High-Rises and the Return of Cheap Credit

Get ready for another round of low-down-payment mortgages

Yet another sign the real estate market is on the rebound: Even high-rise condos—the sector most brutally clobbered by the Great Recession—are looking attractive to lenders today. After years of tight credit after the crash, Chase and Wells Fargo now offer lending options with only a 10 percent down payment on units at The Martin (formerly Panorama Tower North).

Las Vegas has again become an acceptable bet for mortgage insurers over the past two years, allowing the revival of low-down-payment conventional loans (beyond the 3.5-percent-down FHA option), says Mark Baker, a loan originator with Sierra Pacific Mortgage. The usual conventional-loan down payment is 20 percent, but with mortgage insurance, buyers can get in for less money down.

Another reason credit is loosening: Wall Street investment houses and hedge funds are buying mortgage-backed securities again, which means mortgage originators such as Baker have more options for where to sell their loan notes beyond government-sponsored Fannie Mae. “Basically if you couldn’t sell [a note] to Fannie … and didn’t meet their requirements for the past few years, you were pretty much stuck with [the note],” he says. “Now you have a plan B.”

The additional options allow lenders to diversify their pool of borrowers, which usually means looking at lower credit scores, lower down payments, etc., all depending on the risk appetite of mortgage securities buyers.

Here’s hoping the new wave of mortgage buyers tie themselves to responsible borrowers.

We learned the hard way what happens when they don’t.


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