homebuyer assistance: discovering hidden treasure
DESCRIPTION
This presentation highlights the types of home buyer assistance programs that are underutilized, yet which are made available to qualified home buyers. Many of those who qualify are not even aware of the fact that they would qualify for such assistance. The type of assistance that is usually made available is far-ranging, from down payment assistance to interest rate breaks to closing cost reduction. The presentation begins with a layout of housing affordability pressures throughout both Georgia and the United States, with an additional emphasis on the effects that transportation costs have on metropolitan households. This creates a need for “workforce housing” which is interpreted differently from “affordable housing”. The presentation concludes with an illustration of the types of home buyer assistance opportunities that are made available through area MLS with the help of a program developed by Workforce Resource, an Atlanta-based company committed to making such opportunities available to qualified home buyers. The presentation was made at a consumer conference in Chattanooga in early 2010. The presenters were Rob Chrane, Principal of Workforce Resource, LLC, and Dr. Andy Carswell, Associate Professor at the University Georgia’s Department of Financial Planning, Housing and Consumer Economics.TRANSCRIPT
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
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Source: Harvard University Joint Center for Housing Studies
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Proprietary and confidential © 2008-2010Workforce Resource, LLC
Proprietary and confidential © 2008-2010Workforce Resource, LLC
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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
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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
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Opportunity
• Make housing assistance more accessible• Expand the pool of qualified homebuyers• Provide buyers better financing solutions• Serve more customers, more efficiently
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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
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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 .
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Multiple Listing Service Public Search Site
Example only, not an actual web page
Customizable Down Payment Resource links Consumers to Buyer Assistance Programs
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Multiple Listing Service Public Search Results Page
DPR link can appear on qualifying listings
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Broker/Agent Search Results Page
Example only, not an actual web page
DPR link can appear on qualifying listings
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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
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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