Testimonial:NINJA Dad

From Recessipedia

In the autumn of 2006 I knew the gig was up. Two years out of college, my unemployed and I suspect then unemployable daughter was finally ready to leave the nest. Instead of flying into a rental, be it a small studio apartment or an old house brimming with other young ne'er-do-wells, she soared right into a house, a very nice quarter of a million dollar one no less. When I asked her why she wanted to buy, she said she did not want to "throw away" her money by renting, sought the income tax deduction (presumably when she had any to pay), and thought it a good investment because housing prices were going up so fast.

My daughter was, of course, a subprime borrower, one of the worst kinds -- a NINJA, or a borrower with No Income, No Job or Assets. The instrument was a 30-year interest-only mortgage with a so-called "silent second" to cover the down payment. Her plan was to take in boarders and to cover the rest of the rent from her sundry part-time jobs. She hasn't defaulted ... yet ... but periodically she calls crying her eyes out. Yet another boarder left or failed to pay, her hours got cut, she got hurt and missed work, and so forth. She finally has enough business experience and skills to get a decent fulltime job with benefits but of course due to the financial crisis and recession such positions are difficult to come by at present. My biggest concern right now is that there is a whole other group of people out there who would never think of defaulting simply because housing prices fell but who cannot hold on much longer. Thankfully, the real estate market in her area is turning up a little and she has put the house on the market. It's a race against time (and weather) for her now. If she defaults, I wonder if she will ever be able to obtain a mortgage again, although her only mistake was to believe the hype about housing prices always going up.