I remember 125% loans to equity in 2007. What most do not understand is that 'liar loans' had been around for 25 years or more before that. My wife and I have always been entrepreneurs. At least one of us have always owned a business. When we bought our first home in 1980 the mortgage broker told my wife to 'estimate' the earnings for her new clothing store. He then suggested the earnings and we both said, sure. The bank did not ask for a P and L, balance sheet, etc. Why? The loan was a 2nd at 18%. It was all about the money in 1980 and home prices were moving up so banks took zero fiduciary responsibility. It never changed. As we bought more homes we continued to 'estimate' our earnings. It always worked out for us because we had a plan to pay down loans as quickly as possible. I see the same problem with student loans. Most people don't take this easy money understanding how they'll use it as an investment. Like liar loans, it's just a trap. This is a tough country for anyone without a plan to get ahead.
Rule #1, Don't lose money. Rule #2, read rule #1. - WB.
