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Bank of America offers new program

seminole97

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BofA will be offering zero-down payment mortgages with no closing costs or minimum credit scores to first-time home buyers in Black and Hispanic neighborhoods in Dallas, Detroit, Los Angeles, Miami and Charlotte, North Carolina, Bloomberg reports.

Applicants won't have to disclose their race, as the bank will use US Census data to determine which neighborhoods are predominately black or hispanic. The program will have no minimum or maximum loan size for the new offering, which qualifies as a FDIC "special purpose credit program."

Those who apply for the loans will be considered based on nontraditional factors such as reliable payment of rent, utilities, cell phones and auto-insurance, the company said in a Tuesday statement.

According to AJ Barkley, head of neighborhood and community lending at BofA, the program will ditch credit scores so that "people can use other mechanisms to define their creditworthiness, buy a home and build their wealth" (for various values of 'building wealth', we assume).

BofA says the pilot program, called the Community Affordable Loan Solution, will "help make the dream of sustained homeownership attainable for more Black and Hispanic families, and it is part of our broader commitment to the communities that we serve."

And what happens when all these houses are underwater amid a deteriorating economic backdrop and even higher interest rates? For starters, BofA is giving the borrowers $10,000 to $15,000 so they have 'immediate equity in their homes.

While no-down-payment mortgages potentially make it easier for lower-income borrowers to buy homes, they’re not without risks. If the housing market were to slump, homeowners without a significant amount of equity may have little incentive to keep paying their mortgages, hurting their credit scores and sticking lenders with foreclosed homes. Under the BofA program, the lender is giving homebuyers down-payment grants of $10,000 to $15,000 so they have immediate equity in their homes. -Bloomberg
In order to qualify, first time home buyers need to obtain certification from the US Department of Housing and Urban Development and counseling, according to Barkey.

"We will qualify applicants to confirm they have demonstrated an ability to repay," she said, adding "What we don’t want to do with this program is place people in homes they cannot stay in."

 
So invest in banks for awhile and get out before everyone gets underwater.

I want awesome opportunities like home ownership for everyone, but this could cause another collapse if they aren’t careful.
 
Guess we didn’t learn anything 😒

Nope. These folks will start with zero equity, a massive loan , and anyone who has owned a house knows that a 5-10k issue can just pop up out of nowhere.

I hope im missing something but this looks like it could be chaining an albatross to the owner’s necks.
 
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Banks need to invest in communities in which they have deposits. I don't know the particular threshold they need to meet, but this seems to fit. They're not asking the race of the customers, just that the money is lent for local purposes for where they have branches and take deposits. Nothing to see here imo outside of some free marketing for doing what they're regulatorily-obligated to do.
 
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And if the banks foreclose, they can just sell the last affordable single family homes in many areas to investment funds.
 
Nice

Nice I'm looking for a couple more rental units myself.

The long term play in Iowa real estate is to figure out how to forge the paperwork that says you made lots with underground gas tanks safe to live on without actually paying to do the work (which will be priced in to the sales prices of these properties). We have way too many gas stations currently. There is a killing to be made here.
 
And if the banks foreclose, they can just sell the last affordable single family homes in many areas to investment funds.
Updated on August 25, 2022, 11:52 PM UTC

Home Partners of America, the single-family landlord owned by Blackstone Inc., will stop buying homes in 38 US cities, becoming the latest institutional investor to back away from an overheated housing market.
 
Updated on August 25, 2022, 11:52 PM UTC

Home Partners of America, the single-family landlord owned by Blackstone Inc., will stop buying homes in 38 US cities, becoming the latest institutional investor to back away from an overheated housing market.
They got hammered here on price but will make it up on rent increases. Long term it’s still a great strategy. Buy up all of the $2-300k outside good markets and then prevent new affordable housing.
 
Glad they’re using things like rent payments to qualify lenders.

It’s stupid how many Americans pay $1500 every month in rent without missing a payment, but can’t get approved for a $1000/month mortgage.
 
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Sacrificial lambs to buy up the stock of housing investors will start desperately trying to unload as prices crash over the next couple years.
 
Glad they’re using things like rent payments to qualify lenders.

It’s stupid how many Americans pay $1500 every month in rent without missing a payment, but can’t get approved for a $1000/month mortgage.

Seems like bad credit results in ~2% of applications being denied:

According to a NerdWallet report that looked at mortgage application data, 8% of mortgage applications were denied, and there were 58,000 more denials in 2020 than 2019 (though, to be fair, there were also more mortgage applications). The No. 1 reason for those denials? An unfavorable debt-to-income ratio (DTI), which was responsible for 32% of all denials. “The debt-to-income ratio is historically the top reason for denials,” explains Elizabeth Renter, data analyst at NerdWallet. That was followed by a low credit score, which was the No. 2 reason and was responsible for 26% of denials.
 
Smart move by BoA. If the banks collapse again the government will just rush through some bills to give them trillions of dollars.
 
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The long term play in Iowa real estate is to figure out how to forge the paperwork that says you made lots with underground gas tanks safe to live on without actually paying to do the work (which will be priced in to the sales prices of these properties). We have way too many gas stations currently. There is a killing to be made here.
Nah it's much easier to buy houses. Put 10% down, charge $500 a month for rent more than your bank payment to some poor sloth who can't figure out how to buy his own house. Wait 6 months use profit from previous rentals purchase another one. Then find another poor bastard to rent to. Rinse repeat.
 
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Curious about what mechanisms they will use. Where does the credit score fail? No credit history?

people can use other mechanisms to define their creditworthiness
 
Seems like bad credit results in ~2% of applications being denied:

According to a NerdWallet report that looked at mortgage application data, 8% of mortgage applications were denied, and there were 58,000 more denials in 2020 than 2019 (though, to be fair, there were also more mortgage applications). The No. 1 reason for those denials? An unfavorable debt-to-income ratio (DTI), which was responsible for 32% of all denials. “The debt-to-income ratio is historically the top reason for denials,” explains Elizabeth Renter, data analyst at NerdWallet. That was followed by a low credit score, which was the No. 2 reason and was responsible for 26% of denials.

Exactly… their DTI ratios are messed up. If you live in the Bay Area, for example, you would have to make millions per year in order to get a monthly mortgage equal to what the average person pays in rent. Yet people afford their rents… but that’s like 50% of their salary… which you’d never get approved for in a loan.
 
BofA will be offering zero-down payment mortgages with no closing costs or minimum credit scores to first-time home buyers in Black and Hispanic neighborhoods in Dallas, Detroit, Los Angeles, Miami and Charlotte, North Carolina, Bloomberg reports.

Applicants won't have to disclose their race, as the bank will use US Census data to determine which neighborhoods are predominately black or hispanic. The program will have no minimum or maximum loan size for the new offering, which qualifies as a FDIC "special purpose credit program."

Those who apply for the loans will be considered based on nontraditional factors such as reliable payment of rent, utilities, cell phones and auto-insurance, the company said in a Tuesday statement.

According to AJ Barkley, head of neighborhood and community lending at BofA, the program will ditch credit scores so that "people can use other mechanisms to define their creditworthiness, buy a home and build their wealth" (for various values of 'building wealth', we assume).

BofA says the pilot program, called the Community Affordable Loan Solution, will "help make the dream of sustained homeownership attainable for more Black and Hispanic families, and it is part of our broader commitment to the communities that we serve."

And what happens when all these houses are underwater amid a deteriorating economic backdrop and even higher interest rates? For starters, BofA is giving the borrowers $10,000 to $15,000 so they have 'immediate equity in their homes.


In order to qualify, first time home buyers need to obtain certification from the US Department of Housing and Urban Development and counseling, according to Barkey.

"We will qualify applicants to confirm they have demonstrated an ability to repay," she said, adding "What we don’t want to do with this program is place people in homes they cannot stay in."


It's kind of like a flashback to the early 2000's.

I wonder if there's some side deal to forgive the loans in case of default later.

I wonder where that "gift" of $10k - $15K comes from? Is it considered taxable?
 
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