Highest Since 2010 (New Surge In Subprime Lending Courtesy of NACA And Bank Of America)
The Good News! US industrial production YoY rose 5.14% in September, the highest growth rate since 2010.
The Bad News? Subprime mortgage lending is starting to boom … again. When lenders feel comfortable because of a booming economy and home prices things change … again.
Borrowers can have low credit scores, but have to go through an education session about the program and submit all necessary documents, from income statements to phone bills.
They must go through counseling to understand their monthly budget and ensure they can afford the mortgage payment.
The loans are 15- or 30-year fixed with interest rates below market, about 4.5 percent.
“It’s total upside,” said AJ Barkley, senior vice president of consumer lending at BofA. “We have seen significant wins in this partnership. Just to be clear, when we get those loans with all the heavy lifting here, we’re over a 90 percent approval, meaning 90 percent of the people who go through this program that we actually underwrite the loans.”
While the Veterans Administration offers no-down payment loans to veterans and their families, there are few other programs like this. Most low-down payment programs require mortgage insurance, which can be costly. The NACA program does not.
Following the financial crisis, lenders locked up, requiring much higher credit scores and at least 3 percent down payments. The subprime mortgage crisis was precipitated by lenders offering no-down payment loans with short-term “teaser” rates as low as zero. They asked for no documentation, and sometimes tacked interest onto later years of the loan, so-called, negative amortization loans. The NACA loans are all fixed rate with full documentation.
So far more than 10,000 potential borrowers have shown up at various NACA events in cities like Charlotte, North Carolina, and Atlanta, according to Marks, and more are planned. NACA receives a $3,000 commission on each loan.
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