Download - Homebuyer Assistance: Discovering Hidden Treasure

The Art of Homebuyer Assistance:

March 5, 2010

Rob Chrane, President, Workforce Resource

Andrew T. Carswell, Ph.D., University of Georgia

Discovering Hidden Treasures

Proprietary and confidential © 2008-2010Workforce Resource, LLC

Agenda

• Affordable vs. Workforce Housing• Misperceptions• Market Realities • Buried Treasure• Case Studies• Who Wins?


WORKFORCE HOUSING DIFFERS FROM SIMPLE “AFFORDABLE HOUSING” IN THE FOLLOWING WAYS

• Home Ownership Opportunities

• Proximity to Services/Less Reliance on Commutes

• Critical Workforce

• Upwardly Mobile/Young


Source: Harvard University Joint Center for Housing Studies


Common Misperceptions and Facts

• I thought Subprime was gone!• 0% down- a thing of the past?• Isn’t this what got us here?


CRA and GSEs: Culprits or Scapegoats?

• Origins• Motivation• Findings• Differences

Sources: Report to Congress on the Root Causes of the Foreclosure Crisis

Office of Policy Development and Research, U.S. Department of Housing and Urban Development , January , 2010

Rates of Foreclosure in HOME and ADDI Programs

Christopher Herbert, Concentrance Consulting Group Inc., Karmen Carr, Ken Lam, Yusuf Makhkamov


Market Realities

• Tighter credit + media = sidelined consumers• Housing Tax Credit expires = lost incentives• Fewer first-time buyers = move-up gridlock• #1 barrier• Hidden solutions = lost sales


Assistance Programs Carry Many Benefits!

• $Billions in down payment assistance available

• Layering adds more dollars when permitted

• 100% financing available

• Usually NO monthly payments

• Usually 0% interest

• Some are grants


Have You Heard of…?

• $8,000 Federal Housing Tax Credit• Equity Sharing• Land Trusts• MCCs• USDA Rural Development• GA Dream• Vine City/English Avenue Trust Fund• Beltline TAD


Forms of Assistance

• 1st mortgages• Grants• Soft 2nds• Equity sharing• Land Trusts• EAHP


Eligibility Factors

• Location• NSP• Sales price• Household size• Household income• Ownership history • Occupation/special circumstances• EE, EAHP, TOD


Starts with Property

• Qualified listings in every community

• 37,482,000 units

50% of Owner Occupied housing would qualify for Down Payment Assistance if listed today*

*Estimate extrapolated from data captured in American Housing Survey 2007

U.S. Census Bureau and HUD


Who Can Buy a Modestly Priced Home?

• Barriers to homeownership• 2,515,600• Three ways to increase affordability• Maximum impact

– $7,500/+ 8% pts = 5,097,400– $10,000/+ 12 % pts = 6,454,500

Who Could Afford to Buy a Home in 2004 by Howard A. Savage U.S. Census BureauSurvey of Income and Program Participation, 2004


Dysfunction at the Junction

• Fragmented and fractured• Confusing and contradictory• Hard to understand, harder to explain• Buried treasure!


Counseling Challenges and Opportunities

• Reach clients at the right time• Limited funding for marketing and outreach• Insufficient public awareness• Demonstrate value of education and counseling• Find new ways to reach consumer • Investigate new technologies

Source: The State of the Housing Counseling Industry

HUD 2008 Report


Is it any wonder why…

• Professionals struggle• Consumers lose


Case Study #1

• Borrower #1: A woman, 88 years old and living on a fixed income of $965/month.

• Borrower #2: Her 60 year old daughter lives with her and works as a housekeeper, making $1275/month.

• Their current apartment is being condemned and they have 60 days to vacate the premises.

• They have found a home nearby and closer to public transit, but the purchase price is $180,000.


SALES PRICE $180,000 $180,000

LESS: 4% GRANT OF LOAN AMOUNT $2,752 $0

LESS: OPPORTUNITY BOND ASSISTANCE $36,000 $0

LESS: AAHOP/ADDI DOWN PAYMENT $10,000 $0

LESS:OTHER- AHA ($20,000), MAP ($35,000), EDI ($12,500) $67,500 $0

AMOUNT FINANCED * funds applied first to CC & Pre-paids $69,200 $174,600

INTEREST RATE 6.50% 7.125%

FIRST MORTGAGE TERM 30 30

MONTHLY P & I PAYMENT $437 $1,176

MONTHLY PMI NA $86

MONTHLY T&I ESCROW $285 $285

MONTHLY MORTGAGE PAYMENT $722 $1,547

MINIMUM INCOME REQUIRED (33% DTI) $26,255 $54,600

CLOSING COST AND PRE-PAIDS $5,452 $7,938

CASH TO CLOSE $116,252 $13,338

LESS AVAILABLE DPA AND GRANTS $116,252 $0

NET CASH TO CLOSE $0 $13,338

Assistance No Assistance


Case Study #2

• Borrower: A public school teacher living comfortably on her $47,500 annual salary in a 1 bedroom apartment.

• She has been living within her means and has been able to save about $12,000.

• Her elderly parents moved to the U.S. from their homeland on the other side of the world to live with her.

• Our teacher found a home suitable for the three of them including space for an office. The cost was $249,900.


SALES PRICE $249,900 $249,900


LESS: OPPORTUNITY BOND ASSISTANCE 2nd $24,990 $0

LESS: ADDI DPA $10,000 $0

LESS: $0 $0



TERM OF FIRST MORTGAGE 30 30

PRINCIPAL AND INTEREST PAYMENT $1,264 $1,633

MONTHLY PMI NA $119

MONTHLY T&I ESCROW $365 $365

MONTHLY MORTGAGE PAYMENT $1,629 $2,117



CASH TO CLOSE $58,996 $17,771


NET CASH TO CLOSE $16,010 $17,771



Case Study #3

• Borrower: An Atlanta city municipal worker earning $45,500 per year is a 1st-time homebuyer and a single father to a son.

• He wants to live close to work and enroll his son in a new charter school just blocks from his office.

• He found a condo downtown where he can walk his son to school on his way to work.

• The sales price is out of his range at $249,000, but he is considering borrowing against his 401K in hopes of qualifying for a smaller mortgage.


SALES PRICE $249,000 $249,000


LESS: $0 $0

LESS: AAHOP/ADDI DOWN PAYMENT $10,000 $0

LESS: EASTSIDE TAD FUNDS $94,000 $0



TERM OF FIRST MORTGAGE 30 30

PRINCIPAL AND INTEREST PAYMENT $958 $1,668

MONTHLY PMI NA $120

MONTHLY ESCROW (Condo- Taxes & HOA only) $630 $630

MONTHLY MORTGAGE PAYMENT $1,588 $2,418



CASH TO CLOSE $112,379 $32,279


NET CASH TO CLOSE $2,803 $32,279



Opportunity

• Make housing assistance more accessible• Expand the pool of qualified homebuyers• Provide buyers better financing solutions• Serve more customers, more efficiently


What is Down Payment ResourceSM?

• An easy-to-use solution– Automated connection of qualified listings and buyers– Tracks and describes assistance programs

• A web-based service for:– Banks and lenders– REALTORS®

– Home builders and developers– Housing counselors

• A new business generator


Capture More First-Time Homebuyers

Example only, not an actual web page

Down Payment Resource link allows consumers to self-screen for eligibility and request assistance.


Earn CRA Credits While You Sleep


Consumers can determine their eligibility for assistance 24/7.


Market Bank-owned REO

Down payment assistance is

available for homebuyers. > See if you’re eligible


80-90% of homebuyers start their search online. Show them where to find their downpayment .


Multiple Listing Service Public Search Site


Customizable Down Payment Resource links Consumers to Buyer Assistance Programs


Multiple Listing Service Public Search Results Page

DPR link can appear on qualifying listings


Broker/Agent Search Results Page


DPR link can appear on qualifying listings


Consumer Self-Evaluation

Consumer clicks on link, answers short list of questions, learns programs they may be eligible for, then requests to be contacted for details.


Consumer Contact Request

Consumer submits contact information and requests to be contacted.


After viewing MLS #3501344 at CBBankOwned.com, the following customer has requested to be contacted for more information on the following programs:

LO or agent receives email with consumer’s contact information and details of eligible programs.


Who Wins?

• Consumers• Communities• Real Estate professionals• Small businesses• Industries• Local, State and Federal Governments


Summary

Affordable vs. Workforce HousingMisperceptionsMarket Realities Buried TreasureCase StudiesWho Wins?


Thank You!

Rob Chrane, President, Workforce Resource

Andrew T. Carswell, Ph.D., University of Georgia