Bank of America unveiled a new affordable mortgage program that offers consumers the option of putting as little as 3% down and requires no mortgage insurance. The program does not involve the Federal Housing Administration, whose program has recently undergone a lot of scrutiny from big banks.
Bank of America announced a partnership on Monday with Self-Help Ventures Fund and Freddie Mac for its new “Affordable Loan Solution” mortgage, a conforming loan that provides low- and moderate-income homebuyers access to a responsible lending product with counseling at affordable entry prices.
To make the program function, the three companies will work together to help ensure the loan is properly originated and backed in case the loan goes delinquent, the companies said Monday.
For starters, Bank of America said the mortgage will be available through all of its mortgage sales channels.
Self-Help, which is based in Durham, North Carolina, will then buy the loans and servicing rights, along with providing post-closing counseling for any borrowers who might be experiencing payment difficulties.
Since Self-Help is taking the first-loss position, the loans require no mortgage insurance.
Freddie Mac will purchase all of the eligible affordable mortgages originated via the Self-Help and Bank of America partnership, having recently approving Self-Help as a seller/servicer to facilitate the rollout of this offering to borrowers.
The program allows down payments as low as 3% on the purchase of a primary, single-family residence, with no reserve funds required in most situations.
The loan also requires a minimum FICO score of 660, and first-time buyers will need to participate in homebuyer education.