USDA Mortgages: Zero-Down Government Loans Called "Subprime Beef"

BusinessWeek:

Builders and lenders are dusting off a familiar pitch: mortgages with $0 down and 100% financing. The deals, which take advantage of a little-known loan program at the U.S. Agriculture Dept., are bolstering sales in some areas. These new mortgages share some characteristics with the old ones now wreaking havoc on the housing market--and critics fear lending standards could slip. Says Daniel Oppenheimer, an analyst with Credit Suisse: "Unlike beef, these loans should be described as USDA subprime."

Read the whole story: BusinessWeek

Comments

[NoMoreBailOut]

The fed is playing in re inflating the housing & finance bubble while the public willingly lets it happen (not that we could stop if if we wanted to). We're all too busy getting rich with stocks while the Wall Street crooks resume their treachery knowing they will get bailed out yet again.

good articles 4 slow news day; http://www.iamned.com

The lack of any finance or heath care reform is appalling

[cork6142]

I think the days of sharing profitable gov programs with the corporations is over. Why give profitable programs like student lending, home lending, and healthcare to corporations to tack on their profit (and risk) ? Can we destroy the myth that big government is bad now? Americans who decried big government got what they paid for these last 20 years--corporations that are too big to fail that require more tax dollars for their services than our gov programs did. Enough already.

[themodernleader]

The closer you look at the operations of the Obama "economic team" bunch the more you see the policies of the Bush Bunch. Obama is accelerating the policies of Bush in raising banking and oligarchy while destroying American democracy. We are no longer models for the world. Instead, we are imitiators of those traditional administratrions that diminish rather than expand ordinary human imagination and operation. The goal of traditional leadership is to keep the ordinary people in their place for the eternal comfort and power of oligarchs, a stagnate civil service system that is inherited and emerging dynasty.
This is the reason that the American brand of leadership is being rejected by the enslaved people of traditional countries throughout the world. The American leadership is their own that they are trying to escape.

[Philclock]

Big Government at its finest. Wait'll it gets hold of the other half of health care, it's already strangling the first.

[anticapitalist1983]

wow. the government couldn't do worse than the insurance industry's 30% overhead if it tried.

also, the government did not create this crisis, and the incentives driving this USDA program are private business incentives not government ones. its home builders, real estate agents, mortgage lenders who are driving this. they are desperately trying to fill in the hole created by the crisis in their balance sheets.

when you say big government, i don't think USDA home program. i think US military. its 50% of our budget.

[Philclock]

THE GOVERNMENT CREATED THE INSURANCE COMPANY PROBLEM, turning them into mini-monopolies by 1) not allowing them to operate nationally (each state picks just a few, gives them a virtual mini-monopoly of the business; 2) Not allowing them to compete with Medicare, Medicaid & the government children's insurance program (forget the name).

Let 'em really compete, guess what, profit margins come down, service goes up, power to the people!

Big Government controls almost half of all health care expenditures, check it out in US National Health Care Expenditures 1960-2007:

http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp#TopOfPage

[politicsofeight]

Moore, Tallibi, and Krugman are right. We need more people like them in high office

If no justice is served the American People are going to get more restless, and the next time something happens.....there could be real UNREST! WE have to hold people accountable for their actions.

hat tip to: http://www.iamned.com

Ignorance = Negligence....... They knew what was going on the whole time, all the while padding their pockets. The U.S. crony-Capitalist justice system is a f**king joke. There must be some way we can outsource for justice against these criminals.

talibi is right

[anticapitalist1983]

and elizabeth warren.

check out http://cop.senate.gov

[Philclock]

What if your justice is my oppression?

[camanokat]

USDA home loans are meant for moderate income buyers. There are maximum income limits that vary by county. If you make above that amount, you cannot qualify. The homes must be modest, meaning nothing like the house shown in this picture.

There are also geographical limitations. You cannot use USDA to buy a home in LA, NY or Seattle. You must thoroughly document your income and likelihood of job continuity. Your debt to income ratio cannot exceed 41%. The land cannot be worth more than 50% of the purchase price.

This program has been around a long time and has a high success rate. To compare it to subprime is ridiculous.

[Matrsnot]

Not to worry. The subprime lending is what got us where we are today economically. I wonder who voted to make Freddie and Fanny give that money away? Oh wait. it was a democratic congress. And the same people are now going to get us out? Unreal logic.

[anticapitalist1983]

the housing crisis would have been an event 10x less severe without wall street re-packing the loans into CDSs, CDOs, MBSs, etc... and wrapping themselves up in risk, piling risk on top of risk 10x over.

that's what caused the crisis. it's nice to live in fantasy land though where the dems are somehow responsible for everything that has ever gone wrong.

[procopios]

I don't get it, how are they going to turn mortgages into Taco Bell?

[chicago11]

The program has been around for 50 years. I grew up in a USDA-financed house - new, 1,300 sf, total cost of $13,000. Modest. Hard-working families. This is absolutely not a speculative market. Borrowers aren't likely to be picking up nice foreclosures on the cheap.

I've been working with housing issues for 35 years and have come across USDA homes all along. Let me tell you that they even disallowed a pretty octagon window in a new house because it was ostentatious - even though the borrowers extended family had given it to the young couple as a gift to be used in constructing their new home. The USDA programs mean modest but sturdy housing.

[camanokat]

Yes, and you can't own any other real estate in order to qualify for USDA, so no spec buying or flippers.

[kevski]

I have read "" Families must be without adequate housing"" and wasn't sure of the exact interpretation of that specific guideline for eligibility purposes.

[kevski]

I have heard a couple of stories when they come to assess the home, word was that they really slow down the process and hand the owner a laundry list of thing to repair before proceeding to close.

[31Blue]

I read the article ... but it still kinda sounds like a bad idea.

The orig intent of the USDA may be noble, but if this program is exploited to re-inflate the housing bubble then there will be more very bad trouble.

[bunnyv]

My boyfriend got this loan and he had to send in all kinds of proof of his income as well as a letter from his employer, w2's etc. Not exactly the same as people with no job getting loans.

[kevski]

Good for him, good luck.

[chicago11]

This is a very misleading article.

USDA loans may be no money down, but they are highly restricted by location, borrower creditworthiness and borrower incomes. A fancy house shown in your picture would not qualify.

"USDA sub-prime beef" is a cute sugar-high headline - but a total disservice to your readers and this program which, for those who read the article, have a very low default rate.

Quit over-simplifying to get that rush. In other words, grow up and be responsible!

[KossAtl]

Where can I get one.

[kevski]

You can start your search here to see if you qualify.

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?NavKey=home@1