Ripping straight from the pages of the "those who failed to learn from history are doomed... period" book of centrally-planned desperation to maintain American Dream 'wealth' by unsustainably levitating home prices, the government's bankruptcy mortgage guarantors have just announced "HomeReady Mortgages." These so-called 'enhanced affordable lending products - provided by the US taxpayer - enable 97%-plus Loan-to-Value loans to borrowers based not on their income (which is too low) but on "non-borrowers" like extended family or children! "Whatever it takes" to maintain the illusion of normalcy and hand out more money just reached peak Einsteinian insanity.
In its latest 'offering' letter for HomeReady Mortgages, Fannie Mae offers what it calls 'innovative underwriting flexibility'...
- Offers an innovative new feature that supports extended family households: will consider income from a non-borrower household member as a compensating factor in DU to allow for a debt-to-income (DTI) ratio >45% to 50%.
- Allows non-occupant borrowers, such as a parent.
- Permits rental income from an accessory dwelling unit (such as a basement apartment).
- Allows boarder income (updated guidelines provide documentation flexibility).
In other words, as KARE11 tries to defend...
"It could be a credit problem, it could be an income problem, it could be an employment history problem, it could be a debt-ratio problem. There are a number of things that can affect a person's situation," said Chris O'Connell, a licensed mortgage loan officer with Nations Reliable Lending in Edina.
Mortgage giant Fannie Mae recognizes these hardships, and in response will soon offer a new kind of mortgage with new rules designed to add flexibility for borrowers.
"They've recognized that households have changed and our guidelines need to change with it," said O'Connell.
HomeReady will consider incomes from others planning to live in the house without being a borrower on the loan.
This means, if you live with parents, siblings, working children or maybe a roommate, as long as they make 30 percent of the household income, Fannie will include their money to help you qualify for a loan.
These are being called "non-borrowers" by Fannie.
Non-borrower backed mortgages!!??
Also, non-occupants of the home can add further income to the mortgage. Perhaps parents living elsewhere but willing to help pay the loan.
"The typical household has changed now. It's not the household we used to know 20 years ago because there's a lot of extended family. Parents are living with the family, children are staying home longer, and it allows you to consider their income too," said Tousley.
But it gets even better... If you don't have the down-payment (of 3% or less of the home's value) then there is a solution for you too...
Flexible sources of funds can be used for the down payment and closing costs with no minimum contribution required from the borrower’s own funds
Gifts, grants, Community Seconds®, and cash-on-hand permitted as a source of funds for down payment and closing costs.
And what is a "Community Second" we hear you cry? Well...
An alternative financing option for low- and moderate-income households under which an investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit organization. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate at all).
Part of the debt may be forgiven incrementally for each year the buyer remains in the home.
So, to sum up - if you don't have any savings, the government will give you some to use as a down-payment (which as long as you stay poor will be forgiven over time).. and then the government will allow you to borrow 97% of the value of the home on the basis not of your income and ability to pay but of any rag-tag bunch of friends, family, or pets you can gather under your 'new' roof... and all subsidized by the good 'ol US Taxpayer... for your own good.
And why are they doing this? Aside from the obvious desperation to keep home prices higher via unsustainable demand? Simple... because it's fair... it is everyone's right - no matter how poor, how uncreditworthy, how under-employed, how much of a drag on the rest of society, or how ignorant - to leverage themselves (at the US taxpayer's dime) at 30-40 to 1 into record high US home prices... as they explain themselves...
(Aligned with Fannie Mae’s regulatory housing goals and may help lenders meet applicable Community Reinvestment Act goals)
So do not claim when this all goes utterly pear-shaped that this was not the government's doing... it was! and is!
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To torture an analogy to death, give a nation just enough 'rope' and it will drown itself in generational debt servitude... or perhaps that was/is the plan all along... certainly makes it 'easy' to vote for the party with all the handouts?