Interest-Only Loans: Lenders Are Offering Them Again

Now a days, interest-only mortgages are coming back into scene.  They are considered as the factor behind the housing crash.

Mat Ishbia, the president and CEO of Michigan-based United Wholesale Mortgage said, "I think it's opening the door back to responsible lending, giving people choices."

The company has recently announce that it is currently offering these interest-only loans through the brokers.  However there is a condition and that is the borrower must put a twenty percent down payment to assure the company that it won't be like what happened during the housing boom.  Another requirement from the borrower is a FICO credit score of 720, which is considered above average.  Moreover, they must qualify with the payment terms once adjusted higher.

Ishbia believes that, "These people can afford these mortgages. They're savvy homeowners." He also added, "We're giving them the choice. It is no more risk to us. We actually think it's less risk."

United Wholesale Mortgage sells the loans to investors instead of holding them butthe government-backed mortgage giants like Fannie Mae and Freddie Mac do not buy these types of loans.

Interest-only loans, for the information of many, fall outside what is considered a qualified mortgage.  These are the loans used by borrowers to buy homes they could not afford during the housing boom.  And because of the negative effect that the interest-only mortgage has during the housing boom, lenders have tightened their restrictions even if they are using this type of loans again.

Wells Fargo has confirmed that it offers interest-only loans and that it holds it in its portfolio.

Franklin Codel, head of mortgage production for Wells Fargo Home Lending said in late 2013", If we feel the borrower has the ability to repay but they're not necessarily a qualified mortgage for some reason, we can still do the loan and we will do so."