Frost Bank Is Betting On 0% Down Mortgages In Texas

Frost Bank previously announced in 2023 that it was reentering the mortgage business after a multiyear buildup that included system development and pilot programs. Now, reporting from Dallas news outlet WFAA says that the Texas-based bank is coming back swinging with a new program for borrowers who have been priced out of the housing market.

Bill Day, Frost Bank’s senior vice president of corporate communications, clarified the company’s timeline to HousingWire and confirmed the bank began offering mortgages again in 2023.

“We’ve been steadily increasing since then,” Day said. “We started working with companies to help us design a system back in 2021 and started offering mortgages to employees in a pilot program in 2022. Then we started offering mortgages to customers in a few markets, and later statewide, in 2023.”

After relaunching its mortgage arm, Day said the company set a goal to have $500 million in mortgages by the end of 2025. Frost was able to surpass that, with Modex data revealing that Frost posted $744.2 million in volume last year.

“It has been an incremental process because we created our mortgage lending system ourselves, rather than acquiring a mortgage operator or something similar,” Day said.

“We wanted to build a mortgage lending process that would fit with the rest of our customer-centric culture, which is why we intend to service the mortgage ourselves through the life of the loan, rather than bundle and sell off the mortgages as is common elsewhere in mortgage lending.”

A central part of Frost’s push has been its “Progress Mortgage,” a product designed to attract borrowers who have been priced out of the market. The loan offers up to 100% financing with no down payment, no private mortgage insurance and about $4,000 in closing-cost assistance for qualifying borrowers, particularly those earning less than 80% of the area median income (AMI).

Borrowers earning between 80% and 110% of the AMI in low- to moderate-income census tracts may also qualify for waived administrative fees, according to Frost’s website.

The product features a 30-year fixed rate, no minimum loan amount and is structured to lower monthly payments, expanding access to homeownership for underserved buyers.

“Progress Mortgages are not a main source of income for us, but they’re important to our customers here in Texas, where affordable housing is increasingly scarce due to rapid growth, and it’s a great way to introduce new customers to Frost Bank,” Day said.

Banks, which once dominated the mortgage market prior to 2008, have steadily withdrawn their originations activity and mortgage servicing rights (MSRs) presence.

Banks originated roughly 60% of mortgages in 2008 and serviced roughly 95% of outstanding balances, according to data cited by Michelle Bowman, the Federal Reserve’s vice chair for supervision. By 2023, these figures had fallen to 35% and 45%, respectively.

But industry executives told HousingWire last month that banks could become more active if changes to the Basel III regulatory framework provide more flexibility for them to put mortgages on their balance sheets.