There's a kind of in-word floating around in any discussion of the financial debacle. A what-the-hell-is-that-fancy-talk kind of word. A frenchie word. Speak French? Then you'll have no trouble understanding what one financial analyst meant when she said, "So all of these risky tranches of ninja loans and subprime loans were peddled to investors worldwide."
Don't worry. "Tranches" simply means "chunks" or "slices." You wouldn't want a crisp financial analyst talkin' about "chunks of ninja loans." Even if you do know what a ninja loan is.
N.I.N.J.A (No Income, No Job, No Assets).
That elucidation came from "Ask a Ninja" who also offers a link to a Washington Post report way back in early 2007 when there were plenty of concerns about the direction of the financial system:
Which of these products do you think makes sense?
(a) The "balloon mortgage," in which the borrower pays only interest for 10 years before a big lump-sum payment is due.
(b) The "liar loan," in which the borrower is asked merely to state his annual income, without presenting any documentation.
(c) The "option ARM" loan, in which the borrower can pay less than the agreed-upon interest and principal payment, simply by adding to the outstanding balance of the loan.
(d) The "piggyback loan," in which a combination of a first and second mortgage eliminates the need for any down payment.
(e) The "teaser loan," which qualifies a borrower for a loan based on an artificially low initial interest rate, even though he or she doesn't have sufficient income to make the monthly payments when the interest rate is reset in two years.
(f) The "stretch loan," in which the borrower has to commit more than 50 percent of gross income to make the monthly payments.
(g) All of the above.
If you answered (g), congratulations! Not only do you qualify for a job as a mortgage banker, but you may also have a future as a Wall Street investment banker and a bank regulator.
No, folks, I'm not making this up. Not only has the industry embraced these "innovations," but it has also begun to combine various features into a single loan and offer it to high-risk borrowers. One cheeky lender went so far as to advertise what it dubbed its "NINJA" loan -- NINJA standing for "No Income, No Job and No Assets."
Gee. All that was funny a year and a half ago. Laugh until you cry, but don't claim we didn't have plenty of warning.
