NINJA Loan

I hadn’t heard this acronym before — NINJA Loan:

ninja loan n. A loan or mortgage given to a person who has no income, no job, and no assets. Also: NINJA loan. [From the phrase, No Income, No Job or Assets.]

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These are also known as default and foreclosure loans.

Example citations via Wordspy:

"It’s not as though the absurd excesses of the mortgage market were some big secret. Lenders brazenly advertised "low-doc" and "no-doc" loans that required borrowers to provide little or no documentation of their ability to repay. They pushed "ninja" loans, requiring no income, job or assets. And adjustable rate mortgages that were barely affordable at their teaser rates.
—"Risky-mortgage meltdown was predictable, preventable," USA Today, August 10, 2007

In 2004, when US interest rates were 1 per cent, there were few problems in the sub-prime market. However, since then the Federal Reserve Bank has raised rates 17 times in a row. Defaults on Ninja loans have become common and some sub-prime lenders, such as New Century Financial, have been driven to bankruptcy as a result.
Why is this a problem for homeowners in the UK?

The sub-prime difficulties are affecting the global financial system because these Ninja loans do not just sit on US banks’ books. They are sliced up, repackaged and sold on to hedge funds, pension funds and other investors around the world. This is why equity markets have taken such a battering recently."
—Paula Hawkins, "Will we feel the chill?," The Times (London), August 24, 2007

Its not too hard to understand why 70% of the country does not want to bailout either the homeowners, the lenders or the funds that bought this junk.

~~~

Note: These loans are not to be confused with the hilarious AskaNinja

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What's been said:

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  1. Lyon commented on Sep 10

    The real name of that loan is a NINANE. Some guy in CA thought he had a cooler name for it.

    It actually reads no income, no asset, no employment.

    It was a great loan for refinances if your credit score was over 700 and the LTV was 65% or less.

    The problems occurred when the subprimers adopted the “stated income stated asset”) loans with credit scores of 580+ and CLTV to 90%.

    All you had to do was have someone verify that you worked for them and presto! You stated you made 35g’s a month and stated you had 250k in the bank and you were good to go.

    Those companies like Ownit backed by Merryll- which is now First Franklin) are gone, thankfully.

  2. Owner Earnings commented on Sep 10

    That term is GREAT! Been around for a while now…

  3. Groty commented on Sep 10

    I first read about NINJA loans on Roubini’s site…..proabably 6-8 months ago.

    I’m pretty sure people who comment on The Big Picture have used it as well.

  4. Strasser commented on Sep 10

    New flash: Sen Schumer is introducing a bill to expand assets of Fannie and Freddie by 10% and buy back $145 B in loans… lawd have mercy.

  5. Tim commented on Sep 10

    “Its not too hard to understand why 70% of the country does not want to bailout either the homeowners, the lenders or the funds that bought this junk.”

    I feel this way myself, but do you have a citation for this reference – some WSJ article perhaps? If so, I missed it, but would like to read it.
    thanks
    Tim

  6. Don commented on Sep 10

    And of course the number of these loans and their percentage of the entire subprime universe is not stated. Oh well, it makes a nice story.

    It’s rather interesting to see the percentage of folks who are in subprime loans who could have qualified for a prime loan, as well as the recent stories regarding the builders’ in house lending operations that were falsifying income and assets on customers’ applications supposedly without telling said customers.

    But it will all work out in the end, rate cuts for Wall Street and Bankruptcy for the little people (gotta love the finance industry’s timing on that bankruptcy bill).

  7. wnsrfr commented on Sep 10

    OT-but of interest to BigPicture readers, at http://bookclub.tpmcafe.com/ there is a discussion of the book “The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics” where the Supply-side Econ theory is sliced and diced. I haven’t read it yet, but it looked definitely of interest to this crew…

  8. Karl Smith commented on Sep 10

    NINJA is not bad for someone with a high enough credit rating and I think pretty solid for a high credit rating and a low LTV.

    Why?

    Because the fact is, there is a greater chance that someone with a 600 credit score and a verified job will quit or get fired before his mortgage is up than a 780 person not being able to repay what they said they could repay.

    People are creatures of habit.

  9. michael schumacher commented on Sep 10

    OT

    I had to go peak at Kudlow’s blog……..

    OMFG

    Please show me proof that someone can be more disconnected from reality than that shill.

    Lowering rates will save the dollar???

    Please tell that to the dollar sitting at historical lows….this is with the sentiment (wrongly placed) on a rate cut.

    BTW I hope you all noticed that S&P is out making ratings upgrades on Goldman deals…….

    Ciao
    MS

  10. Florida commented on Sep 10

    Every other week, here in the Sunshine State, you get new stories of people who were making $20,000/year and somehow got themselves in for 10 speculative home totally millions, all in the believe they’d unload at higher prices. It’s pretty ugly.

  11. shoeless commented on Sep 10

    I, too, would like to see the poll numbers showing 70% of us are pissed off and not gonna bail out the cheeze balls who are in over their collective heads. With dim wits like Schumer and Frank running around looking to increase Fannie’s limits to $650k from $417k for conforming mortgages, we need that 70% to rise up and shout a clear “no” to this bull crap.

  12. SPECTRE of Deflation commented on Sep 10

    Barry, how about the neutron loan? It kills the borrower, but it leaves the house standing. I read this God knows where several weeks back. How aprapo for this mess.

  13. techy2468 commented on Sep 10

    shoeless…

    i am waiting for home prices to get reasonable in california…but looks like we want to keep the RE inflation intact to save the economy.

    800k for a three bedroom is outright crazy…but one of my friend bought it 2 years back…he makes a ton of money…but he is still paying 60% of his disposable income for this depreciating house in san jose.

  14. mike commented on Sep 10

    Anecdotal evidence of falling rents:

    I visited my property manager’s website today and couldn’t help but notice that rents seemed SIGNIFICANTLY less today than when I recently signed my lease in mid-June. The WayBack Machine (archive.org) confirmed my suspicion – rents are off nearly 20% in a few short months. At first I chalked this up to seasonality, but a check of previous changes at the WBM show that rents have held fairly steady the past few years. They’re now at their lowest archived list – below the early ’04 lows.

    I’m not sure what this means (except that there are relative bargains to be had for apartment seekers in the Princeton area), but it “feels” significant.

  15. Christopher Laudani commented on Sep 10

    Barry,

    Isn’t this insulting to NINJAs?? I’m sure some of them have very good jobs and lots of assets.

    Reminds me of the “so easy a caveman can do it” commercials that insulted cavemen everywhere.

  16. Aaron commented on Sep 10

    Who are the legitimate no-doc borrowers? Someone told me yesterday that she knew several people who got no-doc loans because they were self-employed, because they owned small businesses, or because they were salespeople on commission and had low base salaries. But those kinds of assets strike me as documentable– at the very least you’d have tax records.

  17. No More Bailouts commented on Sep 10

    Tim, shoeless,

    70% number comes from a Fox News/Opinion Dynamics poll that has been widely discussed. You can google it, or snag it from the top post on my blog (Typepad doesn’t seem to like it when I post comments with more than one link.)

    There’s anecdotal evidence that opposition in at least my badly overpriced market (SoCal) runs even higher.

    http://www.latimes.com/news/opinion/la-oe-viles4sep04,0,7874701.story?coll=la-opinion-center

    Discussion I’ve seen online is almost 99% in opposition. Me, I’m starting a petition. :-) Please sign it if you agree.

  18. SPECTRE of Deflation commented on Sep 10

    Turn on CNBS, and you will see a ninja warrior. Cramerica is wearing a football helmet folks. LOL!

  19. Blissex commented on Sep 10

    «Its not too hard to understand why 70% of the country does not want to bailout either the homeowners, the lenders or the funds that bought this junk.»

    But there will be a huge bailout (either cash or inflation, inflation more likely) As soon as the 70% of citizens (and the close to 100% of campaign donors) who own real estate realize that without a bailout the prices of their assets will plummet after having been grossly inflated by marginal demand pumped up by any means possible by the fed and govmt (nothinb like a real estate boom to make people not think about two very expensive wars, entirely financed by tax cuts, that are going badly).

  20. SPECTRE of Deflation commented on Sep 10

    This is what passes for business reporting and analysis. We have now fallen to carnival barking as a form of reporting.

    Cramerica’s show, “Madmoney” is aptly named because they have a mad man as host.

  21. Winston Munn commented on Sep 10

    Russ Winter produced some enlightening data today:

    “…a survey of 1,700 mortgage brokers sponsored by trade publication Inside Mortgage Finance indicated that in August 33% of homes under contract failed to close. They either couldn’t get financing or buyers walked away from the new terms. Three years ago only 4% of pending sales failed to close. Additionally, the survey also found that nearly half of borrowers with adjustable rate mortgages were not able to refinance their loans.”

    This is NOT a rate issue. This is a credit crunch, brought about by the shadow banking system that the Fed has no way to control.

    Better to just issue Fannie and Freddie backed Visa cards to bolster consumer spending than to try to salvage this bubble.

  22. No More Bailouts commented on Sep 10

    Blissex,

    “But there will be a huge bailout as soon as the 70% of citizens…who own real estate realize that without a bailout the prices of their assets will plummet”

    There may very well be a bailout, but it won’t be because homeowners demanded it. (Note that I mean actual homeowners. Someone who got a 110% Neg Am loan is not an owner, they are a speculator.)

    I’ve been talking to a *lot* of homeowners the last couple weeks about this, and overall I have to say that I am impressed with both their financial acumen and their reasonable outlook. They know what flipping and massive speculation have done to their neighborhoods, and would like a return to normalcy where people buy homes they can afford for their families to LIVE in. What a concept. They’re also far more worried about their jobs then they are about the price tag attached to their house.

    In fact, I’m one of those people. I am staunchly anti-bailout, and I am also a property owner. I bought in 2004, so I may very well end up underwater before this is all over, but that’s ok too because I only purchased as much property as I could comfortably afford and I have no plans to sell anytime soon.

    I and a lot of others recognize how unhealthy the current situation is for everyone’s financial future in this country (mine included.)

    This situation, at its root, is an affordability crisis. People with good jobs and good savings can’t afford to buy homes anymore without taking out a suicide loan. Now that suicide loans are at least temporarily unavailable, they can’t afford to buy homes period.

    There are exactly two ways to solve this, absent socialism – incomes can rise and prices can fall. Period. Anything else just prolongs the pain.

    Time to be adults, take our medicine, and get it over with.

  23. Winston Munn commented on Sep 10

    No More Bailouts wrote: “There are exactly two ways to solve this, absent socialism – incomes can rise and prices can fall. Period. Anything else just prolongs the pain.”

    You are completely correct in your analysis; however, there are other considerations.

    First, incomes can rise – the Fed is staunchly against this idea as Bernanke has spoken of his concern of the wage-price spiral. A misconception on his part, but he went to the wrong economics school so you can’t fault him too much.
    Besides, we’ve worked too hard to get to slave labor conditions in the U.S. – the world’s highest productivity with falling mean wages. In a nutshell, since 2003 all productivity gains have been provided for free by the American worker. (except, of course, for the top 5% wage earner who has seen an increase in wealth.)

    Second, prices can fall – falling prices will reverberate throughout the financial world – I mean the whole world – as losses mount on derivaties and off-balance sheet items. ($20 Trillion USD worth) We are talking massive deflation (which is a credit event) that could easily lead to depression era hardships.

    The answer will be some time of corporate socialistic bailout because as everyone knows, What’s good for corporations is good for America.

  24. VJ commented on Sep 10

    More than a dozen states Attorney Generals are investigating enormous levels of fraud that have been perpetrated by unregulated predatory mortgage lenders and brokers, as well as realtors.

    The wide-spread fraud ranges from deceptive practices, including falsifying an applicant’s income, misrepresentation to applicants about mortgage rates, and failing to disclose expensive prepayment penalties to applicants attempting to refinance, to fraudulent property appraisals, fraudulent securities ratings by ratings agencies, and misrepresentation of securitized investments.

    According to one Attorney General, by his own investigation, as much as 50% of the “sub-prime” foreclosures are as a result of fraud involving mortgages sold by unregulated predatory lenders.
    .

  25. Mike G. commented on Sep 10

    Question on the fraud mortgages: Doesn’t that mean the holder of the CDO etc. that has that mortgage in it can “put” the mortgage back to the one who wrote the mortgage? I’d be having my legal team looking day and night for liars in liar loans if I had a bunch of CDOs keeping me up at night!

  26. VJ commented on Sep 10

    Reportedly, Moodys alone raked in more than $3 billion over the last five years in fees just involving mortgage-backed securities.

    Step right up and get your Triple A’s here. Get ’em while they’re hot out of the oven.
    .

  27. No More Bailouts commented on Sep 10

    Winston,

    Thanks very much for your reply. One question:

    “incomes can rise – the Fed is staunchly against this idea as Bernanke has spoken of his concern of the wage-price spiral.”

    Yes, I’ve read that. But can anyone answer this question for me (I would sincerely like to understand):

    Why is it that the “wage-price spiral” is considered such a terrible monstrosity that it must be avoided at all costs, but the CREDIT-price spiral which has been much more damaging to the general affordability of goods and services is ok with everybody?

  28. Mike commented on Sep 10

    Sadly, because that is the way they teach economics nowadays. You can effectively “print up” as much money as you like if you work in the financial markets, then walk away with it: but if the ‘workers’ show any signs of getting some of the goods – tme to clobber them with rate rises. I understand why they do this, but no-one in authority will openly admit how unfair it all is – that would suggest they’d have to do something about those who are allowed to cream it all off!

  29. james c commented on Sep 10

    “Cramerica’s show, “Madmoney” is aptly named because they have a mad man as host.”

    watch it SPECTRE of retardation-

  30. SPECTRE of Deflation commented on Sep 10

    Hey Cramerica. LOL! Man is a moron shill. “My people”…ROFLMAO. He’s Moses or Jesus?

    Watch it? Only when I need a laugh.
    Cramer makes John Kerry look like the Rock of Gibraltar with his flip-flopping.

  31. No More Bailouts commented on Sep 10

    Aaron,

    Re: “Who are the legitimate no-doc borrowers?”

    It depends on your definition of “legitimate” ;)

    Recently, it’s been anyone with a pulse.

    Historically, it’s been HNW individuals. When I worked in a mortgage office approximately a million years ago, low doc loans were most typically for doctors, lawyers, and business owners. Because many of them were quite adept at income tax avoidance, they would frequently have tax returns that indicated they were relative paupers. Low doc allowed them to buy their way out of this problem by making a hefty down payment and paying an above market interest rate.

    In exchange, they got to manage their books basically the same way corporations do, with one set for the taxman and the other set for “investors” (or in this case, lenders.)

  32. Winston Munn commented on Sep 10

    No More Bailouts wrote: “Why is it that the “wage-price spiral” is considered such a terrible monstrosity that it must be avoided at all costs, but the CREDIT-price spiral which has been much more damaging to the general affordability of goods and services is ok with everybody?”

    The simple reason is that this is what they were taught. It is also the failure of the U.S. Fed. Keynesian economics, in my opinion, follows a flawed school of thought. I believe the Austrian School has a better understanding.

    You cannot target price inflation. Price inflation is an effect. The Austrian School believes it is the result of monetary inflation, the classic too many dollars chasing too few goods because too much money is produced.

    The really odd part is that Bernanke is a student of the Great Depression yet his monetary policies mimic the policies that led up to the depression.

    The strange thing to me is that although he believes it was the tight credit that spurred on the depression, he does not make the connection that it was the previous loose credit standards that set up the fall.

    Bottom line is: I can’t answer your question; however, I agree that debt-inflation is deadly.

  33. No More Bailouts commented on Sep 10

    Winston,

    I lied :-) I have *two* questions.

    “We are talking massive deflation (which is a credit event) that could easily lead to depression era hardships.”

    What, in layman’s terms, does that mean exactly? I assume massive unemployment, anything else?

    I ask because I have a borderline heretical question to ask next:

    How bad would that be, really?

    Depression era unemployment was double-digits, maxing out at around 25%.

    I’ve seen persuasive articles arguing that current govt numbers under-report unemployment by more than 50%, and that the current true rate could be as high as 10-12%. This is less of a hardship now then it was in 30’s, however, because we are a much wealthier nation.

    Furthermore, there’s an unemployment wave coming at us now from the Real Estate industry that is unavoidable – – bail out or no bail out. The fact of the matter is that, minus govt and real estate (i.e. public deficit spending and private deficit spending) we’ve been in a jobs-recession since 2001.

    Anecdotally, I know that for me and a lot of people I know, the employment situation is less than rosy. A generation ago, a single income in this country would support a middle class life style. Today it takes > 3 full time jobs between my wife and myself to accomplish the same feat, and we’re far from unique or wealthy.

    If what we’re worried about is the American economy, why not take money that would otherwise go to a bailout and invest it in something useful? Say a WPA-style works program that could tackle:

    * Repairing our crumbling bridges and other infrastructure
    * Building out a competitive, nationwide, broadband infrastructure (an area where we’ve fallen FAR behind)
    * Light rail, alternative energy, distance learning – the list of worthy projects is as long as my arm, and a much more productive use of time, energy and capital than keeping an army of real estate agents on artificial life support.

    Presto – we address unemployment AND rebuild our long term competitiveness at the same time.

    Perhaps a depression era event is what is required to get us to take depression era style action?

    I know the above has a snowball’s chance in hell of actually happening. Just thinking out loud here.

  34. No More Bailouts commented on Sep 10

    Winston – cross posted with your previous message. Thank you very much for your detailed answer; I do sincerely appreciate it.

  35. matt commented on Sep 11

    Ninja was the fantastic euphemism that banks started using because people didn’t like the pejorative, Liar Loan. Who doesn’t want a NINJA loan? They kick butt.

  36. Blissex commented on Sep 11

    «I’ve been talking to a *lot* of homeowners the last couple weeks about this, and overall I have to say that I am impressed with both their financial acumen and their reasonable outlook. They know what flipping and massive speculation have done to their neighborhoods, and would like a return to normalcy where people buy homes they can afford for their families to LIVE in. What a concept. They’re also far more worried about their jobs then they are about the price tag attached to their house.»

    Perhaps, but I am rather skeptical. Either your homeowners live in Soviet Republics full of Communists like Minnesota or Vermont, or they talk this way now but they will vote their wallets when the time comes. Nothing is more sacred in the American Dream than rising property values. Zoning laws, whatever is used to protect them.

    «This situation, at its root, is an affordability crisis. People with good jobs and good savings can’t afford to buy homes anymore without taking out a suicide loan. Now that suicide loans are at least temporarily unavailable, they can’t afford to buy homes period.»

    How does that matter to politicians? The only people affected by this affordability crisis are the 30% who are not already home owners, and a large chunk of that 30% are young people in a small cohort who stand to inherit real property from their parents and relatives in the 70%. In practice the only people suffering from this affordability crisis are immigrants and low income workers, who cannot vote or don’t vote as much as real estate owners.

    «There are exactly two ways to solve this, absent socialism – incomes can rise and prices can fall.»

    «First, incomes can rise – the Fed is staunchly against this idea as Bernanke has spoken of his concern of the wage-price spiral.»

    The Fed is staunchly against the lower end wages rising, high end salaries have been going up and up and the fed have been admiring the efficiency of the markets at work :-).

    However, given a choice between massive inflation and massive deflation, I suspect that Bernanke will choose inflation, because right now to choose deflation would be treason.

    As few people care to remember the USA is running a war economy, where the government is fighting (and doing badly) two big very, very expensive wars. These wars have been financed entirely by tax cuts on the rich, for the first time in the history of the world I think :-).

    During wartime the first duty of Treasury and Fed is to ensure the financing of the war effort, and engineering a recession would undermine the ability of the USA to finance and continue the war.

    Their second duty is to ensure that home front morale is high, and happy luck times with ever increasing real estate prices for the 70% of home owning citizens is an important part of that.

  37. No More Bailouts commented on Sep 11

    Blissex,

    “Either your homeowners live in Soviet Republics full of Communists like Minnesota or Vermont, or they talk this way now but they will vote their wallets when the time comes.”

    Yes, of course, how silly of me. We “Communists” believe that the government should butt out and let the free market set the price of assets, while the “Capitalists” on Wall Street think Uncle Sugar should step in and interfere. It all gets so confusing for us simple-minded folks sometimes…

    You may not believe me, but I have ample evidence for my position. See again the poll I provided above showing 70% opposition to a bailout.

    As for voting their pocketbook – you’re correct. I am a property owner and concerned with my pocketbook – – which is why I will be voting AGAINST any politicians pushing for a bailout.

    Re: the affordability crisis only affecting poor people – nonsense. It has severely damaged the livability of my neighborhood, as well as the upward mobility of lots of people who already own homes. Furthermore – we know perfectly well who’s paying for any bailout. On Wall Street you guys may get to print your own money, but out here we have to earn it. Constant corporate welfare programs like the proposed bailout only make it harder.

    In fact, I’m a registered Democrat – – and I believe that pushing this bailout is one of the very few ways that my party might manage to LOSE ground in the next general election. Stand up for personal and fiscal responsibility here, and they can run the table. I hope somebody is paying attention.

  38. Small Business Loans commented on Jan 2

    Im looking for information on a small business loan. Someone told me to check out http://www.unsecuredsolutions.com aka Unsecured Solutions. How do I know which small business loan company would be the best to work with? How do I check out their reputation and what should I be looking for interest rate wise these days?
    thanks for all your help.
    Tony V

  39. Brad Draper commented on Jan 9

    Thats an interesting term. I don’t really agree with unsecured loans but I guess sometimes they are what people need. Here is a site that seems pretty good. http://americaoneunsecured.com

    Thanks, BD

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