Ep. 168 - The Media LOVES 2008 | Why $0 Down Mortgages Aren't a Problem

Jun 05, 2024


In recent news, a CNN article claimed that zero down mortgages, a "shady financial tool" from the 2008 housing bubble era, are making a comeback. This headline, like many others in the media, is designed to grab attention by evoking fear and drawing comparisons to the devastating housing crash of 2008. However, upon closer examination, it becomes clear that these claims are largely unfounded and fail to take into account the significant changes in the mortgage industry since the crisis.


The media's tendency to sensationalize and oversimplify complex issues in the housing market has led to a proliferation of clickbait headlines and fear mongering. By focusing on the negative aspects of the market and drawing superficial comparisons to the past, these articles often fail to provide a balanced and informed perspective on the current state of the industry.


Down Payment Assistance

One of the main points of contention in the CNN article is the resurgence of zero down mortgages, which the author suggests are a sign of lenders returning to the risky practices that contributed to the 2008 crash. However, this argument overlooks the crucial role that down payment assistance programs play in helping first-time homebuyers and low-to-moderate income families achieve homeownership.


Down payment assistance programs have been around for decades and are designed to bridge the gap between the required down payment and the borrower's available funds. These programs are subject to strict regulations and are typically only available to borrowers who meet specific criteria, such as income limits and credit score requirements. By portraying these programs as inherently risky or predatory, the media does a disservice to the many families who have benefited from them.


The Mortgage Industry Today

It is essential to recognize that the mortgage industry today is vastly different from what it was in the lead-up to the 2008 crisis. In the years since the crash, numerous regulations and safeguards have been put in place to prevent a repeat of the risky lending practices that contributed to the bubble.


One of the most significant changes has been the implementation of the Qualified Mortgage (QM) rule, which requires lenders to verify a borrower's ability to repay their loan and limits the amount of debt they can take on relative to their income. This rule has helped to ensure that borrowers are not taking on more debt than they can handle and has made it much more difficult for lenders to issue the kinds of risky loans that were prevalent in the early 2000s.


The Role of Responsible Lending

Another factor that is often overlooked in discussions of zero down mortgages is the role that responsible lending practices play in ensuring that borrowers are well-positioned to succeed as homeowners. Responsible lenders work closely with borrowers to assess their financial situation, provide guidance on budgeting and credit management, and help them find the right loan product for their needs.


In many cases, responsible lenders will actually discourage borrowers from taking on a zero down mortgage if they determine that it is not in their best interest. By taking a holistic approach to lending that prioritizes the long-term success of the borrower, these lenders help to mitigate the risks associated with low down payment loans.


Bottom Line

While it may be tempting for the media to draw comparisons between today's housing market and the 2008 crisis, the reality is that the two are fundamentally different. The mortgage industry has undergone significant changes in the years since the crash, and the prevalence of zero down mortgages is not, in and of itself, a cause for concern. By focusing on sensationalized headlines and ignoring the complexities of the market, the media does a disservice to both lenders and borrowers alike. It is essential that we approach these issues with a more nuanced and informed perspective, one that recognizes the value of responsible lending practices and the role that down payment assistance programs can play in promoting sustainable homeownership.