As expectations rise to finally seeing a mortgage market shift to more home purchase loan originations, it also implies lenders will have to provide first-time homebuyer products that work.
Examples of low default risk loans that have performed well over time include the First Time Homebuyer product offered by
SECU recently celebrated a milestone for the product. Since 1988 the total volume of loans underwritten for SECU members has exceeded expectations, reaching $1 billion. It has helped over 8,300 members become homeowners.
As important, however, says SECU senior vice president of loan originations, Spencer Scarboro, is that loan losses have been minimal.
He recalls how “even in the midst of the great recession,” when the unemployment rate in North Carolina still was very high at around 9%, “net charge-offs in the FTHB program” were very low.
According to SECU data, over the past 12 months charge-offs averaged at just 0.29% and the 60-day delinquency rate remains below 2%.
Under the FTHB program qualified members can borrow up to 100% of the purchase price for a primary residence. It is fair to assume that many of these borrowers would not be able to become homeowners had they applied for a conventional mortgage loan with a major bank.
Borrowers can choose between a fixed interest rate and an adjustable-rate mortgage for a term of up to 30 years.
Adjustable-rate loan options available are either two-year ARMs or five-year ARMs.
Over the years the average FTHB loan has been approximately $180,000; the loan limit does not surpass $200,000.
Competitive interest rates and low settlement costs, along with no origination or credit report fees and no private mortgage insurance requirement, provide significant savings for borrowers.
SECU also offers young members a 100% financing option, and many have taken advantage of it “to gain a head start” on homeownership.
According to Scarboro, the fact that they are a locally focused credit union has helped the institution provide “unique, fair, consumer-focused services to North Carolina communities.”
SECU is a member-owned not-for-profit financial cooperative that has operated in North Carolina for 75 years. Currently it serves its 1.8 million members through 248 branch offices.
Other banks are providing target grant financing for first-time buyers through local-based organizations.
Amegy Bank has partnered with the Federal Home Loan Bank of Dallas. In 2010 the FHLB of Dallas provided $59,000 from an affordable housing program grant fund earmarked for Easter Seals Greater Houston, a local community organization that among others assists borrowers with special needs through the Easter Seal Home of Your Own program.
Through Easter Seals, Amegy Bank and the FHLB of Dallas assist “income-qualified, special-needs homeowners” with down payment and closing costs on properties in the greater Houston area.
Earlier in May Easter Seals used grant money to assist a disabled Houstonian to become a homeowner.
Joe James, who relies on a wheelchair and primarily works from home for American Airlines, was making a second attempt at homeownership when he qualified for $20,000 through the Easter Seal HOYO program. He also qualified for $7,500 in AHP funding and approximately $6,000 provided by an Independent Development Account with Covenant Community Capital, one of the HOYO partner agencies.
James was a return customer who finally qualified for a mortgage payment that was lower than what he previously paid for rent, said Katy Thorstenberg, the HOYO program coordinator who works with first-time homeowners. His case shows homeownership takes persistence and the collaboration of different financing sources, she said.
For example, the AHP grants were designed to assist in the development and rehabilitation of affordable housing for very low- to moderate-income households.
In 2012, the FHLB of Dallas awarded $8.3 million in such grants that helped create or rehabilitate 1,248 housing units throughout its five-state district of Arkansas, Louisiana, Mississippi, New Mexico and Texas. Another $10 million in AHP grants has been made available for 2013.
