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Largest Source of Mortgage Funds in U.S. Tries to Help Homebuyers Struggling With Student Debt

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  1. Robert,

    Great insight! I graduated almost 10 years ago and I am still paying off my student loan. On that note, we are also looking to buy. I am glad they are finally getting something going, there are no guarantees in life but this makes the home-buying decision & process less stressful. Fantastic article.

    -Kris

  2. While the combination of offers detailed here probably represents the most beneficial and targeted loosening of underwriting standards since before last decade’s housing and mortgage boom, there is still reason for concern. Certainly, debts that are documented and actually are being paid by third parties (by contract, of course) shouldn’t count against a borrower, nor should the amount of a contractual payment when a negotiated deferred payment is what is actually due.

    However, parents (or former students) extracting equity out of their homes to retire student-loan debt transfers loan risk from student-loan lenders (mostly the government) to private investors in mortgages. This isn’t much of an issue when home prices are rising, as they are now, but in a downturn this not only increases the chance of an “”underwater”" situation but also could put taxpayers on the hook again for losses incurred from a foreclosure action. Most of these loans will be guaranteed by Fannie Mae, which will have a zero capital buffer before long, so there would be a direct transfer of loss to the taxpayer.

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