Finance Outlook: Economic and Sector-by-Sector Analysis, FITICH RATINGS CREDIT POLICY (New York, N.Y), Jan. 17, 2006 at 12.

http://www.federalreserve.gov/SECRS/2006/May/20060516/OP-1246/OP-1246_37_1.pdf, page 10, June 15th, 2006.

http://www.federalreserve.gov/SECRS/2006/May/20060516/OP-1246/OP-1246_37_1.pdf, page 10, June 15th, 2006.

Study through The Center for Responsible Lending (CRL), which analyzed Loan performance data on March 22, 2006

Ruth Simon, A trendy mortgage falls from favor – Demand for option ARMs, which helped fuel boom, wanes amid rising rates, growing risk, THE WALL STREET JOURNAL, November 29, 2005, at D1.

Greg Ip, Greenspan warns of reliance on housing loans, THE WALL STREET JOURNAL, September 27, 2005, at A1.

Greg Ip, Greenspan warns of reliance on housing loans, THE WALL STREET JOURNAL, September 27, 2005, at A1.

David Leonhardt, Boom in Jobs, Not Just Houses, as Real Estate Drives Economy, THE NEW YORK TIMES, July 9, 2005

Federal Bureau of Investigation - Press Release December 14, 2005, June 26th, 2006.

Kathleen Pender, Mortgage options explode, SAN FRANCISCO CHRONICLE, April 13, 2006

Asha Bangalore, Housing Market – Another Information Tidbit, The Northern Trust Company, May 23, 2005 http://www.northerntrust.com/library/econ_research/daily/us/dd052305.pdf

Kathleen Pender, Mortgage options explode, SAN FRANCISCO CHRONICLE, April 13, 2006

Amendment:
That letter was written BY Steven Krystofiak to mortgage regulators. No reply yet as far as I know.

Lama,

That letter was written BY Steven Krystofiak to mortgage regulators. No reply yet as far as I know.

Thanks a million for posting this interesting information!

At the risk of being dumb, however, please tell me why Mr. Krystofiak wrote this letter. Tightening mortgage lending standards would only hurt his business, even though it is clearly the responsible thing to do.

Are you telling me that there are actually some people in our society today that are more concerned with the general good than their own individual wallets?

If so, I only have one thing to say: AMAZING.

Thanks again for providing this information. Maybe there is hope for this world.