Wednesday, June 20, 2018
Business

The Nation's Housing: Zero-down mortgage programs buck the trend

Zero down doesn't mean zero chance

WASHINGTON — Who says lenders need to charge you a down payment when you take out a mortgage? Just about everybody:

• Fannie Mae and Freddie Mac won't fund a loan without a down payment. Even then, if your down payment is less than 20 percent, they require private mortgage insurance.

• Federal banking regulatory agencies have proposed — but have not yet finally adopted — a regulation requiring a 20 percent minimum down payment as the new standard for safe lending and best pricing.

• Congressional critics complain that the Federal Housing Administration's current 3.5 percent minimum is part of the reason the agency is now in financial hot water. They want 5 percent down at least.

• Financial analysts and mortgage industry experts argue that requiring some amount of "skin in the game" is essential to provide borrowers a stake in the transaction.

But two prominent federally chartered credit unions beg to differ with this consensus opinion. They have quietly been running zero-down-payment programs for borrowers for much of the past two years, and are seeing almost no defaults or foreclosures.

The Navy Federal Credit Union, the largest credit union in the country with 4 million members, offers a zero-down option for qualified home purchasers with no mortgage insurance. It allows "seller concessions" — contributions by sellers of homes to defray buyers' closing costs — as high as 6 percent of the home price.

The maximum loan amount is $1 million, but typical loans are in the $200,000 range. The program is targeted especially at first-time buyers since they often are short on down-payment cash but may otherwise be creditworthy. Navy Federal says it has closed $740 million of these zero-down mortgages in the last 12 months. The credit union retains all loans in its investment portfolio and services them on its own.

To qualify, you have to be a member of the credit union or an immediate relative of one. Members include all branches of the military, active and retired, along with defense-related contractors. You need to pass underwriting muster in terms of income and reserves, and you need moderately good credit scores. Delinquencies on the program to date: under 1 percent, according to Katie Miller, vice president for mortgage products.

Meanwhile, NASA Federal Credit Union has started marketing its own version of zero down. It is currently restricting loans to qualified members buying homes in the Washington, D.C., area but could expand to other areas in the future. The maximum loan amount is $650,000. Seller concessions are capped at 3 percent. Underwriting is rigorous and preferred FICO credit scores start in the mid 700s. Delinquencies over a year and a half: zero, according to Bill White, NASA Federal's vice president for real estate lending. Foreclosures: zero.

So what's the significance of these two programs for the debates under way on Capitol Hill and among banking regulators on the subject?

Tom Lawler, head of Lawler Economic and Housing Consulting LLC, says that as a general matter, "zero down payment is just bad public policy." Frank Nothaft, chief economist for Freddie Mac, maintains that "the more equity (cash up front) you have, the better" the loan is likely to perform. Both Lawler and Nothaft agree, however, that with strict underwriting at application combined with intensive servicing — getting in touch with borrowers at the first hint of trouble and working with them — zero-down loans can perform well in healthy housing markets.

Comments
Passengers on fatal Southwest flight sue airline and manufacturers of plane and engine

Passengers on fatal Southwest flight sue airline and manufacturers of plane and engine

Eight passengers who were aboard a Southwest Airlines flight that was forced to make an emergency landing in Philadelphia after one of its engines blew apart filed suit Wednesday against the airline, Boeing and the companies that manufactured the eng...
Updated: 2 hours ago
Former employee sued by Tesla says he was a whistleblower

Former employee sued by Tesla says he was a whistleblower

Tesla sued a former employee Wednesday, accusing the man of hacking the automaker’s computer systems and stealing company secrets, shedding light on what chief Elon Musk had suggested was the work of a secretive internal saboteur.But the employee, Ma...
Updated: 2 hours ago
Seminole Heights restaurant Mortar & Pestle files for bankruptcy reorganization

Seminole Heights restaurant Mortar & Pestle files for bankruptcy reorganization

TAMPA — Mortar & Pestle, a fledgling Seminole Heights eatery with a mom-and-pop pharmacy theme, has filed for Chapter 11 bankruptcy reorganization. Seacoast Bank was listed as the creditor with the largest unsecured claim: $1.4 million.The restaurant...
Updated: 8 hours ago
Could Lucky’s Market move in to Clearwater’s old Albertsons?

Could Lucky’s Market move in to Clearwater’s old Albertsons?

Lucky’s Market is considering a move in to the old Albertsons box space in Clearwater, according to preliminary plans filed with the city. Lucky’s master broker, Rick Lewellyn, was listed on an agenda as discussing renovating the existing property wi...
Updated: 9 hours ago
Developer proposes Sprouts Farmers Market for Land O’Lakes

Developer proposes Sprouts Farmers Market for Land O’Lakes

LAND O’LAKES – A Sarasota developer is proposing to turn a vacant Winn-Dixie store in central Pasco into a Sprouts Farmers Market or similar specialty grocer.Benderson Development filed preliminary plans Monday with Pasco County to redevelop the form...
Updated: 9 hours ago
Clearwater’s Clegg Insurance Group buys Advanced Insurance Brokerage

Clearwater’s Clegg Insurance Group buys Advanced Insurance Brokerage

CLEARWATER - Clegg Insurance Group of Clearwater announced on Wednesday it has bought Brandon-based Advanced Insurance Brokerage.The merger creates a firm with more than 2,000 customers and more than $10 million in annual premiums. Terms were not dis...
Published: 06/20/18
Wine dinners, beer projects and more will wet your whistle this summer

Wine dinners, beer projects and more will wet your whistle this summer

FILIPINO FOOD: WELCOME CHISMISHave you been to the Heights Public Market at the 73,000-square-foot Armature Works yet? It’s the buzzy food market in Tampa Heights with more than a dozen vendors offering up everything from rolled ice cream to Cuban sa...
Published: 06/20/18
Citizens considers hiking homeowners insurance rates about 8 percent

Citizens considers hiking homeowners insurance rates about 8 percent

Citizens Property Insurance Corp.’s is weighing another round of hefty rate hikes.Staffers with the state-run insurer of last resort have proposed raising the average rates for homeowners by 7.9 percent — just under the legislative cap of 10 percent ...
Published: 06/20/18
A tight supply cuts into Tampa Bay homes sales while prices keep rising

A tight supply cuts into Tampa Bay homes sales while prices keep rising

Tampa Bay’s two largest counties showed anemic home sales in May as prices continued to rise due to a tight supply.In Pinellas, sales of single-family home plunged nearly 12 percent from the previous May, the second-worst showing in a year. Prices, t...
Published: 06/20/18
Pinellas County files suit against companies who built Public Safety Complex

Pinellas County files suit against companies who built Public Safety Complex

CLEARWATER –– The Pinellas County Public Safety Complex was built to withstand a Category 5 hurricane, but officials now say the $81 million fortress has water leaks and cracked walls.The county filed a lawsuit this month against Harvard Jolly, the S...
Published: 06/20/18