Nothing could possible go wrong with giving mortgages to higk-risk people with bad credit who are already already in debt up to their eyeballs. The allowable Debt To Income ratio used to be 25-30% but happily we shall have no more of that old school, boring, prudent borrowing rubbish. Fannie Mae just raised the DTI limit to 50%! That means 50% of borrower pre-tax income can now go to servicing debt.
Now I hate to be Mr Grumpy here, but if you’re a millennial already choking on student loan debt and you get a high interest mortgage and half your income is going towards debt, then an unexpected dead car, medical expense, or job loss could quite rapidly lead to serious financial problems.
And please. Do not call these subprime loans. They are officially nonprime loans. I’m so glad they cleared that up for us. But then, a pig by any other name is still a pig.
Carrington will manually underwrite each loan, assessing the individual risks. But it will allow its borrowers to have FICO credit scores as low as 500. The current average for agency-backed mortgages is in the mid-700s. Borrowers can take out loans of up to $1.5 million on single-family homes, townhomes and condominiums. They can also do cash-out refinances, where borrowers tap extra equity in their homes, up to $500,000. Recent credit events, like a foreclosure, bankruptcy or a history of late payments are acceptable.
Fannie Mae raised its debt-to-income (DTI) limit from 45 percent to 50 percent. DTI is the amount of total debt a borrower can have compared to his or her income. As a result, demand from buyers with higher debt exceeded all expectations. The share of high DTI loans jumped from 6 percent in January 2017 to nearly 20 percent by the end of February 2018