Isn't this predatory and also one of the reasons the 2008 housing crisis happened?
@hwwilliams wrote:Isn't this predatory and also one of the reasons the 2008 housing crisis happened?
No. It merely creates opportunity by using other payment histories in lieu of credit scores, as well as negating the need for a down payment or MIP. Other lending criteria such as the means to pay would still apply.
The issues in 2008 were primarily that there weren't checks and balances on whether people could actually afford to pay, adjustable rate mortgages were rampant, MIP can add a substantial amount to a monthly payment, and people were often pushed into much more house than they could actually afford.
If this helps people who would otherwise be lifetime renters get into a home for the same or less than they are paying in rent today, that's an excellent long term outcome for these first-time homebuyers.
That's a great way to summarize it @K-in-Boston.. I raised more than a bit of an eyebrow upon first hearing of it. If deployed as you outlined, it's a great thing.
NACA has the exact program with BOA, I am assuming they are making the process easier and direct and for minorities. Remember BOA was charging minorities higher interest rates with equal or better credit than Caucasian’s and got sued for it. I am assuming they’re trying to give hugs and kisses
@K-in-Boston wrote:The issues in 2008 were primarily that there weren't checks and balances on whether people could actually afford to pay, adjustable rate mortgages were rampant, MIP can add a substantial amount to a monthly payment, and people were often pushed into much more house than they could actually afford.
If this helps people who would otherwise be lifetime renters get into a home for the same or less than they are paying in rent today, that's an excellent long term outcome for these first-time homebuyers.
If you need that kind of assistance getting into a home, then you really cannot afford it. While it is nice to have no closing costs and no down payment, what about taxes, insurance and setting a little aside for repairs? I wonder how many of these will end up with liens on them because they cannot afford the property taxes, or able to pay for repairs and upkeep. It is a lot more than renting.
@MarkintheHV wrote:
@K-in-Boston wrote:The issues in 2008 were primarily that there weren't checks and balances on whether people could actually afford to pay, adjustable rate mortgages were rampant, MIP can add a substantial amount to a monthly payment, and people were often pushed into much more house than they could actually afford.
If this helps people who would otherwise be lifetime renters get into a home for the same or less than they are paying in rent today, that's an excellent long term outcome for these first-time homebuyers.
If you need that kind of assistance getting into a home, then you really cannot afford it. While it is nice to have no closing costs and no down payment, what about taxes, insurance and setting a little aside for repairs? I wonder how many of these will end up with liens on them because they cannot afford the property taxes, or able to pay for repairs and upkeep. It is a lot more than renting.
Except this is what DTI calculations are for.
I used to work for a deep subprime lender, we did some analysis and it pretty much resoundingly came back that if you gave folks $400 and if they turned around and actually paid their debts, they'd get out of the PDL (pay day loan) space. It wasn't that much and would have immediately refinanced their debt from nearly 400% to even the 110% ballpark we were charging (we had a first payment default rate of like 33% though some of this was unquestionably fraud) . This was 15ish years ago so the numbers are different now, but I strongly suspect the broad strokes are the same.
You are right and some will default, but it won't be all of them and those that it does help... well, this is the first step to generational wealth and that is utterly righteous compared to some of the suck things that banks in particular have done in the past.
Also I'd note NACA is a darned good program overall, their success rate doesn't suck and if they're involved this could well be winning for many people.
