The future of 100% financing

by Justin da Rosa05 Feb 2016
Originator: Expect more lenders to hop on the bandwagon. But is that a bad thing?

“That is the age old question,” Jason Duffy, senior mortgage advisor with Residential Lending, told Mortgage Professional America. “100% financing is not the biggest danger but there needs to be a bar for standards that includes credit requirements and debt rates.”

The question is one that will likely be considered by originators across the country, after California-based credit union announced earlier this week the release of its 100% financing mortgage product.

“We were seeing too many people interested in home loans, who were qualified in every way, and either didn’t have enough money saved up, had to tap into their retirement accounts, or needed to borrow from a family member for the 20% down payment required for a conventional mortgage loan,” San Francisco Credit Union said on its website.

However, Duffy said 100% financing products aren’t inherently an issue for the market as long as they are handled properly. He notes the success that VA and USDA 100% financing loans have had.

“I don’t think 100% financing is the thing that brought on the housing collapse; there shouldn’t be as many issues if the products are for primary residences,” Duffy said. “It could be an issue if they start offering it to investors.”

Duffy also said originators bear some responsibility when it comes to placing clients in these loans by ensuring they have the financial health to support the mortgage.

“I wouldn’t say clients necessarily have to have some skin in the game but it does strengthen the loan program,” he said.


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