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Do people really associate subprime loans with poor people? This article is the first time I've ever seen subprime described that way. I've always taken it to

Do people really associate subprime loans with poor people? This article is the first time I've ever seen subprime described that way. I've always taken it to mean any loan where the borrow is stretching themselves too thin or where there is low or no down payment.

hermanradtke 9y ago
Subprime is typically associated with low credit scores. Low credit scores are associated with poor people.
- deelowe 9y ago
  Subprime means high debt/credit OR low credit scores. There was a lot more of the former than the latter (flippers, speculators, developers, etc.) Prior to the crash.
gumby 9y ago
You're correct as far as it goes, but that boom was associated with an enormous number of so-called "ninja" loans (No Income, No Job: Approved). The NBER paper says the volume of non-subprime loans dwarfed the subprime ones. "non-subprime" loans aren't "prime" of course unless you're a big bank or megacorp.
- nradov 9y ago
  I've also seen "ninja" defined as: No Income, No Job or Assets.
  - mgkimsal 9y ago
    i worked at a mortgage company during that period and internally we used the term "no doc loan" - no documentation (re: proof of income) was required. Felt very odd.
  - gamechangr 9y ago
    I think the word you are going for it "NINA". I was a Real estate investor for a decade.' NINA - stands for "No Income No Asset". My lender joked it was "the liars loan". People would just state their income. I had a person who wanted to partner with me and he said he brings in 400k a year. We pulled his taxes and he had only reported 80k! He tried to tell us "I'm good for the 150k buy-in" but we weren't having it. I recall my buddy joking "We aren't lenders. You have to actually have the money you say you do."
    - nradov 9y ago
      No the word I was going for was specifically "ninja". It's just a slang term that some people in the real estate industry used kind of as a joke during the last bubble.
      - gamechangr 9y ago
        Interesting...I haven't heard that. Does the "J" have an assigned word? (NINA = No Income J? No Asset)? Is it a play on words for something Ninja related?
wpietri 9y ago
I have repeatedly had people on the US right explain to me that the 2008 mortgage crisis was due to government-mandated loans to poor people. As an example, here's some 2008 discussion of this thesis: http://www.slate.com/articles/business/moneybox/2008/10/subprime_suspects.html http://www.slate.com/articles/business/moneybox/2008/10/subp... Here's a 2016 discussion of similar themes: http://ritholtz.com/2016/06/no-cra-not-cause-financial-crisis/ http://ritholtz.com/2016/06/no-cra-not-cause-financial-crisi... That never matched my understanding, but it was practically an article of faith for them.
- concede_pluto 9y ago
  There's a strange theory that banks and brokers had to be forced to reluctantly write bad loans, when in fact they were desperate to write more once they had a way to dump the risk on clueless speculators.
- Digory 9y ago
  Government was making things worse in this area in so many ways in 2008, it's always maddening to hear this one floated. Yes, those loans probably made things worse in some neighborhoods. But those loans didn't trigger sudden, widespread foreclosures in the suburbs.
wnevets 9y ago
>Do people really associate subprime loans with poor people? Racist actually blame poor black people for the housing crash.
jldugger 9y ago
Kinda, yea. NINJA / no doc loans are more expensive, so if you have the paperwork to qualify as a prime borrow, you should probably do so. I need to sit and read the paper really, but my initial assumptions going in: growth in subprime lending increased prices, and what made the crisis was how vast swaths of Prime America refinanced at those inflated prices, effectively withdrawing equity it had built up. I'm having trouble squaring a relatively small percentage of subprime borrowers causing a 20 percent decline, so perhaps its time I shutup and read the paper.

hermanradtke 9y ago

Subprime is typically associated with low credit scores. Low credit scores are associated with poor people.

deelowe 9y ago
Subprime means high debt/credit OR low credit scores. There was a lot more of the former than the latter (flippers, speculators, developers, etc.) Prior to the crash.

gumby 9y ago

You're correct as far as it goes, but that boom was associated with an enormous number of so-called "ninja" loans (No Income, No Job: Approved). The NBER paper says the volume of non-subprime loans dwarfed the subprime ones. "non-subprime" loans aren't "prime" of course unless you're a big bank or megacorp.

nradov 9y ago
I've also seen "ninja" defined as: No Income, No Job or Assets.
- mgkimsal 9y ago
  i worked at a mortgage company during that period and internally we used the term "no doc loan" - no documentation (re: proof of income) was required. Felt very odd.
- gamechangr 9y ago
  I think the word you are going for it "NINA". I was a Real estate investor for a decade.' NINA - stands for "No Income No Asset". My lender joked it was "the liars loan". People would just state their income. I had a person who wanted to partner with me and he said he brings in 400k a year. We pulled his taxes and he had only reported 80k! He tried to tell us "I'm good for the 150k buy-in" but we weren't having it. I recall my buddy joking "We aren't lenders. You have to actually have the money you say you do."
  - nradov 9y ago
    No the word I was going for was specifically "ninja". It's just a slang term that some people in the real estate industry used kind of as a joke during the last bubble.
    - gamechangr 9y ago
      Interesting...I haven't heard that. Does the "J" have an assigned word? (NINA = No Income J? No Asset)? Is it a play on words for something Ninja related?

wpietri 9y ago

I have repeatedly had people on the US right explain to me that the 2008 mortgage crisis was due to government-mandated loans to poor people. As an example, here's some 2008 discussion of this thesis: http://www.slate.com/articles/business/moneybox/2008/10/subprime_suspects.html http://www.slate.com/articles/business/moneybox/2008/10/subp... Here's a 2016 discussion of similar themes: http://ritholtz.com/2016/06/no-cra-not-cause-financial-crisis/ http://ritholtz.com/2016/06/no-cra-not-cause-financial-crisi... That never matched my understanding, but it was practically an article of faith for them.

concede_pluto 9y ago
There's a strange theory that banks and brokers had to be forced to reluctantly write bad loans, when in fact they were desperate to write more once they had a way to dump the risk on clueless speculators.
Digory 9y ago
Government was making things worse in this area in so many ways in 2008, it's always maddening to hear this one floated. Yes, those loans probably made things worse in some neighborhoods. But those loans didn't trigger sudden, widespread foreclosures in the suburbs.

wnevets 9y ago

>Do people really associate subprime loans with poor people? Racist actually blame poor black people for the housing crash.

jldugger 9y ago

Kinda, yea. NINJA / no doc loans are more expensive, so if you have the paperwork to qualify as a prime borrow, you should probably do so. I need to sit and read the paper really, but my initial assumptions going in: growth in subprime lending increased prices, and what made the crisis was how vast swaths of Prime America refinanced at those inflated prices, effectively withdrawing equity it had built up. I'm having trouble squaring a relatively small percentage of subprime borrowers causing a 20 percent decline, so perhaps its time I shutup and read the paper.