BARRON'S February 26, 2007
MARKET WATCH
A Sampling of Advisory Opinion
Edited by Anita Peltonen
Press Clipping
Benson's Economic & Market Trends
"That Great Cracking Noise......"
Subprime Titanic Hits Iceberg
February 22: The subprime market is overloaded with bad loans that have effectively smashed holes into the hull of this financial ship. It's been surprisingly easy for people buying a new house to borrow hundreds of thousands of dollars by simply telling the bank how much money they make - without proof. It's called a stated-income loan, but many in the industry call it a "liar loan" or "NINA" [no income, no asset verification]; 40% of the subprime market [up to $500 billion] is made up of these loans...[perhaps] half of subprime mortgages had no income verification.....[subprime] mortgages companies are very thinly capitalized and highly levered......21 sizeable subprime lenders have already shut down or filed bankruptcy.
RICHARD BENSON