June 15, 2020

In its Regulatory Plan for FY 2020, HUD raised concerns about governmental entities benefiting financially from DPA programs. To ensure government programs are not benefiting too much, HUD is considering establishing a de minimis amount that government programs can receive above the cost of the DPA. Such a regulation could dramatically decrease the amount of DPA available from governments who could no longer fund their programs. Government programs like the Chenoa Fund, offered through CBC Mortgage Agency, provides minorities, who often lack intergenerational family wealth to help with home purchases, the ability to buy a home. CBCMA EVP Miki Adams says, “HUD’s focus should be less on the benefit to the government entity and more on the benefit to the borrower.” Adams added that HUD needs to base any changes it makes on program specific loan performance and pricing data, which HUD is currently not collecting. See our policy recommendations here.

 

Read on the Chrisman Report: https://www.robchrisman.com/june-15-production-jobs-marketing-cap-mkts-servicing-products-correspondent-tidbits-webinars-training-this-week/

 

 

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June 5, 2020

Be part of the solution. Minorities have 1/10th the net worth of Whites. According to two prominent African American leaders, this wealth gap is the greatest civil rights issue of our day. Homeownership is the best vehicle for acquiring wealth. You can enable the engine of wealth creation in your community by helping minorities learn about down payment assistance programs to buy now and begin building wealth. Be more than simply a mortgage lender pursuing the latest refi or purchase boom. Now is the time to take a stand and help those missing out on homeownership opportunities.  Be a part of the solution in the creation of housing equality and bridging the racial wealth gap. Contact Chenoa Fund and find out how you can do your part to enact real change. We have the training materials to aid you in your active community outreach.

 

Read on the Chrisman Report:

June 5: Risk, appraisal, LO, AE jobs; broker, DPA, LOS, products; FHA COVID forbearance guidance; payrolls push rates higher!

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Conversation: Hispanic Homebuyers Will Be Critical for the Next Housing Market Recovery (Urban Wire)

On May 6th, 2020, Urban Wire posted an article about Hispanic homebuyers and the post-COVID housing market recovery—Hispanic Homebuyers Will Be Critical for the Next Housing Market Recovery. Here’s Why They May Struggle. The following quote quickly summarizes the article: “The youth and high labor force participation rates of Hispanics position them well to help the housing market recover from the current crisis, but to unleash the power of this demographic, we’ll need to support potential homebuyers and address issues regarding access to homeownership.”

 

Some Critical Urban Wire Data

Urban Wire uses the following data to claim that Hispanics could lead the housing market recovery:

  1. Hispanic homebuyers contributed significantly to the post-2007 housing market recovery.
  2. The Hispanic population is growing quickly, making up 57.6% of population growth (2018), and making up 40.4% of household formation in the last decade.
  3. The Hispanic population falls mostly in prime homebuying demographics, provided they financially weather COVID-19 well.

 

Urban Wire also notes several barriers that could prevent Hispanic homebuyers from this potential:

  1. A high median DTI ratio (42%), with over 1/3 above 45%.
  2. Most Hispanic families can only afford small down payments, with a 2018 median of 3.5%.
  3. The Hispanic population largely has vulnerable incomes.

 

CBCMA Commentary

One of Urban Wire’s five recommendations to strengthen Hispanic homeownership was down payment assistance, and, at CBC Mortgage agency, we couldn’t agree more. We’ve already spent a lot of time sharing how down payment assistance can unleash the power of underprivileged potential homebuyers.

 

The benefits of down payment assistance are enormous, and the risks surprisingly small. For example, a fairly recent Harvard study showed that down payment assistance doesn’t significantly affect the risk of loans—great news, because down payment assistance can be used to overcome most of the barriers that Urban Wire identified. Let’s use Chenoa Fund as an example. Many Hispanic borrowers are held back by high DTI ratios—however, about two-thirds of these borrowers have a DTI of 45–50% (or below), which is within Chenoa Fund guidelines. Thus, these borrowers still have an option to help them break into the home market. Additionally, most Hispanic homebuyers can only afford small down payments, the median being 3.5%; well, Chenoa Fund provides 3.5% down payment assistance on FHA and conventional loans, exactly what these borrowers need. These borrowers can be responsibly assisted into homeownership, begin wealth accumulation and a pattern of intergenerational wealth, and they don’t have to be held back by poor circumstances. Even better, helping Hispanics (and other minority groups) can help the economy bounce back faster following the COVID-19 epidemic.

 

CBC Mortgage Agency’s own data also supports Urban Wire’s positions. First, borrowers that used Chenoa Fund accumulated an average of $27,000 in equity from 2016 to 2020—real wealth gains, great for both the borrower and the economy. This is also wealth that, for the most part, could not have been generated otherwise, as about 90% of Chenoa Fund’s borrowers would not have been able to buy a home without assistance. In short—everything we have suggests that Urban Wire is right, at least with regard to down payment assistance and the potential power of minorities.

 

We also want to applaud Urban Wire for the other solutions it proposed that could help Hispanic communities more easily access homeownership; no one solution, alone, will bring homeownership to minorities, or help the housing market resurge. Federal aid, more robust income assessment measures, and land-use and zoning reform could positively change generations of Hispanic families by putting more in homes today. CBC Mortgage Agency lends its voice in support of all efforts to responsibly improve homeownership. We also suggest reading Urban Wire’s article directly—it’s worth every word.

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The Cleveland Realtist Association, Minority Homeownership, and Chenoa Fund

41%.

 

That number represents the homeownership rate of the black community in the United States.

It’s among the lowest of homeownership rates in the nation—and it has been going down for years. Homeownership rates improve slightly for other minority groups, but they still aren’t good (45–55%). From this, it is clear that many underprivileged Americans need help to access the benefits of homeownership.

 

Fortunately for Ohio, there is the Cleveland Realtist Association (CRA).

 

The Cleveland Realtist Association, a chapter of the National Association of Real Estate Brokers (NAREB), dedicates itself to fighting inequity and injustice, and to building up its local community through service and education initiatives. The CRA knows the hardships that face black and minority Americans and seeks to raise their standard of living through homeownership.

 

The Cleveland Realtist Association also strives tirelessly to serve its communities in many other ways; here, I want to highlight two efforts that CBC Mortgage Agency (CBCMA) has supported the CRA in.

 

First, the Cleveland Realtist Association champions down payment assistance (DPA). DPA is a necessary resource for many black and minority families, as the down payment is becoming an increasingly insurmountable barrier to homeownership. CBC Mortgage Agency, provider of Chenoa Fund, applauds the CRA’s vision and strives to support the CRA and the cause of down payment assistance.

 

Second, the Cleveland Realtist Association provides many trainings to help real estate agents become certified realtist. In fact, one of the CRA’s recent trainings prepared over one hundred realtist to serve their communities in Cleveland, Columbus, Dayton, Cincinnati, Akron, Youngston, and Toledo. To support this effort, CBCMA provided a realtist training and certification course through CRA. Monique Winston, president of the CRA, had this to say about CBCMA’s training course:

 

“I have received nothing but amazingly positive feedback from those who attended the Chenoa [CBCMA] certification sponsored by the Cleveland Realtist Association (a division of the National Association of Real Estate Brokers—NAREB). The response was so encouraging that we added a second class, and word quickly spread among chapters throughout Ohio and other states, such as New Jersey. It far exceeded my expectations.”

 

Mark Williams, a branch manager at CrossCountry Mortgage, attended one of these trainings and had the following comment:

“As a lender who has used this program, I’m extremely pleased with the training. This training was informative and very useful in learning about various products available through Chenoa. Through this program, I was able to save several purchases for clients that otherwise would not have been able to purchase their first home. It is specifically useful for individuals who may not have savings, but have stable employment and responsible spending habits. Our clients are grateful for the assistance you offer.”

 

To further support these realtist, CBCMA offers the following to all realtist trained through its program:

  • Free custom marketing 
  • Direct account representative available to answer borrower questions 
  • Account highlighted and marketed as a realtist, CRA- and CBCMA-trained
  • Borrower leads 
  • Priority of company news and updates

 

This realtist training program is still available; schedule your CRA realtist certification with Chenoa Fund through realtor@chenoafund.org.

 

The Cleveland Realtist Association’s vision goes forth boldly with certified realtists armed with knowledge and a passion for their communities. To learn more about the Cleveland Realtist Association, NAREB, and their shared mission, visit https://www.clevelandrealtist.org/. There you can find the dates of future seminars and become a member.

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20-24: Undisclosed Debt Monitoring Policy

All FHA Programs: All borrowers must have at least one credit score. To be sure that there is no new adverse credit activity, new debt, or material inquiries, CBCMA requires a soft pull credit report or UDM (Undisclosed Debt Monitoring) report within ten days prior to close. CBCMA highly recommends correspondents utilize a debt monitoring service that checks for new debt or material inquiries. While soft pull credit reports are acceptable, they may disclose additional information that may require an update to the AUS.

If there is a new material inquiry, then CBCMA will require that an LOE explaining the new material inquiry be provided to determine if new debt was incurred. If new debt was incurred prior to closing, then FHA guidelines may require that the file be re-run through AUS and the debt added to the borrower’s final application.

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The Cleveland Realist Association, Minority Homeownership, and Chenoa Fund

41%.

 

That number represents the homeownership rate of the black community in the United States.

It’s among the lowest of homeownership rates in the nation—and it has been going down for years. Homeownership rates improve slightly for other minority groups, but they still aren’t good (45–55%). From this, it is clear that many underprivileged Americans need help to access the benefits of homeownership.

 

Fortunately for Ohio, there is the Cleveland Realist Association (CRA).

 

The Cleveland Realist Association, a chapter of the National Association of Real Estate Brokers (NAREB), dedicates itself to fighting inequity and injustice, and to building up its local community through service and education initiatives. The CRA knows the hardships that face black and minority Americans and seeks to raise their standard of living through homeownership.

 

The Cleveland Realist Association also strives tirelessly to serve its communities in many other ways; here, I want to highlight two efforts that CBC Mortgage Agency (CBCMA) has supported the CRA in.

 

First, the Cleveland Realist Association champions down payment assistance (DPA). DPA is a necessary resource for many black and minority families, as the down payment is becoming an increasingly insurmountable barrier to homeownership. CBC Mortgage Agency, provider of Chenoa Fund, applauds the CRA’s vision and strives to support the CRA and the cause of down payment assistance.

 

Second, the Cleveland Realist Association provides many trainings to help real estate agents become certified realists. In fact, one of the CRA’s recent trainings prepared over one hundred realists to serve their communities in Cleveland, Columbus, Dayton, Cincinnati, Akron, Youngston, and Toledo. To support this effort, CBCMA provided a realist training and certification course through CRA. Monique Winston, president of the CRA, had this to say about CBCMA’s training course:

 

“I have received nothing but amazingly positive feedback from those who attended the Chenoa [CBCMA] certification sponsored by the Cleveland Realtist Association (a division of the National Association of Real Estate Brokers—NAREB). The response was so encouraging that we added a second class, and word quickly spread among chapters throughout Ohio and other states, such as New Jersey. It far exceeded my expectations.”

 

Mark Williams, a branch manager at CrossCountry Mortgage, attended one of these trainings and had the following comment:

“As a lender who has used this program, I’m extremely pleased with the training. This training was informative and very useful in learning about various products available through Chenoa. Through this program, I was able to save several purchases for clients that otherwise would not have been able to purchase their first home. It is specifically useful for individuals who may not have savings, but have stable employment and responsible spending habits. Our clients are grateful for the assistance you offer.”

 

To further support these realists, CBCMA offers the following to all realists trained through its program:

  • Free custom marketing 
  • Direct account representative available to answer borrower questions 
  • Account highlighted and marketed as a realist, CRA- and CBCMA-trained
  • Borrower leads 
  • Priority of company news and updates

 

This realist training program is still available; schedule your CRA realtist certification with Chenoa Fund through realtor@chenoafund.org.

 

The Cleveland Realist Association’s vision goes forth boldly with certified realists armed with knowledge and a passion for their communities. To learn more about the Cleveland Realtist Association, NAREB, and their shared mission, visit https://www.clevelandrealtist.org/. There you can find the dates of future seminars and become a member.

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Conversation: DPA Doesn’t Cause Loans to Default.

Despite the focus of the world largely being on COVID-19 and quarantines right now, the battle for down payment assistance (DPA) continues to rage quietly in the background. In the most recent instance, HUD has expressed intent to limit (or shut down) national down payment assistance programs, which would effectively create regulatory monopolies in every state. Lack of competition only creates a worse product; therefore, efforts to limit national DPA programs will harm borrowers. (To be clear, when I speak of DPA here, I’m referring to government- or nonprofit-funded DPA, not DPA provided by family or friends.)

 

One of the arguments behind limiting DPA is the idea that DPA carries with it extra default risk, which is the perspective of FHA and HUD (page 12). To be fair, HUD does back up its claims with some data, but this data has been proven to not consider all risk factors at play (see: A Cautionary Tale of How the Presence and Type of Down Payment Assistance Affects the Performance of Affordable Mortgage Loans). For example, a risk factor that HUD fails to account for is race; blacks are significantly more likely than whites to receive DPA (as explained in the paper summary for the just-mentioned paper) and are also slightly higher risk. When controls for race are factored into risk models, the slightly increased risk disappears, showing that “DPA appears to be unrelated to default risk” (page 12).

 

This data is significant. For one thing, it suggests that limiting access to DPA will harm minority groups, the exact groups HUD is trying most to help. For another, if DPA is unrelated to default risk then restricting DPA (including nationwide DPA programs) does little to nothing to mitigate risk.

 

The paper also mentions several benefits that come with DPA: (effective) forced savings for low-income households (page 3) and wealth accumulation from equity as markets rose (pages 12–13). Minority borrowers would be denied these benefits unfairly if DPA were restricted.

 

This information—DPA doesn’t impact default risk, DPA helps minorities and low-income earners, the many benefits DPA brings to the underserved—comes together to show that limiting DPA is not the solution HUD is looking for. Limiting DPA doesn’t protect loans, but it will harm minorities looking to break into homeownership.

 

Still, it’s necessary for HUD to monitor the marketplace. Richard Ferguson, President of CBC Mortgage Agency, and Michael Whipple, Vice President of CBC Mortgage Agency, have proposed an alternative course of action in their paper HUD’s Rulemaking on DPA: A Better Way for HUD to Manage Government DPA. Their suggestion is, essentially, to allow continued competition between DPA providers, which will drive forward innovation and consumer-friendly features, and to require transparency of information from all government DPA providers. HUD already has the tools in place for a robust DPA reporting system, so this shouldn’t be too difficult to implement.

 

In short, while the FHA fund does need to be protected, any action or policy intended to do so needs to be data-driven; furthermore, all policies ought to be very carefully examined to make sure that they don’t hurt the borrowers they are intended to help.

 

I highly encourage everyone who reads this to read fully A Cautionary Tale of How the Presence and Type of Down Payment Assistance Affects the Performance of Affordable Mortgage Loans and HUD’s Rulemaking on DPA: A Better Way for HUD to Manage Government DPA.

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Introducing Policy & Research

As you may have noticed in our last post, CBCMA has some strong opinions about how HUD and the other governmental authorities should fit and function in our industry. While sustainable housing is our mission, it is critical that law makers, legislatures, and others provide critical guidance and support to programs like ours.

Through the past 3 years of our tenure, our executive team has researched and publicly commented on many pieces of policy and legislation, and have been participants in the rule making process. As we work towards our goal of sustainable homeownership, it is our secondary mission to join together with legislature and other governmental authorities to make and be the change needed in this industry.

In effort to make our position even more transparent to those who we work with, we’ve created a Policy & Research section here on our site.

Policy & Research

This section will include:

  • Op-Ed pieces that we’ve published
  • Articles from our executive leadership
  • Upcoming events and ways to participate in the housing conversation

We are excited to publish our first piece in this section today titled: HUD’s Rulemaking On DPA:  A Better Way For HUD to Manage Government DPA.

Contrary to the Trump administration’s policy of reducing regulation, HUD’s most recent regulatory plan proposes increased regulation on government-provided DPA, regulation that will prove most harmful to minorities and low-income brackets—the exact groups that DPA has previously been most helpful for. In this upcoming blog post, CBCMA President Richard Ferguson and CBCMA Vice President Michael Whipple break down the problems with HUD’s proposed plan and provide a better solution. This upcoming blog post is a call to everyone in the mortgage industry, particularly those invested in serving the underserved; promoting an open, competitive market; and supporting data-driven policy.

You can find this and all other policy and research pieces here on our website.

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Why does HUD want to end national down payment assistance programs?

by Clayton Jarvis | May 18, 2020
Originally published: MAP

 
With COVID-19 flattening the U.S. economy into a bleak and colorless landscape for prospective first-time buyers to navigate, it seems an odd time for the Department of Housing and Development to move forward in their efforts to shut down national down payment assistance plans.

 

But that’s precisely what’s happening, according to CBC Mortgage Agency president Richard Ferguson.

 

“It’s really quite troubling,” he says.

 

HUD has been a vocal opponent of national down payment programs since the 2008 financial meltdown, for which the Department laid some of the blame on the once widespread practice of seller-funded down payment assistance. Ferguson explains that rather than actually providing funds for buyers, sellers were more often in the habit of raising the asking price of their properties and funnelling the proceeds back to buyers through the aid of a non-profit. The inflated prices meant countless buyers wound up purchasing homes that were overvalued shortly before the housing market fell off a cliff and hit every crag on the way down.

 

“They see a company like Chenoa Fund,” CBC’s down payment assistance program, “and they start to get just a little worried that national down payment assistance programs could have the same kind of affect that they had in 2008,” Ferguson says. “But down payment assistance isn’t what it was 12 years ago.”

 

Still, HUD has remained active over the past year in trying to eliminate the viability of programs like the Chenoa Fund. Circa Easter 2019, the Department attempted to implement a rule that would have spelled the end of such national DPA programs. Fortunately for Ferguson and CBC, the rule was so poorly worded that, if it had been implemented, it would have also prevented individual states from providing down payment assistance. 

 

“We immediately followed suit,” says Ferguson. “It was an easy win.”

 

But HUD has gone back to the drawing board. Ferguson says the Department is attempting to craft a rule that would limit a government entity like the Chenoa Fund to lending within its jurisdiction. Because CBC is a native entity operating on tribal land in Utah, HUD may be hoping the courts limit the Chenoa Fund’s reach to its tribal boundaries.

 

As far as legal arguments go, it’s not exactly foolproof.
“What HUD’s not recognizing is that the federal government bureau that gave us our charter, the Bureau of Indian Affairs, actually stated that we have the ability to provide down payment assistance or operate nationally,” Ferguson says. Any rule in contravention of that charter would likely be thrown out in court.
 
HUD declined involvement in this story, so questions around why shutting down national DPA programs remains a priority when 30 million Americans are out of work will have to be left unanswered.
 
Ferguson believes such programs are more necessary now than ever. Originators, because of the rapidly changing rules and lending standards that COVID-19 has triggered at the state level – not to mention the murk forbearances add to the equation – are growing increasingly wary of providing down payment assistance to borrowers whose loans may not be able to be sold to state housing agencies.
 
“FHFA would be well served by allowing a national provider of down payment assistance to provide a countercyclical balance to what they states are forced to do when these market issues happen,” he says. “We’re actually saving a lot of deals that the states are no longer accepting because they’ve raised credit requirements or lowered DTI or changed pricing.”

 

Reducing the amount of DAP available in the market seems like a curious move for a department whose mandate is “to create strong, sustainable, inclusive communities and quality affordable homes for all”. Ferguson feels homeownership is one of the most effective ways of addressing the widening wealth gap that exists in the U.S., and that HUD’s attempt to cripple programs like the Chenoa Fund will fuel further inequality. 
 
“If these down payment assistance programs go away, most of the minorities that are reliant on these programs will be shut out of the market and will be forced to be a permanent renting underclass,” he says.
 
The Chenoa Fund assists approximately 7,000 homeowners every year.

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20-22: MERS Transfer

All mortgage loans, first and second liens, must be transferred to CBC Mortgage Agency as Investor (owner/beneficiary) and Servicer through MERS at the same time the first mortgage is transferred, which will be within seventy-two (72) hours after the first mortgage is purchased, but never before purchase (MERS ORG #1012881). Review this in section 10.2.
We remind all correspondents of the following when registering and transferring MINs:

  • Select the correct lien type for the loan
  • Ensure the loan amount is correct
  • Lender organization ID is entered as the Originator for all first mortgages
  • CBCMA organization ID is entered as the Originator for second mortgages
  • Borrower(s) social security number is correct
  • FHA Case Number is entered and is correct (if applicable)
  • Enter the CBC Mortgage Agency loan number as Investor Loan Number

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Chenoa Fund

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