The recently announced Clarien/BHC deal is odd. It is a nice opportunity to provide home ownership to those who aren’t likely in a good position to be home owners.  Long time readers will know that I’m not a fan of fancy loan schemes because they distort the market.  Whether you can save for a reasonable down payment is a good indicator of whether or not you can afford the mortgage.

So of course I’m intrigued by the Clarien/BHC deal as it seems like it effectively leverages BHC assets to help Clarien offload and repurpose bad debt under the guise of affordable housing. What am I missing here?

‘“BHC will guarantee the top 25% of each individual loan between 75% and 100% made by the Bank. Properties currently under the control of Clarien as well as select BHC-owned properties will be made available for purchase under the new initiative.”‘

– It isn’t a 100% loan. BHC is theoretically taking on the down payment risk.
– It is only applicable to properties that BHC sells or Clarien “conrols” (repossessed homes of under water mortgages”)
– BHC shifts their inventory to buyers who take on the risk, loaning them effectively the equity in the properties they’re selling.
– Clarien gets to shift underwater homes to new buyers without having to put them on the fair market

All so we can sell to people who can’t manage to save for a down payment and ultimately may not be able to afford the homes as a result.