Freddie Mac Launches "3% Down" Mortgage With No Income Restrictions

It's been a while since the US made a wholesale push to get more cash and income-strapped households into the ever more unaffordable American dream of owning a house, three years to be exact, which is when nationalized housing agency Freddie Mac last rolled out a conventional mortgage that only required a 3% down payment for certain borrowers.

The problem is that what modest requirement the mortgage program had back in 2015, meant that most Americans who needed access would be excluded. The program, which as we described at the time was designed for qualified (that being the key word) low-and moderate-income borrowers - i.e., Millennials - saw limited progress over the last few years, with FHFA Director Mel Watt telling Congress last year that Freddie’s 3% down program (along with a similar one from Fannie Mae) was continuing to grow.

It just wasn't growing fast enough, because while putting 3% down may not have been especially challenging for most Americans, having even the modest income required to go along with it, was.

So fast forward to last week, when Freddie Mac announced on Thursday it was about to supercharge its 3% down program and launch a widespread expansion of the offering, when it announced that it is rolling out a new conventional 3% down payment option for qualified first-time homebuyers, - effectively the same as the 2015 program... with one small difference: there would be no geographic restrictions; more importantly there no longer will be any income restrictions. To wit:

In other words, whereas many Americans could not qualify for the original 3% down program because, well, they lacked virtually any income, that will no longer be a hindrance and the government will effectively backstop the lack of income as a new wave of 'income-challenged' Americans rushes in to buy houses.

Amusingly, the new program, which is called HomeOne (full brochure below), puts Freddie Mac in direct competition for mortgage business with the Federal Housing Administration, which also only requires 3% down on some mortgages.

Furthermore, according to Freddie Mac, this new offering is not replacing its Home Possible 3% down mortgages. Rather, the program is meant to complement the Home Possible program, which will still be available to low-and moderate-income borrowers.

“Freddie Mac’s HomeOne mortgage is part of the company’s ongoing efforts to support responsible lending, provide sustainable homeownership and improve access to credit,” Danny Gardner, senior vice president of single-family affordable lending and access to credit at Freddie Mac, said in a statement.

It was not quite clear how it is responsible to lend money to households which have saved only enough to put down 3% equity value, oh, and which have no income to even give the false impression their equity stake may grow in the future.

It gets better. As Housing Wire summarizes the terms of HomeOne, Freddie Mac said that the new mortgage is designed for first-time homebuyers, who currently make up nearly half of all home purchases.

According to Freddie Mac, a HomeOne mortgage must be underwritten through its Loan Product Advisor, which makes a complete risk assessment based on several factors as it relates to credit, capacity and collateral.

Additionally, the HomeOne mortgage is offered only for conforming fixed-rate mortgages that are secured by a 1-unit primary residence. And, at least one of the borrowers must be a first-time homebuyer.

There is one potential hurdle: when all the borrowers are first-time homebuyers, at least one borrower must participate in homeownership education in order to qualify for the mortgage.

Yes, one may have no income and still qualify as long as one watches a few videos explaining why having an income is critical to avoid having another housing market crash, or something.

None of that matters however, as the US government is once again clearly more interested in well and truly blowing another housing bubble, where not Countrywide or New Century, but the government itself is issuing NINJA loans.

"The HomeOne mortgage will provide our customers the flexibility they need to help borrowers anywhere in the country achieve the milestone of homeownership and overcome the common down payment resource hurdle,” Gardner continued. “HomeOne is a great solution for aspiring homebuyers to grab that first rung of the property ladder and enjoy the financial and social benefits of participating in homeownership.”

What was unsaid is that now that rates just happen to be rising, making homes even more unaffordable and resetting ARM mortgages higher, the generously funded by taxpayers HomeOne also assures another housing crisis, and even more GSEs/Fredde/FHA bailouts in the near future.

The fun beguns on July 29, 2018, when the new HomeOne mortgage will become available.  For more, check out the program detail and marketing materials from Freddie Mac.

Comments

CuttingEdge BullyBearish Sat, 04/28/2018 - 11:55 Permalink

déjà vu (dāˌzhä vo͞oˈ)

  • n. Psychology The illusion of having already experienced something actually being experienced for the first time.
  • n. An impression of having seen or experienced something before: Old-timers watched the stock-market crash with a distinct sense of déjà vu.
  • n. Dull familiarity; monotony: the déjà vu of the tabloid headlines.

 

Ironically came up top of the page on a DDG search. Google would probably come up with it meaning fake news, with their current algos.

In reply to by BullyBearish

blindfaith balanced Sat, 04/28/2018 - 12:30 Permalink

Let us NOT forget that Obama, by Executive Order, took from the Freddy and Fanny rules that any bank or lender engaged in or convicted of fraud, etc.,  can not make any loans. 

Yep, ol' Berry handed the likes of Wells Fargo and Warren Buffuck all the candy in candyland.  You do remember Barry gave Wells to Warren don't you?

In reply to by balanced

any_mouse DownWithYogaPants Sat, 04/28/2018 - 14:55 Permalink

Yesterday Zillow talking about lingering housing inequality and today we have another attempt to provide easy financing for housing to those who lack the resources required to purchase and maintain real estate over time.

Financing Property Taxes by rolling into the payment to the mortgage lender.

Everybody's happy except the neighbors.

In reply to by DownWithYogaPants

mkkby any_mouse Sat, 04/28/2018 - 19:18 Permalink

3% down means you are under water day one.  It costs around 10% just to sell, given all the fees, taxes and commissions.

So you need around 2 years of appreciation just to break even and avoid having to bring cash to the sale.  That's right - you'd have to PAY THE BANK so you can sell *your* house.

Ponzi - yep.  The system only exists because prices keep rising.  When that stops watch the banks get bailed out again.

 

In reply to by any_mouse

techpriest any_mouse Sat, 04/28/2018 - 21:25 Permalink

Yesterday Zillow talking about lingering housing inequality

I have become convinced that "equality" programs like easy home loans and student loans are in fact anti-equality programs that put people into impossible situations, so that when they predictably fail, the government in the name of "helping the little guy" must rush in and pay the debts... to the banks. What a farce.

In reply to by any_mouse

Theosebes Goodfellow techpriest Sun, 04/29/2018 - 12:52 Permalink

I for one have to say I'm delighted to see this come about. Or should I say, Ladies and Gentlemen, start your engines!

I now know the relatively exact timeline for the next huge crash. Let work this out. This program starts July 29th of this year. Give it 6 months to get all the ill-eligibles into new mortgages and get those loans into MBSs. we should see the first foreclosures around the 9 month mile marker, with a full blown collapse at 15 months.

Stuck with the bill: The US taxpayer

Laughing all the way to the bank: Realtors, Mortgage originators, banksters

Wash, rinse, repeat. That said, it's an easy way to pick up rentals. For a home with a $70k price and an $800 rent, I'm cash positive in as little as 6 months. with a $2100 down and $450/mo note, that baby is coughing up $350 a month. Considering how long it took them in the past to foreclose, you could skip making any payments and rent the sucker out for a year and net what, $6 grand?

Okay, your patsy's good credit would be shot, but hey, just call ICE and have his or her ass deported. Is this a great country or what? /S

In reply to by techpriest

blindfaith Four Star Sat, 04/28/2018 - 13:12 Permalink

Then do as they do in Florida and California, likely other states as well.  You buy a house twice as big and rent out 1/2 to "the newly arrived".

 

Yes yes, I know I will get down arrowed for this but real estate sales people tease sellers into jacking up prices, and the dumb ass buyer is told that 'prices are going up fast'.  Yep because they are doing it.  If they need to buy the house to get the ball rolling, that is what they do.  I have seen this many many times.

In reply to by Four Star

mkkby cheka Sat, 04/28/2018 - 19:33 Permalink

Let the games begin.  A poor person takes the 3% down mortgage, subsidized so he brings no cash to the table.  No income verification.

Never make a payment.  Live free.  Do this in a state where it takes a long time to foreclose.  When they do foreclose pretend care about a work out, just to drag the process out.  Maybe file bankruptcy papers.

Live rent free for years.  Perhaps rent it out and collect cash, or just rip out the plumbing for scrap.

In reply to by cheka

Endgame Napoleon Pool Shark Sat, 04/28/2018 - 14:04 Permalink

Sign on the dotted line, but not until you attend a New Homeowners Training Class, taught, in part, by a newly licensed insurance agent who graduated from college a few years back.

This agent, making $12 per hour—if lucky and not making $10 per hour—along with sporadic commission whenever the franchise owner can actually afford to pay the commission owed, cannot afford a home him or herself.

Unless s/he has spousal income, the New Homeowners Class lecturer is living in mom’s basement or with a bunch of not-yet-attached, post-college pals.

S/he does not require homeowners insurance and does not have health insurance, either, as the standard insurers do not provide benefits for most of their multi-licensed sales staff.

The non-licensed and mostly non-degree-holding, mom-dominated corporate office staff, making between $9 and $11 per hour, with their very, very, very, very, very  flexible hours do have benefits.

They also have income boosted up by spousal income, child support that covers rent or free rent and other monthly freebies from government, plus refundable EITC child tax credits up to $6,431 for reproducing while single.

Frequently absentee, unlicensed, mom-gang employees at the corporate office could use their $6,431 in “taxes” as a downpayment on a home, after which they would have to listen to a lecture from a licensed colleague who does not have an extra penny to put on a downpayment after rent that soaks up more than half of his earned-only income is paid. 

Oh, that is right. There is no downpayment. Well, they might get some of the sales staff to bite, but not the womb-productive moms who have a lot of options, including apartments in nicer, safer areas of cities than most college grads can afford called mixed-income or tax-credit units. 

The moms are given an amount off per kid birthed, and the developers are given a tax credit to build them. When cold calling those apartment complexes, licensed agents are often shocked to find out that they cannot sell them renters insurance.

Because, these are reduced-rent complexes for the womb-productive. The parking lots are full of 0-down SUVs. Moms—working part time to stay under the income limits for free stuff from government—cannot have sex and reproduce without an SUV. Most will choose that status symbol over a house, so no worries. 

In reply to by Pool Shark

roddy6667 Endgame Napoleon Sun, 04/29/2018 - 03:37 Permalink

Agents are 100% commission. Out of that they must deduct income tax, SS, Old age disability, a one million dollar car insurance policy (for buyers as passengers), Errors & Omissions insurance, state-mandated yearly ongoing education, real estate licenses, Realtor dues, all car expenses, and a lot of other stuff. Being self-employed and only getting 1099's, you must provide your own health insurance. A surprisingly small percentage of the commission goes into the agent's bank account.  I was a Realtor for years, and I never saw an office that paid a salary, except to the manager and the secretary.

In reply to by Endgame Napoleon