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Enter the NINJA: A Subprime Glossary

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Sunday, June 1, 2008

The subprime mess was fueled by so many cockamamie practices that the lending industry had to invent a lexicon for them. A sampling of the new vocabulary:

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Liar loans: Loans to borrowers who verify their own income, which is often inflated, either by the loan originator (to assure that the loan will be approved) or by the borrower.

NINJA loans: Loans that require No Income, No Job and no Asset verification.

No doc loans: See NINJA loans.

Reverse redlining: Targeting lower-income, less financially savvy communities -- once the objects of redlining -- for higher-priced loans.

Equity stripping: Refinancing borrowers over and over again into ever-larger loans from which lenders pay themselves bigger and bigger fees, including pre-payment penalties. Many of today's distressed borrowers find that even though they paid their mortgages on time for several years, they built no equity: It was sucked out in fees with each new loan.

Being underwater: Stuck with a mortgage that's greater than the value of one's house, which has deflated with the bursting of the housing bubble.

Jingle mail: House keys left in the mailbox by owners who walk away from their mortgages and allow the bank to repossess their homes before their credit goes bad and hurts their ability to rent. This phenomenon may not be happening yet, but many worry that we'll soon be hearing those jingling sounds in neighborhoods nationwide.

-- Kathleen Day


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