Oh, No! The No-No here again?

Inquiring minds are watching history repeat itself. Like a Blake Edwards skit the Feds have decided it was just bad luck what happened to No-Money-Down Loans were at the center of the mortgage meltdown. How else do you explain the re-emergence of these loans. From “You Can Get a Mortgage for No Money Down—Again!“:

James “Bob” Phillips, a mortgage consultant with Polygon Home Loans (a joint venture of the builder and Wells Fargo), explains that the ads refer to two government programs that his company makes available to customers. One is run by the U.S. Department of Veterans Affairs and guarantees loans for veterans. The other is operated by the state Housing Finance Commission and offers assistance to first-time buyers who have a combined household income of under $85,600; the state also offers second mortgages to help such people cover down payments and closing costs.

Under the state program, banks issue the loans to customers, then the government buys them up. In return, banks get credit toward meeting their obligations under the federal Community Reinvestment Act, and collect a small fee. In fact, the fee’s so small, says the Housing Finance Commission’s Dee Taylor, that many institutions didn’t even advertise the availability of these loans until recently, when many other options dried up. In the past year, the commission has more than tripled its number of down-payment mortgages, to about 1,000.

Don’t worry. This time there are safeguards

And while those mortgages may look like easy money, Taylor says there are more strings attached to them than there were to the subprime loans that the banks handed out in the bad old days. Borrowers need to document their income, have good credit ratings, and take five hours of homeowner education.

Oh, that explanation makes one’s fears just melt away, right?


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