Pearl River As it becomes harder to get loans to buy homes, borrowers are increasingly looking for alternatives, including non-traditional, unguaranteed, noncomforming mortgages. The Wall Street Journal notes that in 2025, such loan originations rose from less than 1% in 2020 to almost 6% of total mortgages in 2025. Should we worry? Maybe, they haven’t been this high since the 2007-8 crash, although this is an area ACORN knows intimately and negotiated aggressively and successfully with many money center banks in our CRA agreements.
The issue for us was being able to count other sources of income for lower income borrowers that were not fully realized by W-2 information. Tipped employees were an obvious example, as would be gig workers now who are self-employed with tipped income as well. Counting alimony payments when and where they occurred and could be verified. Verification of other, informal, sources of income were key to getting the loans and convincing the banks to agree to make them. One bank after another assured us that their loan portfolio for ACORN originated loans was better than any other portfolio when it came to foreclosures or nonperforming loans.
The loans are growing now from another direction, not lower income borrowers, but reportedly from higher income speculators and wannabe landlords looking to acquire more rental properties. Upper income borrowers are using such mortgages to top off purchases that are higher than traditional mortgages are willing to go. Rocket Mortgage would not reveal size of its nonconforming exposure, which should be a warning alert. LoanDepot said it saw a “68% increase in the production of nonconforming loans from 2024 to 2025.” What could go wrong? Plenty, as we know from past experience, when some of these loan originations, if not policed, can become today’s version of broker-created “liar’s loans” of two decades ago.
Where is Barney Frank when we need him now? Former Massachusetts Congressional representative Frank was one of the architects and a sometime firewall against attempts to modify and cut the Community Reinvestment Act. For many years he was our go-to ally in protecting the CRA. He was a character as well with a sharp tongue. I can remember joining my old friend and comrade, Dan Russell, and hearing him speak at a fundraiser in western Massachusetts, when I happened to be in the area years ago. I’m not sure that there is anyone in position to protect us now, and certainly Frank was unable before he retired to extend regulation over nontraditional banking sources or such loans. Frank also shocked and disappointed ACORN when he joined the stampede in voting in favor of the resolution attacking ACORN after the unscrupulously edited videos and President Obama throwing us under the bus unapologetically.
Bankers going wild and loans unregulated and unguaranteed, what could go wrong with nothing but foxes guarding these henhouses now? Everything, and we’ve been there, done that, and learned little.