Risk Of No Down Payment Mortgages

There is longstanding and overwhelming statistical proof
<http://mortgagedfuture.com/fha-ready-to-join-fannie-and-freddie/> that
zero down payment home buyers default on mortgages at a far higher rate
compared to home buyers who make a down payment. This matter has lately
received more attention than in the past due to the large number of
foreclosures related to zero down payment purchases during the housing
bubble years. In 2005, for example, nearly half of all home purchases
were made with zero down payment mortgages.

Zero Down Payments = Foreclosures

FHA Delinquency Crisis <http://whistleblower.ml-implode.com/?p=22>

Could FHA's rising delinquency rate be due to FHA incorporating
risky practices that have become standard in the mortgage industry?
Since industry experts often cite 100% financing as being a major factor
in the mortgage meltdown, let's take a look at borrower down payment
sources:

The delinquency rate clearly rises in tandem with the increase in
non-profit funded down payments.

In 2005, HUD commissioned a study entitled "An Examination of
Downpayment Gift Programs Administered By Non-Profit Organizations".
Later that year, another report titled "Mortgage Financing:
Additional Action Needed to Manage Risks of FHA-Insured Loans with Down
Payment Assistance" was completed by the U.S. Government
Accountability Office. Both studies concluded that seller funded down
payment assistance increased the cost of homeownership and real estate
prices in addition to maintaining a substantially higher delinquency and
default rate.

No Skin In The Game
<http://online.wsj.com/article/SB124657539489189043.html>
The analysis indicates that, by far, the most important factor related
to foreclosures is the extent to which the homeowner now has or ever had
positive equity in a home.

Instead, the important factor is whether or not the homeowner currently
has or ever had an important financial stake in the house. Yet merely
because an individual has a home with negative equity does not imply
that he or she cannot make mortgage payments so much as it implies that
the borrower is more willing to walk away from the loan..

[No Down Payment]

No Down Payment

Courtesy: WSJ <http://online.wsj.com/article/SB124657539489189043.html>
Wells Fargo (WFC <http://seekingalpha.com/symbol/wfc> ) Initiates Down
Payment Assistance Program
Ignoring the overwhelming evidence of high default rates on zero down
payment purchases, Wells Fargo this week announced a major nationwide
down payment assistance program (DAP) to be used for down payment and/or
closing costs on FHA, VA and conforming loans. Incredibly, the program
is being advertised as a means of helping low to moderate income
applicants achieve the "American dream" of home ownership. Based
on the historical evidence, Wells Fargo is sowing the seeds for the next
major crop of foreclosures. Incredibly, this is being done even as the
current foreclosure crisis grows in intensity.

Approving mortgages that immediately put new homeowners at a high risk
of default is financial lunacy and a disservice not only to the
homeowner but to a nation already in financial chaos due to defaulting
homeowners.

Down Payment Assistance Programs (DAPs) Help More Low- and
Moderate-Income Borrowers Achieve Home Ownership. Refer your low- to
moderate-income applicants to local housing agency contacts and help
them achieve home ownership by using one of these Downpayment Assistance
Programs (DAPs) approved for use with a Wells Fargo Wholesale Lending
first mortgage. DAPs provide financial assistance for qualified
borrowers and, depending on the program, may be used for debt reduction,
down payment and/or closing costs on FHA, VA and Conforming Conventional
loans.

On Appraisals: The Impact of HVCC