Fannie Mae Rolls Out Easy Mortgage, Catering To High-Risk Immigrants 4gh.,b28
- 1/07/2016 6:52 PM EST
- Subprime 2.0: The White House is rolling out a new low-income mortgage program that for the first time lets lenders qualify borrowers by counting income from nonborrowers living in the household. What could go wrong?
The HomeReady program is offered through Fannie Mae, which is now controlled by Obama’s old Congressional Black Caucus pal Mel Watt. It replaces the bankrupted mortgage giant’s notorious old subprime program, MyCommunityMortgage. In case renaming the subprime product fails to fool anybody, the affordable-housing geniuses in the administration have re-termed “subprime,” a dirty word since the mortgage bust, “alternative.”
So HomeReady isn’t a subprime mortgage program, you see, it’s an “alternative” mortgage program. But it might was well be called DefaultReady, because it is just as risky as the subprime junk Fannie was peddling on the eve of the crisis. At least before the crisis, your income had to be your own. But now, as a renter, you can get a conventional home loan backed by Fannie by claiming other people’s income. That’s right: You can use your apartment roommate’s paycheck to augment your qualifying income. Or your abuela.
You can even claim the earnings of people who are not occupants, such as your parents, under this program. You don’t have to bring much financial wherewithal to the table. You can even live in government-subsidized housing. Just as long as you round up enough income-earners and pool finances to help meet the debt-to-income ratio of 43%.
You don’t need good credit either. You can qualify with a FICO credit score as low as 620, which is subprime. And you can put as little as 3% down. It’s available for first-time homebuyers and repeat deadbeats. It will also expand to include refinancings. It’s all part of a government campaign to ease access to home loans for Hispanic immigrants who tend to live in groups and pool finances.
Fannie says that 1 in 4 Hispanic households share dwellings — and finances — with extended families. It says this is a large “underserved” market. The program actually targets properties “in high-minority census tracts.” The National Association of Hispanic Real Estate Professionals, a liberal trade group, is praising the move, arguing it will bring tens of thousands of Hispanic families into the home market who have been “skipped over” by stingy (meaning prudent and responsible) lenders. “It’s very encouraging,” NAHREP Chief Executive Gary Acosta said. “It demonstrates that Fannie has done a lot of work on the issue of identifying ways to qualify more people.”
Fannie and its regulators say, don’t worry — this new program won’t introduce any undue risk into the mortgage-finance system. Gee, where have we heard that before?
Fact is, outside income is hard to verify and seldom stable. And low down payment and credit scores are the two most reliable indicators of default risk. To assure such high-risk borrowers understand the importance of making their monthly mortgage payments, Fannie requires mortgage lenders to ask HomeReady applicants to take a four-hour online course on homeownership.
Well, there you go. Good as gold. Most troubling, Wells Fargo and other big mortgage lenders have already signed on. More will soon follow as the program rolls out in a big way through Fannie’s automated underwriting system later this year. We’ve seen this movie before, and it does not end well. Like MyCommunityMortgage, HomeReady will simply expand into lower and lower income markets while slashing requirements and burning lending standards even more.
Eventually it will become a no-income, no-job, nothing-down giveaway.
That is, NINJA loans (but with pro-forma official documentation to satisfy the bogus Qualified Mortgage rule).Here we go again. Full circle back to mortgage hell.