Saturday, April 28, 2018

Return of the NINJA loans? Fannie once again lowers borrowing standards to help keep housing bubble from popping

During the first housing bubble phenomenon in the U.S., lending standards become so distorted that mortgage companies and Fannie Mae were willing to provide money to anyone who had a heartbeat.  In fact one of these types of lending programs became known as NINJA loans (No income, No job).

And now that the second housing bubble appears to be starting to deflate around the country, mortgage lenders once again are willing to do anything to keep the good times going, including lowering down payments to a paltry 3%, and looking the other way on an individual's income.

It's been a while since the US made a wholesale push to get more cash and income-strapped households into the ever more unaffordable American dream of owning a house, three years to be exact, which is when nationalized housing agency Freddie Mac last rolled out a conventional mortgage that only required a 3% down payment for certain borrowers. 
The problem is that what modest requirement the mortgage program had back in 2015, meant that most Americans who needed access would be excluded. The program, which as we described at the time was designed for qualified (that being the key word) low-and moderate-income borrowers - i.e., Millennials - saw limited progress over the last few years, with FHFA Director Mel Watt telling Congress last year that Freddie’s 3% down program (along with a similar one from Fannie Mae) was continuing to grow. 
It just wasn't growing fast enough, because while putting 3% down may not have been especially challenging for most Americans, having even the modest income required to go along with it, was. 
So fast forward to last week, when Freddie Mac announced on Thursday it was about to supercharge its 3% down program and launch a widespread expansion of the offering, when it announced that it is rolling out a new conventional 3% down payment option for qualified first-time homebuyers, - effectively the same as the 2015 program... with one small difference: there would be no geographic restrictions; more importantly there no longer will be any income restrictions. - Zerohedge


We have been down this road. Doesn’t anyone learn?

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