CFPB Discusses Mortgage Financing Alternatives

On December 21, 2022, the CFPB published an article describing how interest rates have risen over the past two years. Data from Freddie Mac Primary Mortgage Market Survey shows that interest rates for 30-year fixed-rate mortgages increased to as high as 7% in 2022 from a historical low of 2.90 in 2020. According to recent CFPB analysis of quarterly HMDA data, these higher rates have already led to increased monthly payments and higher debt-to-income ratios for mortgage borrowers.

In light of the relatively high interest rate environment, the CFPB provided some alternative financing options that financial services providers are offering which may aid consumers to access lower rates. Some of the alternative mortgage products include:

  • Adjustable-Rate Mortgages (ARMs);

  • Temporary Buydowns;

  • Home Equity Line of Credit (HELOC) or Home Equity Loan; and

  • Loan Assumption.

In addition, the CFPB said that consumers may consider alternative financing arrangements, such as contract-for-deeds or land contracts, rent-to-own arrangements, and equity-sharing arrangements.

Read the CFPB’s blog post here.

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