NO MONEY DOWN Mortgage Loan Program
The REAL Truth Behind Bank of America NO MONEY DOWN Mortgage Loan Program
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Guys, I want to talk to you today about
bank of America's Community Affordable Loan solution.
Let me read you a little bit about this particular new program they got.
Bank of America announced today a zero down payment,
zero closing cost mortgage solution for first time homebuyers,
which will be available in designated markets, including certain
black slash African American and or Hispanic Latino neighborhoods
in Charlotte, Dallas, Detroit, Los Angeles, and Miami.
This loan program requires no minimum
credit score or mortgage insurance, aka PMI.
According to bank of America, the company will make a down payment
for the client in the form of a grant up
to $15,000, giving them immediate equity.
Now, when I read that and I said to myself, guys, I'm an old banker, right?
I was a banker for 25 years.
I said to myself, banks don't do anything for free.
They don't do anything without
knowing at the end of the day, they're going to make some money.
That was my first question.
What really is bank of America's real purpose for doing this?
Number two, I said to myself, is it really in the best interest
of a new homeowner to be taking on a loan with no money down?
Someone buys a $400,000 house, right?
metlife international holdings llc
Bank of America gives them the $15,000 down payment.
Now they're at 385 next year, markets down by 5%, right?
So that means the house is worth 380.
You got 385 in it.
You're going to be upside down in the house year one.
Plus on top of that, I don't think it really gives people
the right financial responsibilities when you give
somebody the ability to go into a new home with zero money down, right?
Typically when people don't have any skin
in the game, that's typically when times get hard, people will just leave.
They just stop making the mortgage. Why?
Because they got no money in the deal.
So I don't know if that, in my opinion, is a good idea.
Now, on the flip side, people may say,
well, you know, there are people in those communities, right?
See that? Designated areas.
What does that mean?
If I live in Dallas, can I go to any neighborhood?
Can I go to any neighborhood and buy a house?
Or do I got to only go to the black in the Latino neighborhoods to buy a house?
I don't know. You all help me with that.
Because it said black African American Latino communities.
Areas.
I don't know what that means. Right.
So that's a little bit odd to me.
Why not just say, hey, we're going to do this zero down,
and you go pick any community you want to live in in Dallas.
You go pick any community you want to live in in Charlotte or Miami, right?
That's the way I see it.
So I'm not sure what's going on here.
I don't know if bank of America is
and again, guys, this ain't just about bank of America.
This could be any lender.
I'm just saying bank of America because they publicly came out with this
program.
That's why I'm mentioning them.
I'm not saying bank of America is bad or good.
I'm just telling you I'm not sure why they would be doing this now.
Maybe they're trying to boost up their CRA credits.
Community Reinvestment Act where you have
to give back to the communities that bring their deposits into you.
There are people of color who bank with bank of America in some of these
designated areas that they do put their money in bank of America's bank.
So the law says, hey,
these people put their money in your bank, you got to also do something.
Now, maybe that's what it is.
Maybe it's CRA.
The reason we got in the mess we got
in in 2008 is because of these Ninja loans, right?
No money down, no minimum credit score, no job.
Hey, that's when we got in trouble. Why?
Because these people bought these houses
at the top of the market where we're at today, the top of the market.
And then all of a sudden when the market
started falling, these people couldn't keep up with the mortgage payments.
Guess what?
Foreclosures went through the roof.
And I'm not saying that will happen
in this situation, but it reminds me of that.
So I don't know, man.
I think bank of America has to make money somewhere in this.
And I think probably where they make their
money at is they're going to have a higher interest rate, right
A lot of times banks, even though it appears no money down,
all of this stuff they hide really the premium that they're
getting for the deal, they hide it in the interest rate.
So so if the normal market rate is 5%,
that deal, you know, the zero down, no PMI, no closing costs.
That deal may carry an interest rate of six and a half percent.
So therefore they got a one-and-a-half
percent premium in each one of these deals that they do.
And again guys, I'm not saying that's a fact.
I'm just giving you my opinion is
since I've worked in the banking industry for 25 years as a commercial lender.
And I know how these banks are here to make money.
Guys. They're not here to be philanthropic.
They're not here to be to save the world.
They're not here to save every low-income
family and put every low-income family in a home.
They're not here for that.
They're here to make money.
Let's not get it twisted.
Especially your big gigantic banks.
They're here to make money, right?
And if they're doing this, and I'm not saying it's not a good thing,
I'm saying if they're doing it, they have a reason for doing it
and there is a financial compensation piece to it somewhere.
We got to be careful not to fall in that trap, right?
Listen, I want everybody I think everybody
should deserve homeownership if that's what they want.
See, homeownership ain't for everybody.
Everybody doesn't want to own their own home.
But if you do, the great problem I have is these designated areas.
I got a little bit of a problem with that.
Listen, if you're going to do the program,
let me buy a house wherever I want to buy a house.
Bank of America is a national bank.
Why are you designating it to certain areas of a few large cities.
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