Have the majority of home purchase (as opposed to refi) foreclosures been for loans that were 0-Down?
Yes. But I would bet that a majority of those should not have been allowed to take a loan of the size they did.
Rather than just eliminate Down Payment Assistance Programs(DPA) altogether, policymakers need to look at the big picture. Traditionally, housing is the first victim of an economic downturn. But is is also usually the first to recover. If we make it more difficult for qualified borrowers to buy homes, then we are contributing to the problem. Maybe you take the simplistic view that only those with $ in the bank for a down payment are qualified borrowers.
What about relocation? People in the military, as well as most industries, need to relocate occasionally. Or "Move-Up" buyers who have outgrown their current home. Both of these could be in a situation, due to a market downturn, that they have little equity in their home. What they have could easily be eaten up by selling costs, moving costs, fix-ups, repairs, decorating, etc.
If these contributing members of society have always paid all bills on time, don't have excessive debts, and have shown a stable earning history to support the payment of their new loan, they would be very low risk for default. However, HUD has made it so they still cannot buy a home unless they have also been able to accumulate enough liquid assets to make a down payment, possibly depleting their savings.
I would contend that DPA is a valuable tool for homebuyers, as well as lenders. With strict qualifying standards for debt/income, stability of income, and an additional requirement for liquid asset reserves to cover 2-3 months payments, DPA would be an extremely low risk for lenders. If they want to loosen some of the standards in exchange for higher mortgage insurance premiums with higher risk borrowers, it could open up the markets to many more buyers.
Please encourage our lawmakers to help turn around the economy...Bring Back Down Payment Assistance!
MarkD
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