What is a Ninja Loan?

The Ninja Loan is a loose acronym from No Income, No Job, No Assets, and the term also represents something of a word game.

The Ninja Loan is a loose acronym from No Income, No Job, No Assets, and the term also represents something of a word game.

Due to the fact that a ninja loan is expected to be in default, the borrower is described as being a ninja because he or she can so easily disappear, especially when it comes to making payments. Using the Ninja loan is heavily criticized as a dangerous lending practice and can be partly held accountable for the 2007 subprime crisis and the collapse of the financial markets in 2008.

In a scenario where a ninja loan is offered and they become significantly less common since the economic downturn in 2008, the real borrower has few funds to repay the debt, but on applications these loans may have “seen” okay. Really, what happened to the many ninja loan was that neither the patrons nor the brokers deliberately falsified information about jobs, income or wealth. Alternatively, lenders can simply speak for applicants without checking their information. The error was not only on the side of the applicants, many of which submitted genuine programs, but also on the lenders authorized loans in a ruthless manner.

In addition, many ninjas loan types were sold to companies, which significantly contributed to the mortgage crisis, and some were part of secured debt obligations invested in by people from companies. Although the NINJA loan alone cannot be held solely responsible for the collapse of the financial markets and housing industry that resonates throughout most of the world, it was certainly a lending practice that caused great problems and shone light on irresponsible actions on that part of lenders. .

Based on this crisis, however, some companies have set up NINJA loans to help bail out other businesses in difficulty. It was an intent of the big economic rescue plan packed at the end of 2008 in the United States. Other lenders have responded to the crisis by exercising extreme caution, which means double checking all the information that loan applicants and increasing the requirements for things like “good” credit scores.

One of the reasons why NINJA loans became popular was because they were borrowed at subprime rates. This meant borrowers would pay much more interest in repaying loans that could have added significant profits to lenders. Instead, however, lenders did not profit from the lack of proper screening of the applicants, and they lent money to people who were able to repay loans. History can one day see NINJA loans as one of the least responsible actions of the lending industry in the late 20th and early 21st century.