Zero-Down Mortgage Trap, and Hispanic Heritage Month
Is Bank of America turning over a new leaf, or is this image rehabilitation? And for the start of Hispanic/Latinx Heritage Month, I've written a list of my favorite Latin American things.
A couple of weeks ago, Bank of America introduced a zero-down mortage program whose purported objective is to empower first-time homebuyers in predominantly Black and Hispanic neighborhoods. Sounds good, right? Except it reminds me of something — I can’t quite put my finger on it — oh yeah, THE SUBPRIME MORTAGE CRISIS. I’d heard about BoA’s zero-down mortgage product, but it wasn’t until I read this piece by Moneda Moves (they also have a great podcast, by the way) that I really started to question the timing of this whole thing.
Subprime mortgages are given to borrowers with poor credit, those who can’t obtain approval for conventional loans. There was a lot of that going around in the run-up to the Great Recession. Lenders protected themselves by compensating for those riskier investments with rates and structures that were unfavorable to the borrower. In the years leading up to the ‘07-’08 financial crash, about 80 percent of subprime mortgages were adjustable-rate loans. When those rates shot up, borrowers defaulted en masse. The rest is history.