Here’s a look at some new mortgage meshuggeneh from Burbed reader nomadic.
The Dignity Mortgage would have a higher rate for higher-risk borrowers but include rate cuts after five years of on-time payments.
PHOTO: Pattie and Ollie Sibug would like to buy their San Diego town house, which they are renting for $1,750 a month. They are among those who may benefit from a proposed subprime mortgage program. (Allen J. Schaben, Los Angeles Times / January 29, 2013)
With home prices rising, interest rates falling and builders building, some prominent housing advocates are calling for a new kind of loan for buyers with lower incomes or bad credit.
They’d like to call it the Dignity Mortgage, but it has another name — one that’s become more of an epithet since the housing crash: subprime.
Applicants might include people caught in the early stages of the mortgage meltdown who have since rebuilt their finances, said Faith Bautista, who heads the National Asian American Coalition.
"They lost their work, their homes and their credit scores four or five years ago," Bautista said.
And let’s see what nomadic has to say about this idea.
These people are pushing for a mortgage that not only gives them better terms after five years of timely payments (which seems reasonable) but they want the extra interest paid during the "trial" period REFUNDED to them after those five years. In other words, the banks take more risk but don’t actually get paid for it in the end. Not to mention all of the other extra costs of the program (e.g., "extensive" financial counseling). WTF? Also thought it ridiculous that the rate goes down to what people with "sterling credit" and 20% down are paying. I haven’t done the math, but I suspect people aren’t necessarily paying off 10% of the purchase price in the first five years of their loan.
Think this is a better way to treat the poor people who shouldn’t have been buying houses at all but want another swing at the property piñata? Or was it all the banks’ fault from start to finish? Aaaaaaaaaand, this is an Open Thread.