The housing bubble in the US generated demand for affordable mortgage products. As home prices rose relative to household income, lenders offered new mortgage products such as NINJA (no income, no job) loans, pic’a’pay loans (where you chose whether to make the full payment due, only pay the interest due or skip a payment entirely), and some non-vanilla adjustable rate mortgage (ARM) products. Not to mention loans to borrowers with less than good credit (aka, subprime borrowers).
Liquidity moves markets!Follow the money. Find the profits!
Real median household income fell from 1999 through 2004 as real home prices skyrocketed thus creating an affordable housing squeeze.
The Consumer Financial Protection Bureau (CFPB) has made residential lending for non-vanilla loan type problematic, particularly with their ability to repay rules.
But lenders responded with mortgage loan products that are “off-vanilla.”
I give you the interest-only mortgage from SoFi, that claims to be “a modern finance company that’s fueling the shift to a bankless world.”
It is a variation of AEI’s Wealth Building Mortgage (a 20 year 7/1 ARM loan), but in reverse. While the AEI WBM mortgage can be as low as 0% down, the SoFi mortgage requires at least 15% down.
So as home prices begin rising AGAIN relative to household income, we will see more mortgage loan offerings of the 0-3% down type along with innovations such as interest only mortgages, if only for the first ten years of a 40 year mortgage.
Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.