Fannie Mae brings back no-downpayment mortgages
Kyle Wingfield
10:26 am August 6, 2010, by Kyle Wingfield
What could go wrong? From the Washington Independent:
“Buy new with $1,000 down,” the advertisement says, the words resting atop a trim green clapboard house offset by a bright blue sky. “The time has come. Stop wasting rent check after rent check and start building equity in your own home. And with only $1,000 down, affordable monthly payments and no private mortgage insurance required, the dream is closer than you think.”
It sounds too good to be true. But it is true. This offer does not come from a subprime lender, looking to reel in thousands of unqualified and ill-advised homebuyers, only to slap them with add-ons, fees and variable rates. It is not a teaser or a trick. The advertisement references a program initiated by the National Council of State Housing Agencies and Fannie Mae, the taxpayer-backed, government-sponsored enterprise that buys up mortgages from lending banks.
The Federal Housing Authority already offers mortgages for just 3.5 percent down — a program that now accounts for one in five U.S. home loans (link thanks to The Atlantic’s Megan McArdle) — but apparently the geniuses at Fannie Mae didn’t think that was enough of a taxpayer subsidy. Perhaps they were giddy at the prospect that the taxpayer bailout for them and sibling agency Freddie Mac will end up costing “only” $150 billion or so, although Fan alone still has nearly $220 billion in bad loans on its balance sheet.
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