If and when they are done right, downpayment assistance programs work, according to Wells Fargo.
February marks the one-year anniversary of a $170 million partnership between Wells Fargo and NeighborWorks America that combines downpayment assistance with home-buying education and community development into the Lift program.
Wells is offering the product in 20 U.S. housing markets.
Designed for moderate-income buyers, the NeighborhoodLift and CityLift programs together have helped 1,624 buyers purchase homes after they receive mandatory homebuyer education training.
The DPA bill so far amounts to $27 million. An additional 460 applicants who will receive nearly $8 million in DPA funds have already signed a contract to purchase a home through the programs.
More than $64 million remains available for DPA grants through Lift programs in participating housing markets, the bank said.
DPA grants are funded by Wells Fargo and administered by the NeighborWorks network of nonprofit affiliates.
Wells Fargo’s executive vice president and head of government and community relations, Jon Campbell, credits the programs as an efficient way “to encourage the kind of collaboration that needs to keep happening between the private sector, the nonprofit sector and elected and public officials.”
Which is why Lift programs work, said CEO of NeighborWorks America, Eileen Fitzgerald. They are helping homeowners make healthy financial decisions and also “are contributing to community stabilization” both in the short and the long term. For example, in Baltimore the program helped promote foreclosure sales.
The $170 million initiative was launched in February 2012 in Los Angeles and Atlanta offering DPA grants ranging from $15,000 to $30,000 per homebuyer “depending on the housing market.”
Qualifying criteria include an annual income not exceeding 120% of the median income for the area, homebuyer education training administered by HUD-approved housing counselors such as NeighborWorks America affiliates, and the requirement to use the purchased property as primary residence for five years in order to “earn their downpayment assistance grants.”
“The program is trending well, in less than a year,” Chris Hammond, Wells Fargo SVP of corporate communications, told this publication. “There’s millions in DPA grants to deliver still.”
He agrees that some providers have offered questionable DPA products in the past.
The Lift program works, he says, because while Wells provides the DPA funds, the program is based on a public private partnership that includes the NeighborWorks America network, local municipalities and other lenders. Mortgage loans are offered to credit worthy borrowers who need a little help but are approved through a local NeighborWorks affiliate. Any lender can participate.
“It really is about sustainable community development,” he adds, as was the case in Atlanta where some buyers of foreclosures immediately started to renovate the properties to their family needs.
It is an investors market in many locations where DPA can make available foreclosure inventories affordable to creditworthy borrowers, he said.
During the past two years more than 14,000 potential home buyers have attended NeighborhoodLift and CityLift events in participating cities. The next CityLift program homebuyer event is scheduled April 5-6 in Baltimore.