Setting up for this decade's mortgage crisis. Wells Fargo is luring in for later foreclosure those borrowers who lack functional numeracy. Then repo the properties and convert to state-subsidized rental housing. Vulture capitalism at its finest. On the other hand, the silver lining for now-excluded thrifty, responsible, hard-working folk is that WF and other such banks already know who is and who isn't likely to default, and thus these lenders are getting out of the honest business of supporting stable communities.

FNMA is pushing this and having their sales reps reach out to banks and credit unions to discuss the current status on these programs and then push them. These are high risk loans with little to no down payment. Additionally, they have a new agenda in the realm of valuations on homes which basically pushes out an appraiser. Currently, only six companies nationwide can meet their new version of appraisals. Convenient, huh?

I worked in that business for many years, and it went something like this: around the year 2001 (give or take), they started doing "black box" underwriting, and scrapped the traditional 28/36 ratios (28% of income towards mortgage payment with taxes and insurance, what is called "PITI", and 36% of income for all debt, including the PITI payment). as well as the traditional 20% down payment, in many, many cases.  (This is the simplified version, the 20% down payment as an absolute requirement disappeared many years before that, and the 28/36 ratios were never absolute in all cases.)  Long story short, a lot of people got loans who shouldn't have, and it created nine kinds of hell for mortgage default departments.  Foreclosure is easier said than done.  The major institutional investors bent over backwards to modify loans, to make them into something the borrowers could afford.  I can't even begin to describe all the headaches this caused mortgage servicers.  It was an absolute cluster-bumble.  

As I said, a lot of people got loans who shouldn't have.  Qui legit, intelligat.

The GSEs(Fannie Mae and Freddie Mac) are as corrupt as possible. If any of you have a decent congressman(yes, I know it’s difficult), I would file a complaint against both of these out-of-control entities.

On what grounds?  You'd have to come up with specifics.

Credit requirements have been loosened all across the boards, for many reasons both associated with political correctness and not associated with it.  Part of the reasoning behind loosening the traditional 28/36 rule was that if a borrower made enough money, or had sufficient assets aside from the mortgage, they could afford a larger loan, as many if not most of a household's other expenses are more or less constant.  For instance, if you make $100K per year as opposed to $50K PA, your groceries won't cost twice as much, as a family can only eat so much food.  There were also "liar's loans" where low (or even no) docuмentation was required to qualify, albeit at a higher rate with more of a down payment required.  Qualifying for a mortgage has traditionally been a Kafkaesque nightmare, with sometimes massive docuмentation required (ask any mortgage loan processor) under tight closing deadlines.  Post-closing audit, in which I worked for a time, is no fun either.  Many borrowers found the process very daunting, and the goal was to find some way, somehow, to give a prospective borrower a loan, and again, lenders have to jump through all kinds of fair housing hoops.  Many borrowers are only a month's paycheck away from default, and I can't begin to count the times a delinquent borrower has called desperately seeking some relief, you would have the same people, month after month, calling in their payment the very last day --- every month I used to get a call from a woman driving her school bus in NYC, as well as a military family in Germany who were always "a day late and a dollar short".  People get them into every kind of fix that you can imagine, sometimes not of their making. 

Sadly, for most people, a mortgage is a necessity.  I always say, if you can pay off the old maid, do it.  Owning a home free and clear allows you to live on far less money than having to come up with a payment every month to avoid default and possible foreclosure.  (And once you go past 30 days, no, you cannot make partial payments, you owe for two, or three, or however many months, though as a practical matter, collection departments will work with you, according to the strict terms of the mortgage, they don't have to, but lenders don't want to foreclose, and nobody wants you to have to leave your home.) And don't bite off more than you can chew.  The American mindset is "buy the most house you can afford" (or rather, for which you can make the monthly payment), when it should be "live below your means and save, save, save".