Homeownership counseling symposium draws nonprofits, lenders

January 30, 2017 | By

Whether you call it homebuyer coaching, advising, or counseling, it’s help that’s available for prospective homebuyers. Unfortunately, few know about it. And that’s something participants in a recent symposium at Fannie Mae’s headquarters in Washington, DC hope to change.

Participants from the mortgage industry and their partners in government and the nonprofit housing counseling sector shared ideas during the daylong meeting. They looked at how to get the word out about their services, create new revenue models, and expand the use of technology for sharing data among partner organizations to improve service levels and lower costs.

Read more: What you should know about homebuyer-prep courses (even if you’re a repeat buyer)

Jeff Hayward, Fannie Mae’s executive vice president and head of its multifamily business, welcomed participants. And he noted that in Fannie Mae’s experience, counseling “can help more eligible but tentative families” build the knowledge and confidence they need to buy a home.

Hayward noted that counseling benefits the buyer. But it also helps lenders by expanding the pool of mortgage-eligible buyers – many of whom might otherwise not be in the pipeline. He cited borrowers whom lenders have declined at the prequalification or loan application stages. And he described how they have worked with an advisor to reassess and rectify the reasons for the decline.

Fannie Mae’s role in homeownership is a “business imperative to meet the changing buyer demographic in America,” Hayward says.

Read more: Making an affordable mortgage product easier to use, available to more homebuyers

Fannie Mae’s HomeReady® mortgage is an example of the company’s commitment to affordable lending and supporting new homeowners, he says. The product was designed to help households facing challenges in getting approved for a mortgage. It does that by allowing lenders to consider non-borrower household income and income from boarders. And it has an educational requirement for the borrower.

Fannie Mae recently announced an enhancement to the program. It now offers a $500 loan-level price adjustment rebate for HomeReady loans delivered to Fannie Mae with pre-purchase counseling.

“Informed and knowledgeable borrowers are better prepared,” says Hayward. “And we believe we’ll see improved long-term performance for these loans.”

Research on Homeownership Counseling

Fannie Mae’s Economic and Strategic Research (ESR) Group used the forum to share preliminary findings from their ongoing research on the barriers the industry faces.

ESR interviewed individual lower-income first-time homebuyers. They also talked to focus groups of real estate agents and loan officers who have experience with pre-purchase homeownership counseling programs.

Interview and focus group participants were generally not aware of homeownership counseling services. They did know of the counseling to the extent that particular loan programs or down-payment assistance may require it.

The research also found that when loan officers advise borrowers of the requirement, it’s usually late in the process – typically two weeks prior to closing. There is very little elective participation by either consumers or professionals.

In the interviews, loan officers and real estate agents – the two professions many rely on for help in buying a home – agreed the counseling programs were beneficial. But they were unsure about their role as a referral source. For loan officers, it’s one more thing on the long list of paperwork to make the deal happen. The real estate agents saw counseling as beyond the scope of their services. Their focus is on finding the home, not financing.

In the eyes of the ESR researchers, these findings present an opportunity as the industry looks for ways to motivate homeowners to utilize the programs.

Overcoming Home-Buying Barriers

Acknowledging funding and regulatory challenges, some lenders shared the steps they have taken to integrate counseling with their loan application process.

As part of a pilot program, DiTech is hoping to connect declined applicants to education and counseling solutions.

“If the consumer is not ready today, we want to invest in preparing them for managing housing needs in the future,” explains Laura Reichel. She is DiTech’s senior vice president of government agencies, product development, and investor relations. “We’re looking for strategies to help potential customers overcome barriers to eligibility.”

Transforming an Industry

While there was widespread agreement on the benefits of counseling, the question of how to compensate counseling organizations remains an ongoing challenge.

Some borrowers may only require a few weeks, while others could be in the pipeline “for years,” notes Marcia Griffin, founder and president of HomeFree-USA, a HUD-approved homeownership counseling organization.

Read more: Partnerships to Build Your Pipeline and a Powerful Community Image

Brad Blackwell, EVP, housing policy and homeownership growth strategies at Wells Fargo, was on her panel. He described how his team is focusing on making homebuyer education a common feature of the mortgage buying process, instead of an add-on.

“We need to be thinking big here. The idea is not to just help people qualify for buying a home, but to be as prepared as possible for owning that home. We want them to find the product that is most appropriate for them, to understand what owning a home will be like, and ultimately prepare them so that they will be able to stay in that home,” Blackwell says.

“To that end, we are focusing on taking a leading role in working with educators, counselors, nonprofits, and other mortgage industry leaders to design and create a sustainable national model for housing education. This will allow us all to provide education for millions of customers, not just a fortunate few,” he adds.

Attendee David Berenbaum, CEO of Homeownership Preservation Foundation, offered an idea from the floor during the interactive session. He believes that everyone who benefits from homeownership education should help fund the programs. That could include society (public funding), lenders, investors, and homeowners.

“Technology can be a barrier to the ‘coop-etition’ needed in our industry,” says Ericka Plater, senior vice president, NeighborWorks Services Group. She presented a new technology-sharing program to the group. Some agencies have state-of-the-art computing equipment, she notes, while smaller mom-and-pop agencies lack equipment, technical knowledge, and funding.

“It’s a tremendous challenge,” agrees Griffin.

But the biggest challenge of all was saved for last: marketing. Put simply, many people – including immigrants, young buyers, and minorities – aren’t aware of the advantages of housing counseling.

There is a need to reach people earlier in the home-buying process to offer them a coach for what may be the largest purchase they ever make. The public’s perception of homeownership education and counseling needs to change. That way, buyers can take pride in seeking out help – just as much as when they want a home inspector to assist them.

Marketing the programs and making them part of a “normal” buying process is a challenge the room agreed is a priority. “Now what will you do?” Griffin challenged attendees at the meeting’s close.

 

 

 

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