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What is so evil about a 100% Loan?

By Jeff Engum

Real Estate Agent with Open Mortgage

October 22, 2009 06:15 AM

What is so evil about a 100% Loan?

What we have learned in the whole sub prime debacle is the 100% loans are bad, evil and scary. The borrower needs blood in the transaction or they will just walk away. I have been doing FHA and VA for a very long time while others were doing 100% sub prime loans because they are easy. I was doing FHA and VA loans because I thought it was the right thing to do. This is an amazing fact that I just found out. That VA loan has the lowest default rate of any other loan! VA loans are 100% loan with no HVCC for appraisals. How can that be? With all the wonderful changes implemented to protect the banks from defaults and foreclosures, the evil 100% loan has the lowest default rate of any loan. Maybe the Fed and congress should look at the VA loan for what works.

Comments(3)

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Robert Rauf

CMG Home Loans - Toms River, NJ

Jeff, it is all about quality of the loan!

You have to prove that they can make the payment and funny thing: They actually do when you check up on them!

I have been doing FHA and VA forever too, and always looked for a way other than the BC route for my borrowers. What is best for the borrower is typically best for the lender in the long run too.

Oct 22, 2009 06:19 AM

Vickie McCartney

Maverick Realty - Owensboro, KY

Broker, Real Estate Agent Owensboro KY

Hi Jeff~ Wow, I had no idea how stable those VA loans and borrowers are! Interesting how some work and others don't!

Oct 22, 2009 06:28 AM

Terry Osburn

BHHS|Drysdale Properties - Pleasant Hill, CA

Broker Associate

My belief has never been that the 100% loan was an issue.......It was the lack of checks and balances and FRAUD that entered in and caused the ruckus and downfall.

If a renter can handle $1800 a month rent for many years they should be able to handle a mortgage for that amount or less and reap the benefits for home ownership such as tax breaks, long term community involvement, schools they wish their children to attend etc.

It was the turning of heads of certain powers to be due to the PROFIT coming in and the loss of ethics ......

In California I liken the recent housing crisis and downfall to the California Gold Rush.........It became the California Home Rush with $$ signs of obtaining quick equity......

The banks kept encouraging homeowners to re fi and pull out money for various things.

Oct 22, 2009 06:45 AM

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