Helping "Qualified" Buyers: Fannie, Freddie Detail 3%-Down Payment Mortgage Program

Now that home prices have recovered and homes are not the bargain they were four years ago, it is fitting the parasites once again want to make homes "affordable" to the masses with low-down payment options.

Please consider Fannie Mae, Freddie Mac detail plans for 3% down-payment mortgages.

Housing finance giants Fannie Mae and Freddie Mac on Monday detailed plans to once again back mortgages with down payments as low as 3%, saying the move to make home ownership more accessible contains safeguards to protect against abuses that led to the subprime housing market crash.

“Our goal is to help additional qualified borrowers gain access to mortgages,” said Andrew Bon Salle, executive vice president for single family underwriting, pricing and capital markets at Fannie Mae.

Officials said the program was designed to help credit-worthy borrowers, particularly those with low or moderate incomes, who can demonstrate the ability to repay a mortgage but lack the money needed for at least a 5% down payment.

Freddie Mac will limit its program, called Home Possible Advantage, to mortgages for first-time homebuyers. Borrowers must participate in a homebuyer education and counseling program before receiving the loan and will have to pay for private mortgage insurance.

Fannie Mae's program will be available to anyone who has not owned a primary residence for three years. Private mortgage insurance will be required but counseling and education will not.

Helping "Qualified" Buyers

Notice the statements about helping "qualified borrowers".

If you lower the qualifications to zero, everyone qualifies by definition. But is that a "help" or a debt-trap in waiting?

My Take

If you cannot afford to put 10% down on a home, then you can't afford the home.

I side with House Financial Services Committee Chairman Jeb Hensarling (R-Texas) who stated: "Such loans are inherently risky because the borrower has almost no financial cushion against a personal or economic downturn, vastly increasing the likelihood they will walk away from the loan once it gets significantly underwater."

Low down payment loans are "an invitation by government for industry to return to slipshod and dangerous practices that caused the mortgage meltdown in the first place and wrecked our economy."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com