Mortgages Zero Loans for Homebuyers Preparing to Hit the Expansion Road – InsuranceNewsNet
We have already seen this film. It was called
the “Great Recession and the Mortgage Crash”.
15 years ago, lenders were under pressure from government officials and community stakeholders to lower the mortgage qualification bar to make home ownership easier for black, brown and low-income borrowers.
This push to expand home ownership was admirable. Americans earn much of their community esteem and family wealth by owning property. A home provides stability and family shelter, a sort of savings account for homeowners who benefit from mortgage repayment (rather than rent) as well as historical appreciation of the property.
Let’s go back for a moment to the loose lending practices in 2006, which were a recipe for disaster.
A class of unscrupulous mortgage lenders funded a slew of predatory mortgages to unsuspecting homebuyers and refinanced borrowers, financing them with little or nothing. Often these deals also came with easy underwriting requirements. Coupled with sleepy mortgage regulators and ivory tower policy drafters, it was a predictable disaster that destroyed the American dream for many underserved homebuyers and their communities.
Before we throw the baby out with the bathwater, let’s think about whether no down payment loans and looser underwriting are inherently bad.
Several experts I interviewed cited lack of down payment funds as a significant barrier to home ownership. So, no-output, no-closing-cost CCPCs can work, they said, especially when reasonable underwriting standards are added to the rigor of the credit decision.
Here are some of the program highlights:
• Applicants must be first-time buyers of any race or ethnicity. They don’t have to be black or Hispano-Latino.
• Candidates enter without deposit.
• Prospective buyers must complete a homebuyer certification course before writing an offer.
• Buyers must be income qualified.
And while the bank refused to provide the interest rate offered on its community affordable loan solution, a source who asked not to be identified as the person is not authorized to speak on behalf of
It’s zero down payment with lender paid mortgage insurance built into the rate.
On a door-to-door sale of
We don’t know if or when
So what about best practices for mortgage lenders to ensure borrowers and lenders don’t go into default, especially when it comes to these zero rate mortgages?
“As BofA has done, it is good practice to require advice for first-time home buyers,” said
Prudent underwriting is probably another good reason.
“Bank of America has these loans on its books,” said
What if such programs become free for everyone? Choi told me that Fannie and Freddie are preparing to deploy their own SPCPs. Mortgage lenders will make these loans and sell them to F&F.
Let’s not forget the hot potato game that led to the mortgage crisis. Mortgages have been funded when they should never have been. These loans were sold to investors or bundled into mortgage-backed securities. Someone else ended up with the bag when the borrowers couldn’t pay.
Something else to consider: “Mortgage rates are high. House prices are high. It’s not really a good time to buy a house,” Choi said.
Mortgage police: are you listening?
The 30-year fixed rate averaged 6.61%, 47 basis points lower than last week. The 15-year fixed rate averaged 5.98%, 40 basis points lower than last week.
Conclusion: Assuming a borrower obtains the average 30-year fixed rate on a
What I see: Locally, qualified borrowers can get the following fixed rate mortgages with a single point: A 30-year FHA at 5.625%, a 15-year conventional at 5.5%, a 30-year conventional at 6%, a Conventional High Balance over 15 years (
Note: The FHA-compliant 30-year loan is limited to loans of
Eye-Catching Loan Program of the Week: A 30-year jumbo purchase mortgage locked in at 6.25% for the first seven years interest-only with no points.