Down payment assistance programs and first-time homebuyer solutions have been around for decades, but few programs succeed on a consistent basis – much less thrive.
U.S. mortgage lenders have worked with community development programs and budget-challenged state housing programs over the years, but some mortgage originators find such sources to be difficult solutions for their clients, due to inconsistency in funding availability and/or inconsistency in the loan underwriting requirements. National lenders struggle to find DPA programs that offer some sense of consistency from city to city and state to state. Now there’s a national DPA program that appears to be firing on all cylinders, offering a steady source of funding along with consistent FHA underwriting and loan quality standards. The winners – first-time homebuyers across the U.S.
DPA Background:
Most first-time buyers manage to purchase a home by saving for a down payment over a period of years, or perhaps receiving gifts from parents or other family members. But increasing home prices and stagnant or low wages can make this process difficult, and many Americans lack the earning power to reach that home buying mark. As a result, they have no way to break into homeownership and reap its economic benefits for themselves and for their children.
Studies reveal that many would-be buyers have the income and credit history to qualify for a loan, but they lack sufficient savings for a down payment. This barrier is often the most significant economic obstacle for families seeking to transition from renting to sustainable homeownership, and the consistent availability of down payment assistance programs can make all the difference for more U.S. families.
Homeownership rates have decreased over the last ten years, and this decline was most dramatic among minority households, millennials and single-parent households. The need for down payment assistance is greater than ever.
Enter the Chenoa Fund:
The Chenoa Fund is a DPA program managed by CBC Mortgage Agency, a federally-chartered government agency that provides down payment assistance to borrowers that qualify for FHA-guaranteed mortgage loans. People who meet CBC’s credit score and debt-to-income requirements may be eligible for a FHA first mortgage and a second mortgage through CBC – which in many cases is forgivable – to cover their 3.5 percent minimum investment. The Chenoa Fund has served the U.S. first-time homebuyer market in a significant way, having completed more 10,000 mortgage transactions since 2013.
Not Seller-Funded:
Chenoa Fund DPA programs are NOT seller-funded. Chenoa Fund DPA’s most popular program provides second mortgages, which may be forgivable depending on the borrower’s income. If the borrower’s income exceeds 115% of median income for the area, the second mortgage has repayment terms. If the borrower’s income level falls below the area’s median income benchmark, the second mortgage is forgivable and does not need to be repaid as long as the borrower makes on-time first mortgage payments for 36 months.
Loan Quality:
CBC Mortgage Agency adheres to FHA underwriting guidelines to ensure all borrowers are capable of undertaking the financial commitment of homeownership. Borrowers must have a minimum credit score of 620.
Education:
A leading non-profit homebuyer counseling agency based in Baltimore, MD, known as Hope Loan Port (HLP.org) works closely with CBC Mortgage Agency on a QA and Homebuyer Education initiative. HLP provides financial education for first-time homebuyers receiving Chenoa DPA funds, to ensure new homeowners understand the importance of making their mortgage payments on time. This education component is part of an overall lending strategy developed by HLP to help CBC’s borrowers sustain homeownership, while simultaneously improving loan performance measures in an effort to maintain the financial soundness of the FHA insurance program.
The HLP/CBC outreach and education program engages all new CBC homeowners each month during the first year of homeownership. Each homeowner receives financial advice from a HUD-approved nonprofit housing counselor targeted to their specific needs, with the goal of helping them make their mortgage payments on time. The counselor will also teach customers how to build a budget, save money for home repairs and other steps needed to maintain responsible homeownership.
CRA Solutions:
The Chenoa DPA program is not the only offering available by CBC Mortgage Agency. While the Chenoa Fund helps lenders meet the needs of the low-to-mod income segment in their communities, and serves the first-time buyer market, CBC also offers another innovative solution designed to help banks to meet CRA credit requirements.
CBC offers a web-based marketplace known as the CRA Note Exchange. The CRA Note Exchange facilitates the sale of second mortgage loans, created to provide down payment assistance, to depository institutions seeking to augment their CRA loan portfolio. The CRA Note Exchange is open to all providers of down payment assistance, including State HFA’s who seek liquidity for their second mortgage paper. This solution creates a secondary market for down payment assistance loans, which may enable lenders to reduce costs to the consumer.
Depositories, or buyers of the CRA-eligible paper, may access the marketplace through the portal, CRANoteExchange.com. The site is searchable by census tract and other criteria relevant to a lender’s CRA performance and is intended as a portal for all holders of CRA-eligible notes to create liquidity.
This is a first of-its-kind program offering innovation to the industry, opening new opportunities for banks in need of CRA credits.
For more information on CBC Mortgage Agency Chenoa Fund, visit: https://chenoafund.org/
Sean D. Stockell is the CEO of Your Home Digital, LLC and Publisher of YourHome1Source.com.
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