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0% Down, 100% Chance of Trouble

Tyler Durden's picture




 

As originally posted by Rick Sharga, ECP of Auction.com, on LinkedIn.com

We've seen this movie before, and if I recall correctly, it didn't end terribly well.

In fact, we're still living through the seemingly-endless backlog of delinquent loans and distressed properties that the massive housing boom and bust cycle left us with back in 2008. A cycle that was fueled by free-flowing capital, and built bad loan by bad loan by bad loan.

Imagine my surprise to read today about a new loan product that requires 0% down; has no private mortgage insurance requirement; provides cash from the lender for up to $4,500 of the closing costs, and allows gifts or seller funding for the rest of the closing costs; is aimed at borrowers making less than 80% of the median income in the market where they're buying a home; and available only for properties located in a low-to-moderate income census track.

Details from HousingWire here: http://www.housingwire.com/articles/33120-bbva-compass-launches-zero-per...

So, zero down payment loans to low-income borrowers with basically no cash reserves, on properties least likely to increase appreciably in value, and probably most likely in need of repairs.

What could possibly go wrong with this set-up?

I like the idea of helping people buy more homes, more easily, and more affordably. And I'd like to think that this lender is trying to do just that with its new program.

But having lived through the last cycle of zero-down loans to marginally-qualified borrowers, I know that what really happened was that people who just weren't financially ready for home ownership were put into homes they really couldn't afford, with predictably unpleasant results. In many cases, the resultant foreclosure - along with the financial meltdown that many of these borrowers experienced - has made their opportunity for home ownership - even in the future - extraordinarily unlikely.

We shouldn't be putting borrowers in a position of being one water heater leak away from a foreclosure. Not again.

Let's hope that history doesn't repeat itself here. This is one sequel I'd really rather not see.

 

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Thu, 03/05/2015 - 19:05 | 5859234 HonkyShogun
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If they would tell me when the whole fukkin thing will crash then I can decide if "no payments until 2017" will work for me.

Thu, 03/05/2015 - 19:10 | 5859250 Publicus
Publicus's picture

0% down, 0 risk for the buyer.

Thu, 03/05/2015 - 19:56 | 5859385 chunga
chunga's picture

And...no risk for the lender.

Take the collateral and mark it to fantasy. CTRL-P every penny to muppet/deadbeat willing to sign for it...

Make a fancy wall street bet there will be a default. Then dump it on the taxpayers at par via FNMA or FHLMC.

Linda Green signs it and everything is good! If you do this enough times you might even get a huge bailout as a victim!

 

Thu, 03/05/2015 - 20:45 | 5859520 max2205
max2205's picture

It's just Barry rent and you don't have to pay if you don't feel like it 

Thu, 03/05/2015 - 22:15 | 5859782 weburke
weburke's picture

I for one am grateful for this exact type state fed assist, I just sold a home despite the market and the buyer who was blown away by the house, and deservedly, but good luck to them to pay the mortgage as they are at the edge of a declining economy. I am taking it all and waiting for the october/nov bottom? I know the market may rise still if march 20 is not too much of an elite surprise, but certainly the coming sept crush I plan to miss. 

Thu, 03/05/2015 - 23:03 | 5859943 weburke
weburke's picture

s. 

Fri, 03/06/2015 - 00:04 | 5860121 TheRideNeverEnds
TheRideNeverEnds's picture

yup, after all blackrock etc need someone to liquidate their long housing positions to.  

 

Who better to buy the to.. hold the ba.... take advantage of this great opportunity than John Q Public?  

Fri, 03/06/2015 - 01:59 | 5860339 NihilistZero
NihilistZero's picture

I like the idea of helping people buy more homes, more easily, and more affordably.

This can be done very easily.  Remove all the exotic loan bulshit and let the free market lower the fucking price of the home.

Thu, 03/05/2015 - 19:20 | 5859283 Clueless Economist
Clueless Economist's picture

Great news for ZHers!  Fascist cop shot 3 times including the head in North Philly at 4:45 EST.  In very critical condition..

Cop is African-American as is the perps (shock).  Hope you folks all happy the good guys got the jump on the man for once.

Thu, 03/05/2015 - 19:28 | 5859304 Stoploss
Stoploss's picture

Are they Africans?

Or Americans?

One, or the other, numbnuts.

Thu, 03/05/2015 - 19:33 | 5859320 Clueless Economist
Clueless Economist's picture

Cop has died.  For idiots like Stoploss, the men involved were Americans who had African ancestors.

Thu, 03/05/2015 - 19:37 | 5859334 moonshadow
moonshadow's picture

idk about the economist part, but the rest of your moniker is correct

Thu, 03/05/2015 - 19:42 | 5859355 Clueless Economist
Clueless Economist's picture

Folks here talk real tough anti-Police stuff here, calling for violence against "pigs" etc.  When it happens, you pussies can't handle reality.  Now ain't that right?

Thu, 03/05/2015 - 19:48 | 5859369 LawsofPhysics
LawsofPhysics's picture

LOL!!!  That which connot be sustained, won't be, period.

I sure hope those ivy league eCONomists taste good.

Thu, 03/05/2015 - 20:58 | 5859549 Buster Cherry
Buster Cherry's picture

I plan to make soap out of them....

Thu, 03/05/2015 - 19:58 | 5859389 Anusocracy
Anusocracy's picture

Killing government killers is okay. Do you think they would hesitate to kill you if you were trying to rid yourself of their crime bosses.

Private security, that's another story.

Thu, 03/05/2015 - 20:09 | 5859434 Clueless Economist
Clueless Economist's picture

Bravo!   Now here is a man who backs up what he says!  Sir, I have the utmost respect for you, unlike these other ZH cowards/pussies who downrate me.

Thu, 03/05/2015 - 20:58 | 5859551 RiderOnTheStorm
RiderOnTheStorm's picture

How can anyone downrate any lower the low life piece of shit that you clearly seem to be.

Thu, 03/05/2015 - 20:59 | 5859555 Aaron Hillel
Aaron Hillel's picture

Your statements send contradictory signals, sir.

Are you rejoicing that a police officer got shot?

Or are you attempting to elicit such statement from a person on this forum?

Both/neither?

/ponder

Thu, 03/05/2015 - 20:01 | 5859406 SMC
SMC's picture

Sticks and stones may break our bones but names can never hurt us.

Clueless writes like yet another gov troll attempting to entice a threatening response.

ROFL!  Pathetic.

Thu, 03/05/2015 - 20:11 | 5859441 Clueless Economist
Clueless Economist's picture

SMC....just speaking the truth.  I am sure we agree 99% on the issues facing this country.  Just caling out the loudmouth pussies among us.

Thu, 03/05/2015 - 20:54 | 5859539 RiderOnTheStorm
RiderOnTheStorm's picture

If there is a loudmouth pussy amongst us it appears to be you!!!

Thu, 03/05/2015 - 21:39 | 5859665 Sages wife
Sages wife's picture

Spoken like a true public servant.

Thu, 03/05/2015 - 20:47 | 5859521 Things that go bump
Things that go bump's picture

I don't see anyone here getting all pussified over some bag man for the City of Philadelphia getting shot. My own personal opinion is if you're going to interfere with a man involved in the operation of his business you're just asking for it.

Thu, 03/05/2015 - 21:31 | 5859654 Sages wife
Sages wife's picture

Since when is police capitalized?

Fri, 03/06/2015 - 01:32 | 5860312 JoWazzoo
JoWazzoo's picture

QQQQ   SH

Fri, 03/06/2015 - 08:12 | 5860649 Refuse-Resist
Refuse-Resist's picture

Accountability to the public.  It's coming.

 

After a long train of abuses, crinimal behavior, and no accountability; anybody who thinks what has gone around won't come back around is living in a skittle shitting, barry is a US citizen, the economy is recovered, the terrorists hate us for our freedom, steel fram buildings collapse from 45 minute fires, jews don't own the media or banks -- IOW world completely divorced from reality where most Americans live.

Thu, 03/05/2015 - 19:06 | 5859235 Pairadimes
Pairadimes's picture

How's that for financial innovation? They have managed to eradicate the consequences of moral hazard forever!

Thu, 03/05/2015 - 20:01 | 5859402 Harbanger
Harbanger's picture

Here's the real life circumstance of low interest cheap money.  If you saved 200k to buy a small house, would you pay the whole thing in cash or finance over 30 years?  If you did finance, would you keep the cash under the matress, in a bank account, the market or in PM's?

Thu, 03/05/2015 - 20:13 | 5859440 Callz d Ballz
Callz d Ballz's picture

Buy it on a reverse mortgage, take the equity and cash to Vegas and place on black.  Much more exciting, and you still have a place call home.

Thu, 03/05/2015 - 20:21 | 5859468 Harbanger
Harbanger's picture

Does anyone leave anything for their children anymore?  Wasn't it always about the children?  Giving the reverse mortage $$ to your kids may be cheaper than paying an inheretance tax later.

Thu, 03/05/2015 - 20:36 | 5859498 franciscopendergrass
franciscopendergrass's picture

Children?  What are those?

The end of the movie Casino was so prophetic 

http://youtu.be/tbQfFbZOBMg

Thu, 03/05/2015 - 20:40 | 5859511 KCMLO
KCMLO's picture

My wife and I just went through this very debacle.  We opted to stay in cash.  We were able to find a deal very similar to this BBVA nonsense.  We have a 1.5% interest rate, put no money down, and paid no closing costs.  We didn't even disclose the account that was holding all those reserves.  On paper to the bank we're just a tech-working class couple buying a house. 

Over the life of the loan we're only going to dish out about $20,000 nominal in interest and it's a 30 year note.  Just given the inflation over the last 30 years bringing $1 to 1/3 of it's 1983 value, it seems like a no brainer to let the bank eat shit in 20-30 years.  We're never going to refi this loan either unless we have to sell.

Thu, 03/05/2015 - 20:42 | 5859516 franciscopendergrass
franciscopendergrass's picture

That is what cheap money is for SPEND SPEND SPEND! !!!!!

Thu, 03/05/2015 - 20:52 | 5859535 KCMLO
KCMLO's picture

Sure, that loan is just a 30 year lease from the bank and a forever lease from property taxes but the alternative was a yearly renewing lease from a landlord, his bank, and his property taxes.  We're just one layer closer to actually owning anything, too bad the last layer is impossible to break through.  I'm not a RE cheerleader by any means, but if we dumped all that cash into the house we'd increase monthly cash flow but we'd be out the money.  We both still work (for now) so it seemed logical to forego the cashflow and just hold on to the money. 

On the more evil side... if the neighborhood goes to complete shit we can just walk away from the house, tell the bank to get fucked, and buy (or not) the next one in cash even with our credit destroyed.  Seems like this was the best option out of many shitty ones.

 

Thu, 03/05/2015 - 23:15 | 5859981 l8apex
l8apex's picture

What bank is doing mortgages at 1.5%?

Fri, 03/06/2015 - 08:13 | 5860653 Refuse-Resist
Refuse-Resist's picture

One that borrows at 0%? Oh wait that's all of them.

 

Maybe one that creates loan principle out of thin air?  Oh wait they all do that.

 

One that...

 

Oh nevernmind.

Fri, 03/06/2015 - 02:28 | 5860373 Flagit
Flagit's picture

Sounds gread KCMLO, except the part about the cash.

Turn that paper into gold, silver, and some lead for home security!

Thu, 03/05/2015 - 19:05 | 5859236 glenlloyd
glenlloyd's picture

Doesn't surprise me one bit, I see all these crazy financing deals coming back and I'm reminded that people never learn. Reverse mortgages are back too and being pushed by a tv celeb cum presidential candidate....crazy is as crazy does.

Don't wait, call now!!

Thu, 03/05/2015 - 19:25 | 5859294 thistooshallpass
thistooshallpass's picture

These types of deals popping up in force are definitely a sign that we are in the last inning.

 

With regards to BBVA Compass (formerly "Banco Bilbao Vizcaya Argentaria SA"), it appears that risky lending is their specialty..

 

"BBVA Compass is a subsidiary of BBVA Compass Bancshares Inc., a wholly owned subsidiary of BBVA (NYSE: BBVA) (MAD: BBVA). BBVA is a customer-centric global financial services group founded in 1857. BBVA Group has a solid position in Spain, is the largest financial institution in Mexico, and has leading franchises in South America and the Sunbelt region of the United States"

 

https://www.bbvacompass.com/compass/

Thu, 03/05/2015 - 20:15 | 5859450 divingengineer
divingengineer's picture

I recently heard a radio ad about a seminar in SF bay area that would teach you how to make EASY MONEY FLIPPING HOUSES!!!

You can flip houses at home, work a couple hours a week, using Othe People's Money!

But hurry, call now because seating is limited!

When I heard it, I thought to myself that it must be about time for another crash when you're hearing shit like that.

Thu, 03/05/2015 - 23:26 | 5860007 Blano
Blano's picture

There isn't a week or two that goes by here in Dallas without some flipper or another rolling through with their "amazing, exclusive" flipping program.  With "special" funding programs to boot.

Fri, 03/06/2015 - 02:17 | 5860351 thistooshallpass
thistooshallpass's picture

I don't see the problems with flips.. unless you're the lender. Then you take notice and act accordingly.

Thu, 03/05/2015 - 19:05 | 5859237 LawsofPhysics
LawsofPhysics's picture

be "patient", once NIRP starts you will get paid to take out a billion dollar loan...

Thu, 03/05/2015 - 19:05 | 5859238 nuubee
nuubee's picture

in 10 years time. America is going to have the finest junkyards for spare parts the world has ever seen. I predict in 30 years time our roads will look like Cubas, with 50+ year old vehicles in working shape.

Thu, 03/05/2015 - 19:08 | 5859246 NoDebt
NoDebt's picture

I already own a 50 year old vehicle in good working order.  What are you trying to say?  That I'm Cuban?  ;)

Thu, 03/05/2015 - 19:08 | 5859247 nuubee
nuubee's picture

That depends, how well do you roll?

Thu, 03/05/2015 - 19:11 | 5859253 NoDebt
NoDebt's picture

Mild 383 stroker small block Chevy with a blower, high stall converter, steep gears, cheater slicks and a street/strip suspension setup.  It surprises a lot of modern cars stoplight-to-stoplight.  It does alright.

Thu, 03/05/2015 - 19:15 | 5859267 stant
stant's picture

71 Mach 1 .351c. I tell everyone it's the best on gas of anything I have . I only fill it up once a year

Thu, 03/05/2015 - 20:19 | 5859462 divingengineer
divingengineer's picture

1966 Shelby AC Cobra, 427CID with Hilborn fuel injection.

 

 

 

Sheeeah! I wish!!

Thu, 03/05/2015 - 21:15 | 5859602 MisterMousePotato
MisterMousePotato's picture

A really, really fast car'll go 0 to 100 in ten seconds.

Your car will go 0 to 100 and back to zero in ten seconds.

'Course, that's all it'll do (besides look real pretty).

Thu, 03/05/2015 - 21:21 | 5859620 Ralph Spoilsport
Ralph Spoilsport's picture

A good way to surprise people at stoplights is a Volvo wagon with a Ford V8.

http://bringatrailer.com/2014/09/06/v8-swapped-1983-volvo-240dl-wagon/

Thu, 03/05/2015 - 19:08 | 5859248 Pairadimes
Pairadimes's picture

More like the Australian outback in a certain low budget film that made Mel Gibson a star.

Thu, 03/05/2015 - 19:58 | 5859393 TruthBeforeAll
TruthBeforeAll's picture

Cuban roads would be a dream compared to Illinois. Where you not only already have 3rd world roads, you also get your car covered in salt 4 months a year. We call it the UAW circle of life.

Thu, 03/05/2015 - 20:05 | 5859420 Gambit
Gambit's picture

Lol have you seen the roads/bridges in LA, specifically in the westside/UCLA area?  They already look like Cuban roads, huge pot holes everywhere.  

Thu, 03/05/2015 - 20:21 | 5859469 divingengineer
divingengineer's picture

Got two words for you:  Camden New Jersey

 

 

Thu, 03/05/2015 - 21:21 | 5859621 NoPension
NoPension's picture

Two words, eh?

Thu, 03/05/2015 - 23:29 | 5860015 Blano
Blano's picture

Common core maff.

Fri, 03/06/2015 - 02:35 | 5860389 Flagit
Flagit's picture

I am surprised someone hasn't named their cannabis dispensary, The Pot Hole.

Thu, 03/05/2015 - 19:09 | 5859241 NoDebt
NoDebt's picture

Gee, I hope nobody on Wall St. packages and resells these loans as Triple AAA mortgage backed products.  Nah, they'd never do that.  Not again.  Not so soon.  It's OK we can depend on them not to undertak such risky behavior that could jeopardize sinking their own institutions (and all of the modern financialized world) just to make a quick buck.

 

Thu, 03/05/2015 - 19:11 | 5859254 nuubee
nuubee's picture

The question that enters my mind is, why do these investment banks even spend the money to get new "civilian" customers anymore? Why do I see any commercials for TD Ameritrade or Fidelity, or any of these large consumer investment firms? Shouldn't they have enough of the debt-based assets at this point to just re-hypothecate on their own? Why do they need consumer cash anymore to make their balance sheets look good?

Thu, 03/05/2015 - 19:13 | 5859256 NoDebt
NoDebt's picture

You presuppose a limit to their greed.  There is none.

Thu, 03/05/2015 - 19:22 | 5859286 nuubee
nuubee's picture

Ah, of course, I concede my stupidity. Being a lower-middle-class to middle-class person my entire life, I often perceive that everyone can find contentment with what they have... how foolish of me.

Thu, 03/05/2015 - 20:02 | 5859410 Callz d Ballz
Callz d Ballz's picture

It's ok, granny's got this.

Thu, 03/05/2015 - 19:08 | 5859245 Atlantis Consigliore
Atlantis Consigliore's picture

If want it we need, it and if you dont give it to us , we ill sue and vote you out scumbags;

You better put back that Subprime 125%  cash out purchase money mortgage to create reserves, and at close table buy a car with loan 9.99% and 6.99% Neg Am loan;

or ill burn down this FHA Crap shack to the ground..... 

How else you gonna turn 9 million renters into sucker Owners?  Sucka??  What will 2 million realtors do, if you dont? Hook?

 

Thu, 03/05/2015 - 19:13 | 5859257 Jethro
Jethro's picture

Hoocoodanode!!!!

Thu, 03/05/2015 - 19:15 | 5859268 chunga
chunga's picture

There is only one way to steal money from people who don't have any.

Give it to them.

Thu, 03/05/2015 - 19:17 | 5859273 Dearlydeparted
Dearlydeparted's picture

A repeat of 2004, I betcha this time will they throw in the Free Flat Screen Teevee as Bonus if you sign within...

Thu, 03/05/2015 - 19:17 | 5859274 f16hoser
f16hoser's picture

"I'll Buy That for a Dollar!"

Thu, 03/05/2015 - 19:25 | 5859295 coastalwn
coastalwn's picture

chit... i gunna get me sum...

Thu, 03/05/2015 - 19:42 | 5859356 moonshadow
moonshadow's picture

u gotta say 'git' not get. practice  practice

Thu, 03/05/2015 - 19:27 | 5859299 Max Cynical
Max Cynical's picture

I don't have a problem with this as long as the lender services the loans and is restricted from selling/securitizing the portfolio or receiving tax payer $.

Thu, 03/05/2015 - 19:36 | 5859332 Hotmustard
Hotmustard's picture

If you can get a mortgage with negative interest rates, I might be able to buy a house someday. It may be made from Legos, but dammit it will be mine.(unless I fall behind on property taxes)

Thu, 03/05/2015 - 19:38 | 5859340 Bemused Observer
Bemused Observer's picture

If they want to be so generous, why not just gift them the homes on condition they fix and maintain them? Which they WOULD if they actually owned them instead of renting from a slumlord.

These loans, disguised as 'help' for the lower income folks, is nothing more than a way to extract wealth from them and maintain a hold on them for a long period of time. Taking advantage of the natural desire to have a place of one's own to lock them into impossible payments.
And they're suggesting 84 month car loans, and using some loan proceeds to buy stocks! Are they fucking kidding me with this shit? It amazes me that these types of loans can or would even be offered, after what we've been through.
These people are scum. Buncha fucking shyster-grifters, all of 'em.

Thu, 03/05/2015 - 19:44 | 5859361 coastalwn
coastalwn's picture

play da game ...  dont hate da playa's   

Thu, 03/05/2015 - 19:52 | 5859376 Seasmoke
Seasmoke's picture

dont they need the Kindergarders of 2008 to graduate College before they are able to pull this scam again !!!!!!!!!!!!!!

Thu, 03/05/2015 - 19:57 | 5859388 Dearlydeparted
Dearlydeparted's picture

@Seasmoke

They're too desperate, sorry I mean eager to wait that long.

Thu, 03/05/2015 - 21:24 | 5859633 NoPension
NoPension's picture

It starts with college.

Thu, 03/05/2015 - 19:53 | 5859379 Callz d Ballz
Callz d Ballz's picture

It's either this or junk bonds, take your pick.

Thu, 03/05/2015 - 20:01 | 5859404 TulsaTime
TulsaTime's picture

As long as I can refi, who gives a rats ass....

Thu, 03/05/2015 - 20:02 | 5859411 shovelhead
shovelhead's picture

This is a good deal.

Gets the crack hoes off the streets and gives em a place to work.

Thu, 03/05/2015 - 20:07 | 5859428 Northern Lights
Northern Lights's picture

No one got repremanded after the first meltdown in 2008.

The question is, why wouldn't you do it again?

 

 

Thu, 03/05/2015 - 20:30 | 5859484 TalkToLind
TalkToLind's picture

At the moment I'm feeling entitled to my own custom made Diesel Pusher Land Yacht with 3 Slidesgimme some fiat bitchez at 0% down for 120 months; this goy is good for it!

Thu, 03/05/2015 - 20:56 | 5859544 Larry Dallas
Larry Dallas's picture

I wouldn't be caught dead in that thing.

Thu, 03/05/2015 - 21:29 | 5859650 Ralph Spoilsport
Ralph Spoilsport's picture

What the hell does "creamy all leather furniture" mean? The former owner a bukkaki freak?

Thu, 03/05/2015 - 20:51 | 5859532 Buster Cherry
Buster Cherry's picture

Will they throw in free Ebonics lessons so I can communicate with the neighbors?

Fri, 03/06/2015 - 07:44 | 5860620 Last of the Mid...
Last of the Middle Class's picture

Just buy a couple of glocks, you'll get along great with the neighbors.

Fri, 03/06/2015 - 08:56 | 5860719 laomei
laomei's picture

"For some borrowers, saving up 3% for a down payment is still a hurdle they can’t quite clear"

 

That's just fucking pathetic.  3% down? A measly fucking 3%? You can't even come up with that anymore?  Buy a $300k+ home and can't even cough up $10k?  

 

Over here it's 20% minimum on the first home, 50% on the second, and 100% after that.  And we don't have a problem with it.  Most prefer to dump 50% on the first and pay it off in 10 years or sooner.  

 

A nation of fucking deadbeats.

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