America - Land of Tenants and Renters

Rent or buy - No longer a point of decision - Banks Are Not Lending

The American dream is slipping away. Thanks to Ninja loans from big banks like Wells Fargo and others happy to feed their Wall Street master almost no one can borrow money for a home loan. We are becoming a nation of tenants and renters. How did we get this way?

Part of the American dream has always been, until now, owning your own home.  That has always been, for good or for bad, one thing that made America unique. Like a drug that hard to stop harming the body, Americans still clamor for a home of their own. For millions of American's that will always be a dream and never become reality.

Rent or buy hardly was a decision in the past. Even before Wall Street derivatives and mortgage default swaps everyone knew a home was the best investment. Those days are gone, at least for the foreseeable future. The down payment requirement has been set out of reach. Despite receiving billions of our money, our tax dollars, the bankers are not lending. At least they are not lending to people like Joe the plumber and me.

The one area Bankers are happy to lend in, assuming the borrower can meet the 50 - 60% down payment requirement, is the purchase or construction of rental properties; apartments to rent and low cost housing to rent. I'm just a simple guy but what I see is the big banks were to big to fail, we are to small to care about and the road America is on right now is a pretty scary one.

For six months before the crash of 2008 I tried to get a small business loan to help a ten year old successful import business. Despite having a good credit record and score it was impossible. I was led on for months by Wells Fargo with lies and deception that if I just did this, or just did that the loan could happen.

Myth of Home Value

Finally one day, while at the bank, I met an immigrant couple with their child, a very happy immigrant couple, who had just received approval for what I now know to be called NINJA loans.  I don't begrudge that immigrant couple their happiness, but they were set up for a fall. NINJA loans mean No Income No Job Approval (or Application).  That's right, this couple were migrant workers, they had no employer to refer - thus no job officially, they did not have to verify their income and they got a 250,000 US$ loan for a house with only 5% down payment requirement. I know because I asked, they did not even have a social security card. Most likely they were illegal immigrants. No one at Wells Fargo cared, no one asked.  And no one cared one poop about 55 year old proud American me.

If you check out the resources list at the bottom of this post you will see that Wells Fargo was stretching way beyond even the Wall Street definition of a Ninja loan. 

Looking for NINJAs

Was I upset, you bet your hippie I was.  Livid would be the correct word. Verbally and loudly I let the bank loan officer have it.  The manager invited me to her office. In short, she explained that they had no money for "my type" of loan. I was asking for $50,000 small business loan.  I asked how she could in good conscience loan that immigrant couple that kind of money. Her answer was that that loan had been sold to Wall Street almost before the borrower had signed for it. They made too much money on NINJA loans to waste their time with small business loans. Pissed, you bet I was. She had no time for me except that they had given me the runaround for more than six months.

Flabbergasted was what I was at that point. I told her she had better start looking for another career because something was wrong.  Three weeks later the bottom fell out of the market and the rest is history. That branch of Wells Fargo is gone and who cares where the employees are, certainly not me.

What happened may be history but the story is not over. The big Wall Street banks were bailed out and, as mentioned above, they still did not lend money to the people who needed them most.  It has been almost exactly three years since the crash of 2008 and just now has the government come up with a reasonable refinance plan. 

This new proposal - it still has to get through our gridlock Congress - has some problems. It's too little and too late and only covers houses for loans with Fanny Mae or Freddie Mac. In other words this is another defacto bailout of a bank.

So America becomes a nation of renters, of tenants. Forced to rent and live in housing owned by the 1% that occupy America is complaining about. No longer is rent or buy a decision.  Wells Fargo and other big banks have been found negligent in their dealings, and perhaps even criminally negligent. So what, the horse is out of the barn  and it may never get back in before the barn burns to the ground.

Families will no longer be able to have their own home and the only good thing to come out of this entire mess just may be the following. Perhaps now the American family will have a revival as more than one generation ends up living together under one roof.

Resources : 

Personal Experience and

From http://en.wikipedia.org/wiki/No_Income_No_Asset

No Income No Job no Assets

A NINJA Loan is a type of subprime loan. It was described as a No Income, No Job, (and) no Assets loan because the only thing an applicant had to show was his/her credit rating. The phrase was coined by Charles M. Morris in his book The Trillion Dollar Meltdown, which went to press March 3, 2008 with the manuscript being written in November 2007. They were especially prominent during the United States housing bubble of the 2000s but have gained wider notoriety due to the subprime mortgage crisis in July/August 2007 as a prime example of poor lending practices^[2]. The term grew in usage during the 2008 financial crisis as the sub prime mortgage crisis was blamed on such loans. It works on two levels - as an acronym; and allusion to the fact that ninja loans are often defaulted on, with the borrower disappearing like a ninja.

The term was also popularized in the 2010 US film Wall Street: Money Never Sleeps by the character Gordon Gekko played by Michael Douglas.

What Does NINJA Loan Mean?
A slang term for a loan extended to a borrower with "no income, no job and no assets". Whereas most lenders require the borrower to show a stable stream of income or sufficient collateral, a NINJA loan ignores the verification process.

Read more: http://www.investopedia.com/terms/n/ninja-loan.asp#ixzz1cPxkg6BZ

http://www.telegraph.co.uk/finance/economics/2785403/Ninja-loans-explode-on-sub-prime-frontline.html