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Bank of America will launch a 3% down payment home loan in partnership with Freddie Mac, but will not retain any risk if the loans default. Thats because B of A will immediately will sell the loans and servicing rights to Self-Help Federal Credit Union, a Durham, N.C., community development lender.
February 22 -
Housing policy focused on government guarantees and the 30-year mortgage hasn't done much to help low- and middle-income homeowners build wealth.
February 5 -
Presumptive Democratic nominee Hillary Clinton appears likely to embrace a recent plan to merge Fannie Mae and Freddie Mac into a single government corporation if she wins the White House.
May 20
Homeownership in America today is at a crossroads. The percentage of homeowners has dropped to 63.5%, down from a peak of 69.1% just before the housing crisis. We know how to safely reverse that trend. Now is the time to act. To improve minority homeownership rates, and in the process bolster the overall homeownership rate, the mortgage industry should begin by taking a careful look at the criteria used to enable homeownership, known in the industry as the three Cs: credit, collateral and capacity.
The forecasts of a declining homeownership rate are based on static assumptions about public policy and the effectiveness and growth of private sector and nonprofit programs that would encourage homeownership.
By some estimates, the homeownership rate will decline even more sharply in the decade ahead as millennials choose to rent, instead of own, their homes. They ignore the fact that, while most research shows that millennials are not buying homes now,
For the most part, forecasts of a further decline in homeownership assume that, because homeownership rates for minority groups have trailed that of whites, and because minorities are the fastest-growing segment of the overall population,
The past does not have to be prologue — and more emphatically, there's no need for past trends to carry forward into the future. Because minority homeownership rates have historically been lower than those of whites doesn't mean that they have to continue along the same path.
Prior to the housing crisis of 2008, the homeownership rate for minorities was on the rise. Although early criticism of the crash was leveled at loose credit standards, more exhaustive and less myopic research has shown that rational credit standards that enabled previously underserved populations to obtain homeownership
Post-crisis
If we want the homeownership rate to increase, then credit requirements — especially around qualifying credit scores for the best mortgage rate available — have to make sense. Today they don't.
As for collateral, generally speaking, the more equity in a home the less likely a homeowner is to default. However, this leads to lenders and investors in mortgages to look less favorably on low-down-payment mortgages, the type of mortgage often used by minorities who generally have less wealth to draw on for a down payment.
Homebuyers who have
Moreover, the
Finally, capacity. Capacity is the ability or income to meet the mortgage obligation as well as other expenses without undergoing undue financial stress. NeighborWorks is not in favor of stated income mortgages. We don't want borrowers to take on more debt than they can manage. We want lenders to verify income. However, we also want lenders to
One role of a housing counselor is to tell a consumer the truth about their finances — income, expenses, savings goals, etc. Basically, a budget. When housing counselors work with lenders the entire financial picture of the borrower is considered, rather than only a single ratio. As a result, more homeownership options will be available to everyone, including minorities, who otherwise would not have been able to secure a mortgage.
A few lending products introduced this year are moving in the right direction, offering alternative ways of looking at income, particularly of every adult living in the home,
Marietta Rodriguez is the vice president of homeownership programs and lending at NeighborWorks America, a congressionally chartered nonpartisan nonprofit headquartered in Washington.