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I enjoy reading the Rochester City magazine. In the back of this week’s issue is an ad from SONYMA proudly offering:

  • 30- or FORTY-year fixed interest rates that are typically below market;
  • Financing up to 97%;
  • Flexible underwriting guidelines;
  • Down payment assistance (higher of $3,000 or 3% of the loan up to $15,000);
  • No points;
  • No financing add ons.

It is sponsored by New York Homes and Community Renewal. So let’s rethink this.

  • They are offering loans up to 40 years. I am incredibly perfect credit and do not think I could find anyone willing to lend me money for 40 years, nor should they. Consider, too, that the unemployment rate and crime rate in areas where these programs are going to be popular are much higher than elsewhere, and consider that the life expectancy of people who live in these areas is far lower, shockingly lower, than the typical American. 40 years!
  • Financing up to 97%. That means the loans require only 3% for a downpayment. Now, most homes in urban Rochester sell for around $100,000. Really spectacular ones run from $200,000 up and many sell for less than $100,000. So we are offering people a chance to put $3,000 to borrow $97,000 over a 40-year period. The P&I payments on this are about $430. On a $75,000 home, these payments are $330 per month. That was at a 4.375% interest rate. Drop that rate to below market, say at 3.5% (what I was quoted for a 15-year refi), and the payments fall to $358 and $291. As a point of reference, if you work a single week at the minimum wage, you would have your house payment 100% taken care of (excluding taxes and utilities). This would leave you 3-weeks to take care of your food, clothing and transportation. But remember, the #1 greatest predictor of mortgage default is … the downpayment. 20% down loans virtually never end up in default. And think of why, you are basically giving someone a chance to live in a home for free when only 3% of their own money is tied up in it. And see below for more.
  • Flexible underwriting guidelines! In other words, credit score, proof of stable job and income is too “inflexible” and so we need to figure out other ways to qualify people for loans. One can only imagine what the loan officers look for. “I stared my client in the eyes, in the eyes, and I just KNEW he’d be able to pay back that money!” Seriously, can it be any more scientific than this. Remember folks, this is what the definition of “sub-prime” was. But that may not be as much of a problem had it not been tied in with zero money down and subsidized interest rate policies. Even bad economists can explain why.
  • Down payment assistance! Well, there’s the kicker. So not only does the loan require an insanely low 3% down, we actually aren’t asking the borrowers to come up with any of that either.  What is truly incredible is that the maximum amount of the loan this program seems to support is … $500,000. Yes, a half-million.

Yes, SONYMA makes honeownership affordable in these difficult times.

By the way, earlier in that magazine we learn that less than 1/3 of all third graders in our city schools can read at their grade level. Same for math. We’re doomed.

5 Responses to “Hair of the Dog, Episode 37176983”

  1. RIT_Rich says:

    That is insane. I should buy a whole block in Rochester, and make money off the rents.

  2. Harry says:

    So who gets stuck with these loans? Does SONYMA sell all or them to Fannie Mae, or a bank too big to fail? I thought Dodd-Frank fixed all that.

  3. Speedmaster says:

    From the depts. of “they still don’t get it” and “I’ve never read a Thomas Sowell column” comes this gem from yesterday’s paper, a nationally syndicated (Washington Compost) columnist:
    Michelle Singletary
    http://wapo.st/pFO42p

  4. Speedmaster says:

    By the way, while it has good food reviews, 90% of the City newspaper if Leftist agitprop. Makes the D&C look like the Weekly Standard by comparison. 😉

  5. […] definitely do read yesterday’s post from Dr. Rizzo on topic. He nails […]

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