In the last downturn, there were a surprising amount of people who were underwater but hung on – and today with record-high prices, they are glad they did. We learned that whether you had equity or not, the chance of default was influenced by other factors. If that’s the case, lenders might as well finance the whole enchilada, and price in the same or similar percentage of defaults as last time.
BurkeyLoan launched its BurkeyLoan Mortgage division Tuesday which included its 120% loan-to-value mortgage product that funds both a home purchase and the borrower’s student loans.
BurkeyLoan, a portfolio mortgage lender, will issue, hold and service BurkeyLoan mortgages. The company’s 120% LTV product will allow Millennials to pay off or reduce their student loan debt in order to buy a home.
“After considerable research, review and analysis, we needed to build an access to capital product for the millennial generation,” BurkeyLoan Chairman and CEO John Burkey said. “Many millennials feel they are on a financial treadmill, making every effort to pay off student loans and save for a home while interest rates and home prices escalate.”
“Our mortgage product offers features and benefits that support the needs of the millennial generation,” Burkey said. “The company will utilize sound conservative underwriting that incorporates borrower credit, character, skin-in-the-game and risk mitigation.”
The program is available to community, regional and other banks as well as credit unions that broker residential mortgages.
But BurkeyLoan isn’t the first company to reach out to first time homebuyers struggling with student loans. Back in November, SoFi and the government-sponsored enterprise Fannie Mae announced a new loan option allowing homeowners to refinance their mortgage at a lower rate and pay down the balance of an existing student loan.
The average student graduates with just over $30,000 in student loan debt, according to the Institute for College Access and Success. The median home price increased to $228,900 in January, according to the National Association of Realtors. The new LTV 120% program may enable homebuyers to pay off the average student loan amount, while offering a change to invest in their housing.
I was under the impression that student loan debt was not deductible, as opposed to house improvements. Is my thinking outdated?
This is a pretty dumb idea… for the company. Let me borrow 120% LTV, pay off my student loan debt and give me a free call option on the house.
If prices increase, I win, if prices decline (but this time is different), just walk away, take the ding on the credit but who cares? You’re no longer beholden to student loans.
you may be thinking of discharging student debt in bankruptcy. that you cannot do. However, student loan interest is fully deductible.
Everybody is trying to find the new niche.
Outsiders are hoping to develop the new widget for housing, like this:
And lenders are resorting to ideas like 120% mortgages to drive extra demand.
If they are going to fund loans based primarily on FICOs and not insist on borrowers having skin in the game, what else is possible?
If it’s just consumer finance, we could ditch those pesky appraisals. If the borrower has an 800+ FICO, do we need to verify income? They will make their payments, won’t they?
Seems like a way for burdened students to in effect “launder” their student loan, creating the option to “walk away” from a previously undischargable debt, leaving the debt burden, presumably, on our beleaguered taxpayers, and I’m telling Trump.