Within the competitive landscape of the real estate finance system, some businesses are able to thrive best by complementing other service providers rather than jockeying for market share.
Miki Adams, president of CBC Mortgage Agency (Chenoa Fund), sat down with Dodd Frank Update to discuss how down payment assistance providers, like her, succeed with a business model based on cooperation.
CBC’s internal program was explicitly designed to be lender-friendly and borrower-focused, she explained.
While many housing assistance programs are dependent on government appropriations, CBC’s is funded by private capital. As a national program, CBC can step in when another program’s local or state funding is interrupted, ensuring that borrowers do not lose access to crucial assistance.
CBC does not originate loans itself. Instead, the company works closely with lenders, realtors and brokers to expand access to homeownership and confront housing affordability challenges. Its privately funded model is particularly valuable at times when government funding is unavailable, such as during the recent federal government shutdown.
“Programs like ours are designed to weather these challenges in government,” Adams said. “The more readily available we can make down payment assistance to borrowers that need it, the more opportunities we have to make homeownership a possibility for so many more families that aren’t otherwise able to access or get into homeownership because of certain barriers. I think programs that don’t rely on federal funding, or even state or local funding, should be supported and encouraged.”
To make the process of working with borrowers receiving down payment assistance less cumbersome for its lending partners, CBC tries to keep its internal rules and processes as streamlined as possible, rather than making them juggle a patchwork of different state-based programs. This is intended to reduce administrative strain and enable lenders devote their internal resources to underwriting, compliance and borrower services.
CBC also limits overlays, additional requirements beyond standard guidelines, and deliberately avoids one of the most common restrictions in down payment assistance: income caps tied to area median income (AMI).
“A lot of down payment assistance programs have an AMI requirement,” Adams said, noting these are often capped at 80 percent, above which borrowers do not qualify. Seeing this, she decided to eliminate all AMI limitations for borrowers at CBC.
“That means someone who is a young professional, just out of college, with student loan debt, but who makes a good living, still has the opportunity to get into homeownership, even though they haven’t had a chance to acquire enough funds to meet the down payment requirements,” Adams explained.
To make this approach work, her company developed a structured credit policy, capital markets execution strategy and a risk management plan that would allow broad accessibility without sacrificing safety and soundness.
There is a lack of knowledge among consumers about the types of down payment assistance options available to them, Adams said. The same can even be said for many Realtors, brokers and lenders.
“That’s an area that I have a lot of interest in, because brokers are just immersed in the heartbeat of their communities, focused on helping their neighbors – not that other lenders aren’t – but providing them better awareness about the availability of down payment assistance programs is really critical,” Adams said. “Speaking with some of them in one particular state, I found there was a lack of desire to want to work with borrowers who are either getting FHA (Federal Housing Administration) loans or who are getting down payment assistance for the transaction, because of the concerns that there are going to be delays in closing.”
To spread the word, Adams schedules frequent speaking engagements at educational events for consumers and industry professionals, where they can learn about title insurance, the appraisal process and credit scoring. In some cases, CBC and its partners will even pre-qualify borrowers right there at the event.
“You’d be surprised at just how many consumers are out there that just didn’t realize these programs are available,” she said. “Their eyes just open right up, and it’s the most satisfying experience to be able to know that we’ve just touched someone who is going to be able to change the trajectory of their life by being able to own a home.”
Among the organizations she partners with are the Mortgage Bankers Association and the National Association of Hispanic Real Estate Professionals.