William K. Black
February 3, 2016 Bloomington, MN
This is the third column in my series about the Wall Street Journal report that “big money managers” want to bring back “liar’s loans.” Here are the article’s first two sentences.
Wall Street wants to bring back the “low-doc” loan.
These mortgages, which are given to borrowers that can’t fully document their income, helped fuel a tidal wave of defaults during the housing crisis and subsequently fell out of favor.
The second sentence begins the lies with an important lie. “Low-doc” is a euphemism for endemically fraudulent “liar’s” loans. The second sentence repeats a lie that the fraudulent lenders have told for decades – it is their carefully crafted creation myth of liar’s loans. If the WSJ had done its job and exposed the lie, the creation myth and the fraud scheme would have died decades ago. Instead, the WSJ endorses the lie. Liar’s loans were not designed for or “given to borrowers that can’t fully document their income.” The two keys lies by the fraudulent lenders about liar’s loans arise from their use of the word “can’t.” As I explained in my second column in this series, the IRS created, decades ago, Form 4506-T, which allows the borrower to give the lender access to transcripts of the borrower’s two most recent tax returns. This means that the self-employed can easily and cheaply permit the lender to verify their income – and home lenders routinely require borrowers to sign the 4506-T as a mandatory part of the loan application. The first lie is that there are borrowers that are incapable (“can’t”) document their (purportedly ample) income.