Mortgage Crisis 2.0: BofA CEO Wants To Slash Down Payments To Help Poor Millennials

Tyler Durden's picture

Among a host of other issues, one the critical things that contributed to the housing crisis of 2008 was the fact that speculative borrowers had nearly no "skin in the game."  Anyone who decided they wanted a piece of the rapidly inflating housing bubble could go out and buy multiple houses with no money down or, in some cases, even do "cash out" purchases whereby banks would finance more than 100% of the purchase price leaving 'buyers' to pocket the excess.

Shockingly, such terrible underwriting standards was a really bad idea.  Turns out that offering investors infinite returns on capital, given that they could purchase millions of dollar worth of assets without ponying up a single penny, causes wild speculation resulting in devastating asset bubbles.

But, in the wake of one of the worst asset bubbles in history, new legislation came along requiring traditional mortgage borrowers to put 20% down when purchasing a new home. 

Ironically, the new owner of one of the worst mortgage lenders of the 2008 era, is now arguing that down payment requirements should be slashed in half.  Speaking to CNBC, Bank of America CEO Brian Moynihan, the proud owner of Countrywide Financial, said that his mission is to reduce mortgage down payment requirements to 10% for traditional loans.  Per CNBC:

"But, you know, I think at the end of the day is people forget that, at different points in your life and different points on what you're doing in life requires you to think about housing differently as a place for you and your friends, as a place for you and maybe your significant other, and then ultimately, a place for family. That drives change. And so yes, it's taken more time. And we talked a lot about this, you know, four or five years ago, that if you require a 20% down payment, it takes just a little more time to accumulate 20% than it would 3% or none, which is what the rules were for a short period of time."

 

"So our goal, going back to regulatory reform, is should you move the down payment requirement from 20% to 10%? Wouldn't introduce that much risk."

 

"But would actually help a lot of mortgage to get done. And if you look at the statistics, the difference between 80 and 90 LTV –loan-to-value – isn't much different as it is between 95 and 90. That's when you start to see real differences in performance statistics. And so we don't want to wish people into borrowing money that then they have trouble repaying."

 

Of course, we're certain that Moynihan's sole purpose for wanting to lower down payments is to help those poor millennials living in mom's basement and has nothing to do with the fact that's he's lost a ton of fee revenue to government-backed loans that only require a 3% down payment.

FHA

 

But, why not?  Gradually destroying lending standards worked out really well last time around.

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VWAndy's picture

  EBT cards as collateral?

HRClinton's picture

What else you gonna do, when prices are way up, but incomes have remained flat for 15 years for 70% of population?

Gotta keep the fiat show going.

Paul Kersey's picture

Bank of America, without having any liability, wants to put the commoners even deeper into debt, get paid points up front, get paid for servicing these subprim mortgages, securitize and sell the mortgages before they fail, and then get paid for foreclosing on the properties. If by chance, BofA isn't able to pass all the trash, and gets stuck with some of the junk paper it originated, it will count on the Fed and the taxpayers to make its insiders and bondholders whole. It will be a Win/win for BofA and a lose/lose for Main Street Americans.

Got The Wrong No's picture

They make money at every turn from the sale to foreclosure and in the end millions of properties will be owned by Corporations just like the last time. Somehow this feel like part of the end game with Agenda 21. The Plebs own nothing. 

CheapBastard's picture

Let the banks so whatever they want with the loans as long as THEY hold onto them and they are NOT guaranteed by hard working American taxpeyers.

meta-trader's picture

you can add an extra 1500/USD week after week in your income just working on the internet for a couple of hours each day... check this link... http://bit.ly/2jdTzrM

Badsamm's picture

Higher paying jobs is out of the question eh?

divingengineer's picture

About as likely as lower priced homes.

TheRideNeverEnds's picture

What we need is some zero down interest only sixty year loans @3.5%.

divingengineer's picture

I'd take one of those and laugh all the way to the grave.

Ban KKiller's picture

Bank of America is a continuing criminal enterprise that happens to offer checking and savings accounts. 

Yeah, you heard it from me first. 

BofA? Fuck you and your crybaby attorneys who are total dumbshits. Yeah, you. Stay home and never tell anyone what you do for a living. Why? Well you know why. Last time you did that you were beaten to a pulp, remember? You said you fell down the stairs. 

BennyBoy's picture

 

Brian, I'll wait for negative interest rate home loans.

Coming when BOFA goes broke. Again.

pliny the longer's picture

"crybaby attorneys who are total dumbshits"

can vouch for this.  i've long held that banks must force their employees to take a test and only the stupidest fucking fails of all get jobs.  these are not the smartest people you'll talk to at the cocktail party . . . 

 

 


Mazzy's picture

More in interest payments for (((them))) while the "poor millenials" accumulate practially zero equity for the first half of the loan, which makes selling/moving almost a sure loss even if markets tick up slightly.

And the banks actually like holding the foreclosed properties, and that assumes they didn't instantly pawn off the loan on the secondary mortgage market.  They're not losing anything.

SDShack's picture

Exactly, I can see banks getting together with govt to roll over and repackage student loan debt into first time home buyer low interest, low down payment loans. Which will then be sold on the secondary market to taxpayer backed Fannie/Freddie, but only AFTER being securitized and leveraged at least 30:1. Housing crisis 2.0 to solve Student Loan Crisis 1.0, and when it implodes, bail out the banks ala 2008, plus let them foreclose on and possess the property to entice the next dufus. A self-sustaining ponzi for aging millenials.

buzzsaw99's picture

the 1970s called. They want their hair style back.

Juggernaut x2's picture

Who thought it was a good idea to put an Irishman in charge?

divingengineer's picture

15 million other Irishmen.
Why? You want another nigger or something?

myorouter's picture

Finally I thik the bearish nature of Zerohedge is going to pay off.  And my hat's off to the guys at Shepwave. Good job of analysis this week. Never seen anything like it. https://www.facebook.com/166578775325/photos/a.10153488951800326.1073741827.166578775325/10154415124400326/?type=3&theater 

TrumpRally's picture

Nice trading calls guys.  

Dr.Carl's picture

Unfortunately there are not many traders left on here. Sure am missing the good ol days beore they all went belly up.  Maybe their analysis can bring back some of the good traders. 

Got The Wrong No's picture

Dr. Carl, you are a 27 week poster and you claim to miss the old times???  Looks like another SPAMMER with multiple short time ID's is in the house. If it smell like shit.....You know the rest. 

jasony's picture

He is right I had to get a new id becase of a liberal. Just because someoe doesn't post all the time doesn't mean they have not been reading the HEdge. 

Mr. Universe's picture

Sorry, I wasn't around when I was trading. I quit when I realized that it was all a sham a few years ago. My advice, don't play in a fixed game. In fact the entire sector adds nothing productive and is the root cause of their power. I finally figured out that to profit from these activities, I was no better than those who rig the system.

jasony's picture

OMG YOU ARE A 38 WEEK GUY AND YOU ARE CRITICIZING A 27 WEEK GUY BECAUSE THEY ARE A 27 WEEK GUY.

 

WHAT A DUFUS!

jasony's picture

OMG YOU ARE A 38 WEEK GUY AND YOU ARE CRITICIZING A 27 WEEK GUY BECAUSE THEY ARE A 27 WEEK GUY.

 

WHAT A DUFUS!

jasony's picture

OMG YOU ARE A 38 WEEK GUY AND YOU ARE CRITICIZING A 27 WEEK GUY BECAUSE THEY ARE A 27 WEEK GUY.

 

WHAT A DUFUS!

jasony's picture

OMG YOU ARE A 38 WEEK GUY AND YOU ARE CRITICIZING A 27 WEEK GUY BECAUSE THEY ARE A 27 WEEK GUY.

 

WHAT A DUFUS!

jasony's picture

OMG YOU ARE A 38 WEEK GUY AND YOU ARE CRITICIZING A 27 WEEK GUY BECAUSE THEY ARE A 27 WEEK GUY.

 

WHAT A DUFUS!

Mon T's picture

Good market calls this week.

CHoward's picture

I say - let's make it a flat 5% down and call it a day.  Deal?  Everyone happy??  Great!

Umh's picture

This has to be a scam. What is it, the extra mortgage insurance?

TrumpRally's picture

The beginning of the end for the arrogant little pricks

Offthebeach's picture

They're woried about a crash and want more suckers in the game.  George Bush 'Homeowner Society Programe " all over again.

 This time it's different. 

 

Crusader75's picture

The millennials will gradually take over and strip your children of the unspent and unspendable money you pointlessly devoted your lives to piling up, and you will be unable to do a thing, if you're even still alive. Will be entertaining. As technology and globalization continue to destroy the need for work, Star Trek socialism is the only future. Bwah hah hah.

Shpedly's picture

Not in this house my friend.

JustPrintMoreDuh's picture

Why not 1% down 60yr mortgage.   

#DebtForLife

 

 

bigkahuna's picture

rent it out  -   rent that life out

Dilluminati's picture

What BOA was in effect saying is that if we cannot make debt slaves of the millenial we're screwed.  And the comments about his son I found most disturbing becasue we all don't have Dady making (MILLIONS annually).  So there he is talking about what his son is doing and his son is laughing cuz his dad knows that his reality is no where close to "real reality" and the news is fake news.  The reporter should just dip and suck his dick, come up lick her lips and say: fake news, glurg glurgg glurg.. lick her lips and say: fake news, slurrp slurp slurrrp, come up lick her lips and say: fake news.  I mean a real reporter would have been what in the fuck are you talking about?  

Bank of America chief executive Brian Moynihan was awarded $20 million for his performance in 2016, a 25 percent jump from the previous year. The pay package is the biggest Moynihan has received since becoming CEO of the Charlotte-based bank in 2010, topping the $16 million he received in 2015.

VWAndy's picture

 Catch22 they dont produce jack.

Juggernaut x2's picture

It's CNBC- what did you expect?

Cash Is King's picture

I'd suggest interest only but that would just be silly! WTF?

underthevolcano's picture

Fuck the interest. Fuck the principal. Thin skin lamp shades are the hot ticket.

underthevolcano's picture

When I was young, and poor, I often wondered why things worked the way they did. Back then, mortgages wer at 14% per annum, and credit cards had an annualized % just .01% short of usurary, 60%.

So I thought, what if, what if young people received the things they needed BEFORE they got old. Like a house, and a car etc. That may have been just my fantasies, but it appears that those fantasies are coming true.

I think most people understand that the debts that have been accumulated in the world are not repayable. The only thing that stands between us and freedom are a few, very ugly, very nasty Jews. I know they are pricks because I felt their wrath in HS.

Well, they have been dealt with before, but not sufficiently. The whole principal of double entry book keeping is a fraud, anyhow.

They will never get their 'drop of blood'. Never. So they might as well go home and just shoot themselves. 

VWAndy's picture

 Think of it like skimming farts.

Lost in translation's picture

California Governor Brownstone agrees.

Westcoastliberal's picture

It's all about fees, because when you pay less than 20% down they force you to buy "mortgage insurance" which adds another couple of hun a month to your payment and which the banksters stick in their pockets!

Ajax-1's picture

As we learned in the past, the banksters aren't purchasing hedge policies with the insurance premiums.