Zero-Down Subprime Mortgages Are Back, What Could Possibly Go Wrong?

Ten years after the collapse of Lehman Brothers, banks are once again taking bets on the same type of loans that nearly collapsed the economy amid a flurry of emergency bailouts and unprecedented consolidations. 

Bank of America has backed a $10 billion program from Boston-based brokerage Neighborhood Assistance Corporation of America (NACA), to offer zero-down mortgages to low-income borrowers with poor credit scores, according to CNBC. NACA has been conducting four-day events in cities across America to educate subprime borrowers and then lend them money - with a 90% approval rate and interest rates around 4.5%. 

"It's total upside," said AJ Barkley, senior vice president of consumer lending at BofA. "We have seen significant wins in this partnership. Just to be clear, when we get those loans with all the heavy lifting here, we're over a 90 percent approval, meaning 90 percent of the people who go through this program that we actually underwrite the loans."

Borrowers can have low credit scores, but have to go through an education session about the program and submit all necessary documents, from income statements to phone bills. Then they go through counseling to understand their monthly budget and ensure they can afford the mortgage payment. The loans are 15- or 30-year fixed with interest rates below market, about 4.5 percent. -CNBC

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