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Study Hall: Bank of America's no Money Down Mortgage · Earn Your Leisure

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  Speaker 1: An illegal alien from Guatemala charged with raping a child
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  Speaker 3: I want to start. I want to start with this
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  Speaker 3: Bank of America because that's very controversial. Got a lot
• 1:04
  Speaker 3: of attention. Shout out to MG the mortgage guy. He
• 1:06
  Speaker 3: posted it. I reposted it then there's the whole episode
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  Speaker 3: about it, so check that episode out for more context.
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  Speaker 3: But Bank of America launches zero down mortgage program for
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  Speaker 3: black and Hispanic first time home buyers. Do you think
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  Speaker 3: this will be good in the long term for us?
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  Speaker 4: Sore? Harmful?
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  Speaker 3: And let me just say and correct me if I'm wrong,
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  Speaker 3: But I believe it wasn't necessarily for black or brown.
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  Speaker 3: It was just for neighborhoods, and it's for minority people,
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  Speaker 3: but it's more geared towards the actual neighborhoods, which the
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  Speaker 3: neighborhood could be our black and brown neighborhoods, but it's
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  Speaker 3: not necessarily that you have to be black and brown.
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  Speaker 4: Is that correct?
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  Speaker 2: Yeah?
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  Speaker 5: I think the incentives was to create more first time
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  Speaker 5: home buyers and so some of the barriers that have
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  Speaker 5: been stopping in the black and brown community has been
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  Speaker 5: down payments.
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  Speaker 2: Things like that.
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  Speaker 5: So the program was just for first time home buyers
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  Speaker 5: to try to alleviate the wealth gap. We know that
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  Speaker 5: a lot of the well gap was separate from the
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  Speaker 5: fifties to I mean the forties and fifties to now
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  Speaker 5: because of the equity and homes and home ownership, and
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  Speaker 5: so that was something that we were alienated from even
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  Speaker 5: the effects of it, and felt now today. So this
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  Speaker 5: is like the program's idea was based on that. Now
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  Speaker 5: the location part is like, those are some of the
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  Speaker 5: criteria and so there's a few of them. I'mnna run down,
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  Speaker 5: you know, you want to say something just really quickly.
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  Speaker 5: So it's going to allow first time home buyers to
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  Speaker 5: purchase a home with no down payment, no mortgage insurance,
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  Speaker 5: and zero zero closing costs. But there are some criterias
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  Speaker 5: for it, right, So the first thing is you have
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  Speaker 5: to be credit worthy. There's no specific credit score to
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  Speaker 5: be in the program, but you have to be credit
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  Speaker 5: worthy so that they're gonna look, are you paying your
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  Speaker 5: bills on time? Are you paying your light bill, your
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  Speaker 5: electricity bill? But there's no specific credit sCOD so I know,
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  Speaker 5: like in traditional lending is like yo, you got to
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  Speaker 5: have a five to twenty or you got to have
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  Speaker 5: a six fifty to qualify.
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  Speaker 2: For some programs. So there's no specific score, but you
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  Speaker 2: have to be credit worthy.
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  Speaker 5: The other part is that the elgibility is going to
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  Speaker 5: be based on your income and the location of the property.
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  Speaker 2: So that's where the property that's the party.
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  Speaker 5: Yeah, it depends on where you're going to do it
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  Speaker 5: at and so they're going to use the credit guidelines,
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  Speaker 5: like I said, timely rant, utility bills, phone and auto
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  Speaker 5: insurance payments to determine.
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  Speaker 2: How credit worthy you are.
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  Speaker 5: The other part is that you have to complete right
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  Speaker 5: before you can even be a part or considered. You
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  Speaker 5: have to complete a home buyer certification course provided by
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  Speaker 5: the Bank of America and hud approve of housing counseling
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  Speaker 5: partners before you can even submit for the loan application.
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  Speaker 5: So those are the things that you have to do
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  Speaker 5: and even in order to even be a part of
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  Speaker 5: the program.
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  Speaker 2: So it's got to get everybody to complete information on it.
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  Speaker 6: The parts of it that I do like is that
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  Speaker 6: it is going to give people a chance who may
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  Speaker 6: not have, like you said, have the money for the
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  Speaker 6: down payment to become a home owner.
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  Speaker 2: That part of do like.
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  Speaker 6: A program like this has been done in my hometown
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  Speaker 6: of EA Chicago, Indiana, So that part I'm in love with.
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  Speaker 6: The part that I'm worried about are two things. Number one,
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  Speaker 6: possibility for gentrification. So the credit worthiness part is a
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  Speaker 6: part because if there's no transparent guyes to the consumer
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  Speaker 6: base for what is needed. What if some applicants get
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  Speaker 6: turned down and you're deemed not credit worthy.
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  Speaker 2: But people, let's.
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  Speaker 6: Say California and New York, if our communities don't get
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  Speaker 6: access to these loans and these areas get gentrified at
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  Speaker 6: a faster rate, that is a cause for a concern
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  Speaker 6: for me. And then given that we're in a downturn,
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  Speaker 6: they haven't announced we're officially in a recession.
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  Speaker 2: Twenty three, they probably will.
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  Speaker 6: I don't want in twenty twenty four the housing collapse
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  Speaker 6: to be blamed on us, as it was in two
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  Speaker 6: thousand and seven, in two thousand and eight. Anyone who's
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  Speaker 6: been in the financial industry those for the longest time
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  Speaker 6: that when these mortgages were created, bonded up, they were
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  Speaker 6: using and swap trading and derivatives trading. It was not
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  Speaker 6: the home buyers fought for accepting the loans, because if
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  Speaker 6: you went through underwriting and your loan was accepted, that
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  Speaker 6: is the responsibility of the bank, the underwriting, and the institutions.
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  Speaker 6: But you always need a fall guy in these situations.
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  Speaker 6: So those are my two concerns about it. On a
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  Speaker 6: surface level, I like it, but never historically has most
• 5:09
  Speaker 6: thanks or institutions ever done something for our communities and
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  Speaker 6: there was not a catch to it. I do like
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  Speaker 6: to think of America as a company. I do like
• 5:18
  Speaker 6: it as a stock. I do like Brian more than
• 5:20
  Speaker 6: hand the CEO. He's been fantastic over the last fourteen
• 5:25
  Speaker 6: fifteen years that he's been in. But those are my
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  Speaker 6: two concerns that I have about the program. I got
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  Speaker 6: two concerns as well too.
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  Speaker 5: So when you hear no, when it says credit worthiness,
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  Speaker 5: I worry about what the interest rate will be, right
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  Speaker 5: because based on your credit score will determine how you
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  Speaker 5: know what the interest rate will be. So when credit
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  Speaker 5: worthiness doesn't really tell me where I'm going to fall
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  Speaker 5: that if I'm in this program, if I'm selected. The
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  Speaker 5: other part is that when you say no down payment,
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  Speaker 5: that just means that the home loan is going to
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  Speaker 5: cover the entire value of the property, right And so
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  Speaker 5: the person that would put twenty percent down, obviously they're
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  Speaker 5: going to have a little or payments. Whereas now if
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  Speaker 5: the entire thing is covered inside the value of the home,
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  Speaker 5: the four hundred thousand dollars home is now going to
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  Speaker 5: cost you maybe five thousand dollars a month to pay
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  Speaker 5: the mortgage. That's tough right now if somebody can trice
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  Speaker 5: are going up while interest rates are going up, which
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  Speaker 5: will lead long term if we can't afford it to
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  Speaker 5: more defaults, right and so like, now, how does that?
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  Speaker 2: How does that affect us long term?
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  Speaker 7: Right?
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  Speaker 2: We default on that home? We were in this program?
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  Speaker 2: Who gets right?
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  Speaker 5: So who gets the opportunity to now see some of
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  Speaker 5: the opportunities of buying these homes? Who are from people
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  Speaker 5: who were wanting in this program? So those are like
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  Speaker 5: two of the things that I'm looking long term. I'm like, yeah,
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  Speaker 5: I kind of need to hear the details, especially on
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  Speaker 5: the interest rate.
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  Speaker 6: And especially if let's say in two or three years,
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  Speaker 6: as a twelve percent default rate in twenty thirty, the
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  Speaker 6: talking point is going to be, well, we tried this
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  Speaker 6: before and it didn't work and it failed. I wish
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  Speaker 6: they would have done this when interest rates were at
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  Speaker 6: zero and then now your mortgage rate was like two
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  Speaker 6: point one percent, two point five percent, even if five
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  Speaker 6: point five most people can't handle it.
• 7:03
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  Speaker 6: If we get back to eight percent like how we
• 9:54
  Speaker 6: were in two thousand and eight, it is going to
• 9:56
  Speaker 6: be disastrous, especially with what's the average run price in
• 10:00
  Speaker 6: New York now forty three hundred in Manhattan. So if
• 10:03
  Speaker 6: you're getting a house it's nine hundred thousand, it's going
• 10:08
  Speaker 6: to eat into like forty or fifty percent of your income,
• 10:11
  Speaker 6: even if you are making mid six figures. I would
• 10:16
  Speaker 6: say it would have done this sooner, I really do.
• 10:21
  Speaker 6: I know Matt probably thought I was gonna go crazy,
• 10:22
  Speaker 6: but try to.
• 10:24
  Speaker 7: Keep it off.
• 10:25
  Speaker 6: Well.
• 10:25
  Speaker 3: They have similar programs. I mean NAKA there's something that
• 10:28
  Speaker 3: we've covered before. No Mattter has talked about that before,
• 10:31
  Speaker 3: and that is a program that is actually very similar
• 10:34
  Speaker 3: to this if you really look at the framework of it.
• 10:38
  Speaker 3: It's very strenuous as far as to get through the program.
• 10:41
  Speaker 3: But NAKA is a program that you can actually buy
• 10:45
  Speaker 3: a home with no no down payment, no closing costs,
• 10:48
  Speaker 3: no like anything, really and you know your credit's gonna
• 10:52
  Speaker 3: thing really have to be that great, but you have
• 10:53
  Speaker 3: to go through like a long list of things, you
• 10:55
  Speaker 3: have to go through a class, like even a class.
• 10:58
  Speaker 4: It's very similar to NACA. So it's not something that
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  Speaker 4: I think is.
• 11:04
  Speaker 3: You know, so much different than what is already kind
• 11:07
  Speaker 3: of already in place in a lot of different places.
• 11:09
  Speaker 3: It's just that you know, Bank of America put forth.
• 11:12
  Speaker 3: That's why it made such attention because obviously that the
• 11:15
  Speaker 3: second biggest I believe, the second biggest bank in America
• 11:17
  Speaker 3: outside of Chase. So that's that's real big that Bank
• 11:19
  Speaker 3: of America did it. But there's already kind of programs
• 11:21
  Speaker 3: like that in place. But you know it also, Bank
• 11:24
  Speaker 3: of America had a lot of backlash a few months
• 11:27
  Speaker 3: ago with a story that came out that we actually
• 11:30
  Speaker 3: published that point viral where they were declining black people
• 11:35
  Speaker 3: for refinancing at a much higher rate than they were
• 11:38
  Speaker 3: declining white people for refinancing. So I don't know, maybe
• 11:42
  Speaker 3: this is a way to kind of, you know, clean
• 11:45
  Speaker 3: up some of that that negative publicity that they received.
• 11:51
  Speaker 4: I don't know, but you know, we'll see.
• 11:53
  Speaker 3: I think it's always beneficial whenever you can try to
• 11:55
  Speaker 3: get people in homes. But you know it's also you know,
• 11:59
  Speaker 3: people have to be ready to be in a home
• 12:01
  Speaker 3: as well. So you know, it doesn't make any sense
• 12:04
  Speaker 3: to just get a house and not have any money
• 12:05
  Speaker 3: because anything can have anything go wrong, and you know,
• 12:09
  Speaker 3: you don't want to put yourself in a burden where
• 12:12
  Speaker 3: you have a home and now you're just working just
• 12:16
  Speaker 3: to pay your mortgage. That's kind of like, you know,
• 12:19
  Speaker 3: defeating the purpose in a sense, because that's what most
• 12:22
  Speaker 3: people do. And I spoke about this a few years
• 12:24
  Speaker 3: ago when we were in LA and I said that
• 12:26
  Speaker 3: most people, for most people, buying a home is not
• 12:30
  Speaker 3: the right thing to do. And then people didn't fully
• 12:32
  Speaker 3: understand what I was saying, but I was saying that,
• 12:35
  Speaker 3: you know, I was a financial advisor for twelve years,
• 12:37
  Speaker 3: and I saw where a lot of people would cash
• 12:40
  Speaker 3: out there for to one ks, they would liquid date
• 12:43
  Speaker 3: their savings account. They would take all the money that
• 12:46
  Speaker 3: they had and to buy a home, and they think
• 12:49
  Speaker 3: that they're doing something beneficial, but in reality, you don't
• 12:52
  Speaker 3: have enough money to buy the home, so now you're
• 12:55
  Speaker 3: just struggling just to make ends meet. You depleted all
• 12:57
  Speaker 3: your investment, all your savings and now every single month
• 13:01
  Speaker 3: you're working just to maintain that mortgage and to pay
• 13:05
  Speaker 3: the taxes and keep the upkeeper on the house. That's
• 13:08
  Speaker 3: not a path to wealth. Yeah, of course the home
• 13:11
  Speaker 3: will probably appreciate over the course of time, but I.
• 13:13
  Speaker 4: Mean hopefully the right area. And you know.
• 13:17
  Speaker 3: In all reality, in that situation, it probably would have
• 13:19
  Speaker 3: been more beneficial to rent and use that money to invest,
• 13:24
  Speaker 3: use that money to start a business and have more
• 13:26
  Speaker 3: wiggle rooms. So that's a more advanced conversation that we
• 13:29
  Speaker 3: can have down the line if people are interested in it.
• 13:31
  Speaker 4: But everybody's situation is different. But don't be.
• 13:36
  Speaker 3: House rich and cash poor, because that's that's not a
• 13:41
  Speaker 3: recipe to build wealth.
• 13:43
  Speaker 4: It's not you.
• 13:45
  Speaker 5: And and of course, now as I'm saying and this,
• 13:48
  Speaker 5: there's still costs that are associated even if you don't
• 13:50
  Speaker 5: have the down payment, Like on the writing fees is
• 13:52
  Speaker 5: still something that you're gonna have to pay for, appraisals
• 13:55
  Speaker 5: are still something you're gonna have to pay.
• 13:56
  Speaker 2: For, titles, uh fees.
• 13:58
  Speaker 5: There's there's still fees associated have in a house outside
• 14:01
  Speaker 5: of just the down payment and mortgage, I mean the
• 14:03
  Speaker 5: mortgage insurance.
• 14:04
  Speaker 2: So it still feeds association.
• 14:06
  Speaker 5: Yeah, exactly, all right, mind goad.
• 14:11
  Speaker 6: The last point that I want to make into tie
• 14:13
  Speaker 6: back into what you guys were saying. Houses are a
• 14:16
  Speaker 6: product of the bank. So just because you own a house,
• 14:21
  Speaker 6: it does not mean that it is the best investment
• 14:23
  Speaker 6: for you. Please get it at a great interest rate.
• 14:26
  Speaker 6: Please get it in an area and which appreciates if
• 14:28
  Speaker 6: you just need to go to Google or acts next
• 14:31
  Speaker 6: week on the show, which areas are best for investing,
• 14:33
  Speaker 6: Because I don't want you guys to hope that your
• 14:35
  Speaker 6: property value is going to go up and you're in
• 14:37
  Speaker 6: an area where it does not accrue a lot of
• 14:39
  Speaker 6: growth in the area. But when we talk about the
• 14:43
  Speaker 6: American dream, the white pick offense it being a good investment,
• 14:47
  Speaker 6: when that the doctrine was originally written. That was from
• 14:50
  Speaker 6: the perspective of the bankers who were selling houses and
• 14:53
  Speaker 6: the mortgages that go with a house is not a
• 14:57
  Speaker 6: good investment unless you are in the area with the
• 14:59
  Speaker 6: low value and it grows tremendously, you get it at
• 15:03
  Speaker 6: a great deal, or you eventually sell at home. So
• 15:05
  Speaker 6: I don't want you to be deceived by marketing or
• 15:08
  Speaker 6: propaganda that you should get a home just because so yeah,
• 15:12
  Speaker 6: thank you for pointing that out shot.
• 15:14
  Speaker 3: There's nothing wrong with renting. Yeah, I rented it for years,
• 15:20
  Speaker 3: not because I had to, because I wasn't in a
• 15:23
  Speaker 3: hurry to not rent.
• 15:24
  Speaker 4: It's better than the capital.
• 15:25
  Speaker 6: Put it elsewhere.
• 15:27
  Speaker 3: Exactly exactly, and it could be a write off for
• 15:30
  Speaker 3: your business as well. That's another conversation my graduates from
• 15:37
  Speaker 3: my school being forced back drop drop, Mike, drop drop.
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