Nov. 16, 2005 - WHAT'S UP, DOC?

"Low-doc" or "no-doc" mortgages were originally designed for self-employed borrowers who found it difficult to provide documented proof of income. But today, lenders increasingly market them to buyers who want quick financing. However, there are concerns that these loans -- often are called "liars' mortgages," according to U.S. Office of the Comptroller of the Currency deputy comptroller Barbara Grunkemeyer -- have allowed borrowers in pricey housing markets to exaggerate their incomes and purchase homes beyond their price range. Lenders disagree, though, noting that low- or no-doc mortgages typically are offered to established customers, and they're profitable because lenders can charge interest rates 0.25 to 0.75 percentage points higher than fully documented mortgages. LoanPerformance, a subsidiary of First American Real Estate Solutions and provider of mortgage data and analytics, reports that, of loans used to back mortgage securities in the private sector, fully documented mortgages fell to 54 percent of the market from January through August -- down from 72 percent five years ago.

Source: Wall Street Journal (11/16/05) P. C1; Hagerty, James R.; Simon, Ruth
© Copyright 2005 INFORMATION, INC. Bethesda, MD (301) 215-4688