DS News

DS News Jan 2023

DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.

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Page 22 of 83

21 ers who are not economically disadvantaged, which could eventually displace lower-income households. Historically, concerns about violating the Fair Housing Act made many lenders wary of people-based programs that use identify- ing characteristics, such as race/ethnicity, to determine eligibility. However, regulators, like the Office of the Comptroller of the Currency (OCC), have indicated that SPCPs can use this approach, which has led to a growing number of people-based programs. For exam- ple, the LISC San Diego Black Homebuyers Program offers a down payment assistance grant to Black first-time homebuyers in San Diego County who earn less than 120% of the area's median income. In a similar vein, the Homeownership Council of America's (HCA) National Down Payment Assistance Programs serve BIPOC first-time homebuy- ers earning up to 140% of AMI, as well as low-to-moderate income first-time home- buyers earning up to 80% of AMI, across the country. Assistance Many SPCPs provide down payment assistance, either as a low-interest loan or as a grant. However, the amount of assistance varies considerably. At the lower end, the Chase Homebuyer Grant program offers a $5,000 grant that can be used as part of a down payment or to reduce closing costs. At the upper end, the LISC San Diego Black Homebuyers Program offers a $40,000 grant. (Recipients can also receive an additional $9,000 grant from Union Bank, the pro- gram's partner lending institution.) Other approaches include offering lower interest rates or loosening underwriting guidelines. Wells Fargo's SPCP is structured as a refinancing program in which all Black borrowers with an FHA mortgage in the Wells Fargo servicing portfolio qualify for a reduced interest rate (which was 3.75% in July 2022). TD Bank's SPCP is a special mortgage product that uses broader debt-to- income and loan-to-value metrics for cus- tomers in qualifying majority Black/Hispanic census tracts, as well as a $5,000 lender credit that can be put toward a down payment. Terms Entities offering SPCPs not only must decide whether down payment assistance funds are being offered as a loan or a grant, but also whether the loan is forgivable. Some programs, for example, try to recycle funds and serve families in the future by providing low- or no-interest down payment assistance loans that must be repaid when the home is sold. Alternatively, the Champlain Housing Trust Homeownership Equity Program offers first-generation BIPOC homebuyers up to $25,000 in down payment assistance as a zero-interest loan that is fully forgiven after three years. is helps ensure that borrowers do not immediately flip their homes while also allowing them to accumulate wealth they can access when they sell their home or pass it on to an heir. Other programs—such as the San Diego Black Homebuyers Program, the Chase Homebuyer Grant, and the credit compo- nent of TD Bank's program—provide down payment assistance as a grant that has few if any additional requirements related to them. e rationale is that homebuyers who benefit from family gifts for down payments do not have to repay those funds and do not have to abide by required periods of residency in the home, so program participants should be similarly unrestricted. Entities developing SPCPs have to consider several other important factors, including how they reach potential recipients (who may distrust lenders) and whether programs should include more fine-grained eligibility requirements to ensure they reach the desired households. (For a good over- view of these and other issues, see the SPCP Toolkit provided by the Mortgage Bankers Association and the National Fair Housing Alliance in partnership with HCA.) As entities grapple with these questions, many have forged successful partnerships with community-based organizations to help conceptualize, implement, and evaluate these programs. As more SPCPs are launched and more households use them, evaluating their effectiveness will be an important part of developing initiatives that can help narrow longstanding racial homeownership gaps. Journal

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