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Homeready: Fannie Mae's New Instant Underwater Mortgage

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HomeReady? More like DefaultReady.

http://davidstockmanscontracorner.com/here-comes-fannie-maes-instant-underwater-mortgage-3-down-no-cash-needed/

Fannie Mae, the Washington DC mortgage giant, has announced their latest program: HomeReady. According to Fannie Mae, “HomeReady is designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in designated low-income, minority, and disaster-impacted communities. HomeReady lets you lend with confidence while expanding access to credit and supporting sustainable homeownership.”

Here is the product matrix for HomeReady, showing borrowers that they can obtain a 3% downpayment mortgage with no minimum cash contribution!

Of course the lender should feel safe — taxpayers are backing these risky mortgages … again.

Bear in mind that with only 3% downpayment, the borrower is instantly underwater and could suffer a 6% Realtor fee to sell the dwelling. Instant underwater mortgage!

With home prices rising faster than wage growth (or family income), we have a classic bubble. But with rents rising as well, we have an unaffordability problem as well.

Clearly, making 0-3% downpayment loans help to solve the unaffordability problem, but also increases the risk of default. Particularly if interest rates rise and house prices tumble.

The Case-Shiler 20 City Home price index is growing at over 2x income growth.

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If the borrower has a credit score below the minimum required as a result of an insufficient traditional credit history (“th

in files”) as documented by reason codes on the Credit report, the lender may supplement the thin file with an acceptable non traditional credit profile. SFC 818 must Be used to identify loans with

supplemented Thin files (formanually underwritten loans only)


In other words if they cannot afford a loan or have defaulted in the past, we will just tell them they can and it`s ok.

Edited by GinAndPlatonic

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I'm abroad at the moment, in a massive city on the subcontinent.

I knew this place was a basketcase when it comes to housing, but its worse here than i could ever have imagined and the people are going crazy for it.

So far i have seen :

1) adverts in a paper for 'no documentation' mortgages for off plan property in reclaimed swampland.

2) an advert proclaiming 'why buy a 10 crore rupee (£1m sterling) 3 bed flat in bandra when you can have a 3.5 crore one in fort?'.

For some context, i just paid a taxi driver 500 rupees inc tip (£5) for a 1.5 hour journey across the city. So he earns what, £3.33 p/h before costs.

3) an advert proudly stating the 10th most expensive street in the world has just got more expensive thanks to a new development.

4) family telling me a 250k sterling 2 bedder is cheap.

So it ain't just the uk and usa. They're all going mad again.

Edited by Frugal Git

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I'm abroad at the moment, in a massive city on the subcontinent.

I knew this place was a basketcase when it comes to housing, but its worse here than i could ever have imagined and the people are going crazy for it.

So far i have seen :

1) adverts in a paper for 'no documentation' mortgages for off plan property in reclaimed swampland.

2) an advert proclaiming 'why buy a 10 crore rupee (£1m sterling) 3 bed flat in bandra when you can have a 3.5 crore one in fort?'.

For some context, i just paid a taxi driver 500 rupees (£5) for a 1.5 hour journey across the city. So he earns what, £3.33 p/h before costs.

3) an advert proudly stating the 10th most expensive street in the world has just got more expensive thanks to a new development.

4) family telling me a 250k sterling 2 bedder is cheap.

So it ain't just the uk and usa. They're all going mad again.

So what would you rather buy, Bombay or London?

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So what would you rather buy, Bombay or London?

Neither, which was the muddled point of my tirade. However, it would be a close call if a gun was put to my head on signing up to either city at this point. Both have major advantages and disadvantages, but i would say if you were a smart young person - and didn't want to go down the abuse of state 'benefits' route still abhorrently available in the uk, you would be better off here. You've arguably more freedom here with regard to just plonking up a shack and going 'there, sue me'.

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