homebuyer assistance: discovering hidden treasure
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The Art of Homebuyer Assistance:
March 5, 2010
Rob Chrane, President, Workforce Resource
Andrew T. Carswell, Ph.D., University of Georgia
Discovering Hidden Treasures
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Agenda
• Affordable vs. Workforce Housing• Misperceptions• Market Realities • Buried Treasure• Case Studies• Who Wins?
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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
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Proprietary and confidential © 2008-2010Workforce Resource, LLC Source: Harvard University Joint Center for Housing Studies
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Source: Harvard University Joint Center for Housing Studies
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Common Misperceptions and Facts
• I thought Subprime was gone!• 0% down- a thing of the past?• Isn’t this what got us here?
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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
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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
Proprietary and confidential © 2008-2010Workforce Resource, LLC
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
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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
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Forms of Assistance
• 1st mortgages• Grants• Soft 2nds• Equity sharing• Land Trusts• EAHP
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Eligibility Factors
• Location• NSP• Sales price• Household size• Household income• Ownership history • Occupation/special circumstances• EE, EAHP, TOD
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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
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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
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Dysfunction at the Junction
• Fragmented and fractured• Confusing and contradictory• Hard to understand, harder to explain• Buried treasure!
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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
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Is it any wonder why…
• Professionals struggle• Consumers lose
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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.
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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
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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.
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SALES PRICE $249,900 $249,900
LESS: 4% GRANT OF LOAN AMOUNT $7,996 $0
LESS: OPPORTUNITY BOND ASSISTANCE 2nd $24,990 $0
LESS: ADDI DPA $10,000 $0
LESS: $0 $0
AMOUNT FINANCED * funds applied first to CC & Pre-paids $199,900 $242,400
INTEREST RATE 6.50% 7.125%
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
MINIMUM INCOME REQUIRED (43% DTI) $45,875 $57,350
CLOSING COST AND PRE-PAIDS $8,996 $10,271
CASH TO CLOSE $58,996 $17,771
LESS AVAILABLE DPA AND GRANTS $42,986 $0
NET CASH TO CLOSE $16,010 $17,771
Assistance No Assistance
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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.
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SALES PRICE $249,000 $249,000
LESS: 4% GRANT OF LOAN AMOUNT $5,576 $0
LESS: $0 $0
LESS: AAHOP/ADDI DOWN PAYMENT $10,000 $0
LESS: EASTSIDE TAD FUNDS $94,000 $0
AMOUNT FINANCED * funds applied first to CC & Pre-paids $144,000 $241,500
INTEREST RATE 7.00% 7.375%
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
MINIMUM INCOME REQUIRED (43% DTI) $44,316 $57,433
CLOSING COST AND PRE-PAIDS $7,379 $7,379
CASH TO CLOSE $112,379 $32,279
LESS AVAILABLE DPA AND GRANTS $109,576 $0
NET CASH TO CLOSE $2,803 $32,279
Assistance No Assistance
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Opportunity
• Make housing assistance more accessible• Expand the pool of qualified homebuyers• Provide buyers better financing solutions• Serve more customers, more efficiently
Proprietary and confidential © 2008-2010Workforce Resource, LLC
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
Proprietary and confidential © 2008-2010Workforce Resource, LLC
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.
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Earn CRA Credits While You Sleep
Example only, not an actual web page
Consumers can determine their eligibility for assistance 24/7.
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Market Bank-owned REO
Down payment assistance is
available for homebuyers. > See if you’re eligible
Example only, not an actual web page
80-90% of homebuyers start their search online. Show them where to find their downpayment .
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Multiple Listing Service Public Search Site
Example only, not an actual web page
Customizable Down Payment Resource links Consumers to Buyer Assistance Programs
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Multiple Listing Service Public Search Results Page
DPR link can appear on qualifying listings
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Broker/Agent Search Results Page
Example only, not an actual web page
DPR link can appear on qualifying listings
Proprietary and confidential © 2008-2010Workforce Resource, LLC
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.
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Consumer Contact Request
Consumer submits contact information and requests to be contacted.
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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.
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Who Wins?
• Consumers• Communities• Real Estate professionals• Small businesses• Industries• Local, State and Federal Governments
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Summary
Affordable vs. Workforce HousingMisperceptionsMarket Realities Buried TreasureCase StudiesWho Wins?
Proprietary and confidential © 2008-2010Workforce Resource, LLC
Thank You!
Rob Chrane, President, Workforce Resource
Andrew T. Carswell, Ph.D., University of Georgia
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