Why zero-down mortgages at Consumers won’t contribute to another crash
Commonsense, local underwriting is the foundation for sound home lending that helps borrowers and the economy.
A member recently wondered: Are zero-down home loans offered by Consumers repeating a pattern of lax lending rules that contributed to the economic crash of 2008? In a word, no. Our 0% Down Mortgage solution differs greatly from the lending excesses that led to the financial crash 10 years ago. Here are five reasons Consumers’ home loans are financially sound.
- Local people make the decisions
Unlike the bad mortgages other lenders offered in the past, Consumers relies on highly-trained loan underwriters—who are on staff and in tune with our local real estate market—to evaluate loan requests. In the years leading up to the crash, most analysis was done by computer models and automated processes with very little human analysis.
- Income is documented
At Consumers we require strict income documentation evidenced over a period of time. This is in contrast to taking the borrower’s word for their income, known as a “stated income loan”, which was very common among many lenders.
- Commonsense review of credit behavior
Members who receive a 0% Down home loan must have good credit. This is demonstrated by an acceptable FICO score, plus a commonsense review of their credit behavior.
Consumers does not rely on a computer model of credit to determine an acceptable risk. An individual underwriter reviews credit patterns and payment history for each applicant.
- Review of rental history
First-time borrowers must have a documented, acceptable rental history. This obligation closely resembles a mortgage payment. We look closely at large increases in rent payments versus the proposed mortgage payment to make sure borrowers are not overextended.
- Consumers accepts 100% risk
Finally, but most importantly, Consumers retains 100% of the risk on our 0% Down mortgages. These loans are funded with credit union deposits and remain on the balance sheet until the loan is paid off.
Virtually all loans made before the crash were “securitized”, or sold by the originating lender in exchange for a large payment by entities on Wall Street that then transferred the loan to investors in the U.S. and internationally. The originating lender had zero risk in the transaction and no relationship was established outside of the single loan closing.
In short, our 0% Down program is a far superior product than what existed in 2008, and our strict processes allow us to serve many more members in a responsible and sustainable fashion.
Need a mortgage?
Our mortgage loan officers love working with all home buyers – including those who want a 0% Down mortgage to keep upfront expenses low. Give us a call at 800-991-2221 or send an email. We’re here to help you get the home of your dreams!
Consumers helps more than 1,000 members finance land, homes and home improvement projects each year. When you need a mortgage or home equity line of credit, call us at 800-991-2221. We’re here to help you get the home of your dreams!
All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications, and collateral conditions.