On Friday we noticed a disturbing glitch in the matrix, when in a deja vu from the peak days of the last housing bubble, we showed that in the Las Vegas market, builders such as Lennar, are rushing to dump new construction to potential purchasers with the "unbeatable" offer of zero money down.
One key reason for this sudden panic in the housing market is that the Fed's rate hike gambit backfired: with economists far and wide expecting rate hikes, the expectation was that potential home buyers would rush to buy homes ahead of rising rates. Not only did this not happen as Wells Fargo's mortgage application data confirmed...
... but now mortgage rates are sliding back to 2015 lows, removing any sense of urgency from the demand side of the pricing equation.
So what is the alternative? Pushing the supply into overdrive, of course, and doing more of precisely what got the US financial system (and the bailed out GSEs) in trouble in the first place: handing out virtually free housing, and since the purchase price has to be funded somehow, today Freddie Mac, together with Quicken Loans, announced a new lending program, one which would enable "eligible borrowers" and focusing on millennials, to finance a house with a "down payment of as little as three percent."
Because what better way to "boost" US housing than by targeting millennials, most of whom are simply unable to obtain good, well-paying jobs (and thus the need for 3% down mortgages), with offers which few can pass by, and lock them down with even more trillions in debt on top of their $1+ trillion in student loans.
From the release:
Freddie Mac and Quicken Loans Enter Partnership to Make Home Financing Accessible for New Buyers
New Effort Dedicated to Building a Better American Housing Finance System Through Innovative Lending Solutions and Ongoing Education for Homeowners
Freddie Mac (OTCQB: FMCC) and Quicken Loans, the nation's second largest mortgage lender, today announced a partnership to pilot several new initiatives aimed at helping provide more Americans the opportunity to achieve homeownership, while also building a smarter American mortgage finance system.
The program will feature unique, co-developed products to meet the needs of emerging markets, including millennials, first-time homebuyers and middle-class borrowers. It will explore numerous modifications and expansions to Freddie Mac's current Home Possible mortgage products, and will also include continued homebuyer education. Home Possible enables eligible borrowers to finance a house with a down payment of as little as three percent.
The new Freddie Mac/Quicken Loans partnership was announced at the Mortgage Bankers Association's 102nd Annual Convention and Expo in San Diego, CA.
News Quotes: Attribute to Dave Lowman, Executive Vice President, Single Family Division, Freddie Mac:
"We are proud to join Quicken Loans in a new partnership dedicated to increasing homeownership opportunities and simplifying the process of originating and delivering high quality mortgages. The partnership has a simple goal. We are leveraging our unique strengths to explore simple straightforward approaches to mortgage products, technology and borrower outreach strategies. We then hope to use the results from these efforts to make it easier for all of our customers, and the industry, to make successful homeownership possible for a wider range of qualified borrowers."
"Today's announcement marks one more way Freddie Mac is engaging with its customers to help them innovatively build stronger businesses and a stronger housing finance industry that expands affordable housing opportunities for America's families."
What remains unanswered is why rush? Surely, "3% down mortgages" are just a teaser to the infamous "zero percent down" which is just around the corner.
But wait, there's more, because once the US goes NIRP (whether organically or as a violent reaction to the Fed rate hike in nearly a decade), borrowers will actually be paid to take out a mortgage. Just like in Denmark.
And everyone will live happily ever after.