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Liar Loans Redux: They’re Back and Sneaking Into AAA Rated Bonds

Wall Street is once again accepting liars loans just like before. They are also coming up with more bond deals based on these liars loans.

Justice League

  • Homebuyers are taking on debt again without much paperwork
  • Wall Street spreads legal risks through new bond deals

The pitch arrived with an iconic image of the American Dream: a neat house with a white picket fence.

But behind that picture of a $2.95 million home in Manhattan Beach, California, were hints of something darker: liar loans, those toxic mortgages of the subprime era.

Years after the great American housing bust, mortgages akin to the so-called liar loans — which were made without verifying people’s finances — are creeping back into the market. And, like last time, they’re spreading risks far and wide via Wall Street.

Today’s versions bear only passing resemblance to the ones that proliferated in the mid-2000s, and they’re by no means as widespread. Still, they reflect how the business isstarting to join in the frenzy that’s been creating booms in everything from subprime car loans to…

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