Home News Americans Fear Zero-Down Mortgages Mean Repeat of 2008 Housing Crisis

Americans Fear Zero-Down Mortgages Mean Repeat of 2008 Housing Crisis

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  • To allow borrowers to own homes, some lenders are introducing zero down payment mortgages.
  • Some suspect that these products will trigger a resurgence of the 2008 foreclosure crisis.
  • Experts said the fear was understandable, but today’s lending limits are much tighter.

A mortgage that doesn’t require a down payment, closing costs, or a minimum credit score may seem too good to be true.

After Bank of America announced New Zero Down Mortgage Offer Last month, people took to social media to voice their fears that it could lead to another housing crash like the one in 2008.

“The premise is to help a marginalized community, but come on. Literally stop and read. This is the same trend as the 2008 crash,” said TikTok user Inkwater. Said Video in September.

But experts say this is not the market in 2008 and lending standards are much higher. A spokeswoman for the Consumer Financial Protection Agency, a federal consumer watchdog, told Insider that these concerns were misplaced. lender Bank of America, Navy Federal Credit Union, Northpointe Bank, and others are using non-traditional methods to determine solvency, such as looking at a borrower’s rent, phone, car, and utility bill payment history, to help them qualify for mortgages. is expanding access to

“It’s an interesting way to help people who don’t have a traditional credit record,” said a spokeswoman. “Think of someone who doesn’t have student loans or credit cards, but pays all bills, rent, and utilities on time.”

Additionally, the new wave of zero-down mortgages comes with stricter lending standards. As long as the borrower has made sound financial decisions and can afford the monthly payments that come with buying a home, there’s no need to worry about foreclosure, experts say.

A CFPB spokesperson said, “Using this kind of instrument, like repayment ability, is actually an interesting way to win over people who may have fallen through the cracks before.

Since 2008, improved lending standards have made it safer to offer new mortgages

With prices skyrocketing in the housing market, prospective home buyers and lenders looking to help make their home ownership dreams a reality are looking for a variety of ways to purchase a home.

The Federal Reserve’s battle against skyrocketing inflation has had some consequences. interest rate led to a significant increase mortgage interest rateAs interest rates rise, the typical homebuyer’s mortgage payments gain Up 15% from August.

That, combined with the pandemic boom in prices, means many potential buyers are struggling to get home ownership. falling housing prices Whole country.

To address the US affordable housing crisis, some mortgage lenders introduced Products to help potential borrowers make better purchases of home ownership.

bank of america Recent Mortgage Offersis called the Community Affordable Loan Solution and requires eligible borrowers to complete a homebuyer certification course before applying.

This offer is available to buyers of all races in the designated markets, Ethnic disparities in home ownership A market that includes historically black and Hispanic neighborhoods in Charlotte, North Carolina. Dallas; Detroit; Los Angeles; and Miami.

while the BOA program is fulfilled praisewhich has also received considerable criticism

upon twitter When tick tock, people are skeptical of mortgage offers and that sort of thing. Critics have many reasons for concern, but the common sentiment is that zero-down mortgages could set off his 2008-style home crash.

During that time, cheap debt, predatory lending practices, and complex financial engineering combined to allow affordable mortgages for many borrowers. As the situation reached a boiling point, it sparked a foreclosure crisis among homeowners, especially people of color, and a credit crisis among investors who own bonds backed by defaulting mortgages. The result was a global recession.

As some factors Many Americans fear history repeating itself, as it led to a resurgence of the 2008 housing crash.

Bank of America CEO Brian Moynihan says his zero down payment product is unlikely to cause such a catastrophe.

“This is to allow the down payment that we have made in many special programs over the years to anyone who buys a home, as long as they meet the income requirements. District”, Moynihan Said Fox News added that the company’s loan-to-value ratio is in the 60% range, “very well suited for high FICO scores, so there are very few delinquencies.”

His confidence has not yet eased the worries of distrustful Americans.

The CFPB said Americans should not panic. Not the mid-twenties housing market.

“The 2008 housing crisis was due to a complete lack of underwriting,” said a spokeswoman. “Down payment itself is a risk factor, but it can be mitigated by other factors. It was underwritten solely on credit score, and the lender hadn’t even checked the rules that the bureau had put in place to prohibit that practice.”

The CFPB said the BOA’s program is sound and will help make homeownership more attainable for Americans who may have been previously locked out. The CFPB said it is tracking mortgage products to ensure the continuation of the

“Like HUD and other agencies, we have issued guidance,” the spokesperson said. “The thing to remember is that the vast majority of mortgages are now federally backed in some way. must be fulfilled.”

“So we have rules and lenders have to follow them, so what happened in 2008 won’t happen again.”

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