ML-Implode News - No down-payment, no problem: BoA underwriting $10B in subprime mortgages with NACA

Bank of America is giving out $10 billion in mortgage commitments to borrowers with non-traditional backgrounds at a series of events across the country. The fixed-rate loans for 15- or 30-year terms carry an interest rate of about 4.5 percent and approved borrowers put no money down.
The bank is partnered with Boston-based brokerage Neighborhood Assistance Corporation of America (NACA) for the events, which have drawn a crowd of about 10,000 across cities like Charlotte and Atlanta, according to CNBC.

The nonprofit uses "character-based lending criteria" to assess hopeful borrowers' ability to pay for a mortgage despite poor credit history. According to NACA's CEO Bruce Marks, "that's what's going to help people who've been locked out of homeownership to really become homeowners and to build wealth."

The problem with no-money-down deals is, no matter how well you screen, in the event of a bad downturn, even good credits can lose their jobs. At that point, they have no equity margin of safety to go on, so foreclosure, and note-holder losses, are much more likely.

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No down-payment, no problem: BoA underwriting $10B in subprime mortgages with NACA