Wells Fargo Launches New Mortgage Requiring Only 3% Down

[bjl584]

http://www.cnbc.com/2016/05/26/wells-fargo-launches-3-down-payment-mortgage.html

[disneysteve]

There are all kinds of things wrong with that story.

1. 3% down!!
2. As if #1 wasn't bad enough, the 3% doesn't even have to be yours. It can be a gift or funds from some type of special program.
3. You only need a 620 credit score. Sorry but if your credit sucks, you shouldn't be getting a mortgage.

As I've said before, nobody seems to have learned a darn thing from the 2008 housing fiasco. Here we are in 2016 right back to nothing down (or close to nothing) and sub-prime lending.

[Singuy]

There are all kinds of things wrong with that story.

1. 3% down!!
2. As if #1 wasn't bad enough, the 3% doesn't even have to be yours. It can be a gift or funds from some type of special program.
3. You only need a 620 credit score. Sorry but if your credit sucks, you shouldn't be getting a mortgage.

As I've said before, nobody seems to have learned a darn thing from the 2008 housing fiasco. Here we are in 2016 right back to nothing down (or close to nothing) and sub-prime lending.

Listened to some of the interviews about this product so I am happy about a few things.

1. The media is very critical when it comes to these type of loans so at least the elephant in the room was addressed.

2. According to Well's fargo back testing on the type of borrowers of the 3% loans prior and during the 2008 fiasco, only 4% defaulted so they are confident these borrowers will be adequate enough to lend to.

I think most of the people who defaulted are those with 0 skin in the game. They were pushed by the banks to purchase a house beyond their means because the banks took accelerated appreciation into the underwriting, allowing borrowers to obtain interest only loans with 0 money down. This is definitely way more dangerous than what is proposed. I'm not going to give this a gigantic red flag yet, but we are definitely playing with fire again.

[disneysteve]

we are definitely playing with fire again.

Exactly, especially if the 3% doesn't even have to come from you.

Johnny and Suzy just got married (or not). They are anxious to buy a house. They have no savings and poor credit but along comes Wells Fargo who says No problem. If Johnny's mom and dad gift them $3,000, they'll qualify to buy a house for $100,000 so here is your $97,000 mortgage.

Fast forward a year and the economy hits a little speed bump. Housing prices drop a few percentage points and Suzy has her hours cut at work. Guess what. They suddenly find themselves upside down on the mortgage and can't keep up with the payments. But they can't sell the place because they're upside down and still have zero savings.

Yep. Sounds awfully familiar.

[LivingAlmostLarge]

That's probably why there is a bubble.