Mark Twain once quipped that “Truth is stranger than fiction.” His reasoning was that fiction must stick with possibilities, whereas the truth has no such limitations. He was right.
We all know we had a debt crisis fueled in particular by sub-prime home loans. Those loans, made to people with less than stellar credit histories, ended up taking on all shapes and sizes. There were interest-only loans, No Doc loans (where you did not even provide your credit history), piggy-back–no-money-down loans, and of course the famous NINJA loans, where a borrower didn’t have to show income, a job, or assets (No Income, No Job, No Assets… NINJA).
Rightfully, all of these things faded into our past as we dealt with the aftermath of the housing bust, which laid bare the problems such loans caused. You would be forgiven for thinking that such things could not… WOULD NOT… rise from the ashes.
And you would be wrong…
There is indeed a new type of loan out there… it doesn’t require a credit history and it has a unique feature. It is secured not just by the property, but also by a life insurance policy on the borrower. How cool is that?!
FastFunds Financial created this new mortgage, which it says does not require a personal guarantee or a credit check. All of which leads me to believe FastFunds must be run by the mob. Who else could be that ingenious when figuring out how to protect their investment?
The logic is pretty straightforward really…
If the home goes up in value and/or the borrower makes his payments on time, everyone walks away happy. Problems only arise if the home falls in value and the borrower fails to make good on his debt. At that point, the lender, FastFunds in this case, has the 10% down payment as a hedge against a loss on the property. But what if the loss is bigger than that? What then? Well, because the mortgage is guaranteed by a life insurance policy, the answer seems obvious.
The mob will send a guy with a name like One-Eye, or Tiny, or Pretty Pete, to “encourage” the borrower to pay. If the borrower fails to make good, then he might suffer a terrible accident and end up “sleeping with the fish,” wearing a pair of cement shoes. Brilliant!
Who needs foreclosure? Who needs to robo-sign documents? Short Sales are a waste of time! FastFunds doesn’t want your stinkin’ personal guarantee, they want their money! If the cost of making good on the loan is the ultimate sacrifice by the borrower, well, so be it. Along the way there would be a huge cost savings by cutting out the lawyers and all that court time.
All kidding aside though…
It would seem that the debt crisis is still so fresh in people’s minds that they’re reluctant to snap up any sub-prime mortgage product, regardless of any twists added. But FastFunds has an answer for that. It’s targeting people who specifically have credit problems.
Arguably, this group has few options for getting a mortgage elsewhere, as they have proven in the past to be a bad risk, yet they still want to own homes. The big question is, should we be encouraging that? Is our growth in housing so weak that we need to go after not just marginal buyers, but those with proven bad track records, to fuel growth?
I don’t really think the mob owns FastFunds, or that the company would take out a hit on a borrower to get their money back, but I do think the sort of loan offering they have on the market can only end badly.
Unfortunately, when mortgages become a mess and end badly, it is usually us, as taxpayers, who end up paying.
P.S. This so-called housing recovery seems suspect to me. The things companies are doing to get buyers are desperate… and dangerous. The buyers in the market are more often than not investors taking advantage of low prices and low interest rates. The people who will truly drive a recovery in this sector are still hiding away. That’s why you’ve got to listen to this.
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