USA – Borrowers can have low credit scores. They have to go through an education session about the program and submit all necessary documents from income statements to phone bills.
The loans are 15 or 30-year fixed with interest rates below market, about 4.5 percent.
They must go through counseling to understand their monthly budget.
They must ensure they can afford the mortgage payment.
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Magdalene Altidor lost her home to foreclosure during the subprime mortgage crisis.
This week she was first in line at a four-day event in Miami. borrowers with poor credit were offered no-down payment, low interest rate loans. I left home, it was about 4 a.m., she laughed. I’m ready to purchase a home.
The event is one of several being held in cities across America this year, They are run by the nonprofit, Boston-based brokerage Neighborhood Assistance Corporation of America, or NACA.
It’s a national disgrace about the low amount of home ownership, mortgages for low and moderate income people and for minority homebuyers, said Bruce Marks, CEO of NACA.
In the loans that we’ve originated in the past 6 years, zero foreclosures.
Marks and NACA were front and center during the subprime mortgage crisis. They are holding mass mortgage modification events across the country with banks and service providers.
Bank of America was there then and the bank is with NACA now. They are backing the program with $10 billion in mortgage commitments.
It’s total upside, said AJ Barkley, senior vice president of consumer lending at BofA. We have seen significant wins in this partnership.
Just to be clear, when we get those loans with all the heavy lifting here, we’re over a 90 percent approval. This means that 90 percent of the people who go through this program that we actually underwrite the loans.
Borrowers can have low credit scores, but have to go through an education session about the program.
They must submit all necessary documents, from income statements to phone bills. Then they go through counseling to understand their monthly budget and ensure they can afford the mortgage payment.
The loans are 15- or 30-year fixed with interest rates below market, about 4.5 percent.
That’s what’s going to help people who’ve been locked out of home ownership to really become homeowners and to build wealth.
Critics of the program argue that with no down payment, no skin in the game, these borrowers have no reason not to walk away should their homes lose value.
That’s what happened during the financial crisis.
The difference in this program is that the borrowers cannot be investors. In order to get the loan, they have to live in the home.
People have skin in the game in a real way, said Marks. The people that walk away are higher-income people who look to home ownership as an investment, just like buying stocks and bonds.
Working people look at their investment in home ownership for their family, for their neighborhood and for themselves.
Quentin Carswell is a first-time home buyer who tried to get a loan from a traditional bank.
They tell you they have a lot of first-time home buyer programs, and then once you get there they tell you these outrageous numbers.
It’s hard for normal class people to afford to get into a house, and you know put $20,000, $30,000 up for down payment. That’s a lot of money.
So far more than 10,000 potential borrowers have shown up at various NACA events in cities like Charlotte, North Carolina, and Atlanta, according to Marks, and more are planned. NACA receives a $3,000 commission on each loan.
While the Veterans Administration offers no-down payment loans to veterans and their families, there are few other programs like this. Most low-down payment programs require mortgage insurance, which can be costly. The NACA program does not.
Following the financial crisis, lenders locked up, requiring much higher credit scores and at least 3 percent down payments.
The subprime mortgage crisis was precipitated by lenders offering no-down payment loans with short-term teaser rates as low as zero.
They asked for no documentation, and sometimes tacked interest onto later years of the negative amortization loans.
The NACA loans are all fixed rate with full documentation.
Another big difference today is the housing market itself. Home prices have been rising strongly, and there is a critical shortage of entry-level homes for sale. If a borrower finds themselves in financial straits, it is far easier today to sell the home quickly.
Home ownership is freedom.
Author – Diana Olick
Original source – CNBC
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