Should feds axe zero-down mortgage program?
Here's a story this blog and its readers were once again ahead of the curve on.
MassHousing, our state housing authority, started offering zero-down mortgages under the Affordable Advantage banner back in July. It was part of a broader initiative bankrolled by Fannie Mae here and in three other states as well.
Now it looks like the feds are poised to pull the plug on the program next spring, Jenifer McKim reports in today's Globe. In fact, even Barney Frank, in the middle of a reelection fight with a feisty conservative opponent, appears to have soured on the zero-down concept.
We'll see what happens - if the Republicans seize control of the House in November it surely will be a goner long before next spring.
But as I mentioned, the controversy is no surprise to regulars on this blog, who have been weighing in on it for the past two months.
The launch had received zero attention in the local mainstream press when I first blogged about it on Aug. 10.
I was fairly harsh about the whole endeavor - I think most of you were also not enchanted with what seemed like another ill-timed crusade by the do-gooder set.
Frankly, upon more research, I softened somewhat after getting a full picture from Thomas Gleason, head of MassHousing.
I thought Gleason made some excellent points. He pointed out tough new credit and debt requirements that he argued made the decision not to require a down payment a moot point.
And no, it's just plain silly to equate MassHousing or even troubled Fannie Mae with the bad boy subprime lenders of the bubble years.
That said, the down payment issue, as I have written here and in a column I did for Banker & Tradesman, remains a sticking point for me.
If you are going to buy a home, you should have some skin in the game.
And with many buyers now forced to cough up 10 to 20 percent down payments, it is question of fairness as well.
There's also clearly an effort, now that the heat is on, to minimize the significance of these loans.
The Globe story notes MassHousing has given a green light to "about 100" of the new Affordable Advantage zero down loans. That's followed with another stat - zero down loans made up 7 percent of MassHousing's loan portfolio over the past eight years.
True enough, but there are a couple more blanks to fill in here.
As a proportion of all new loans going forward, MassHousing's new zero-down mortgages loom much larger than this.
MassHousing's no money down mortgages could easily make up nearly 20 percent of all the home loans it issues over the next year.
The 100 zero down loans inked over the program's first three months would, extended over a year, add up to 400 of the 2,000 mortgages MassHousing writes in given year.
So this debate is more than just wrangling over symbolism.
