A pilot program that connects mortgage loan originators with housing counselors to assist clients that aren’t yet mortgage ready is now underway in Tampa Bay, Fla. Initial assistance is focused on three areas of support most needed for clients:
►Correcting credit issues (not credit repair)
►Assessing for downpayment assistance (DPA), including wholesale programs
The Tampa Bay Community Development Corporation (TampaBayCDC.org
) is the U.S. Department of Housing & Urban Development (HUD)-approved housing counseling agency that the pilot program has been started with. The goal is to make this program “loan originator- and real estate agent-friendly” and be a referral source for clients who need assistance with issues that are preventing them from purchasing a home. Tampa Bay CDC was selected because of their in-depth experience with credit issues and their willingness to learn about and include wholesaler DPA programs available to independent loan originators.
Positive points experienced so far
1. Prospective homebuyers with issues that need to be resolved can be referred to professionals who can assess the problem and provide a time frame that the client can become “mortgage ready.” Loan originators often try to assist clients with varying degrees of success. But when business picks up, attention to these clients diminishes. Housing counselors focus on client issues and can communicate to the mortgage loan originator on the client’s progress. These clients who are working on becoming “mortgage ready” become a pipeline of future clients for mortgage loan originators and real estate agents.
2. I was pleasantly surprised that an initial client that I’d determined would take approximately five months to get “mortgage ready” took only one month! But the client was not happy with the amount of home that he could purchase due to his debt-to-income (DTI). The only way this client could get a larger mortgage was to have less debt. Because this client’s initial readiness timeframe was so short, this encouraged him to vigorously work on paying down his debt!
3. CIC Credit, the credit reporting agency being used by Tampa Bay CDC and myself, provides the Meridian Link platform that allows all three credit bureaus (TransUnion, Equifax and Experian) to be viewed individually to see which bureau(s) in a credit report is showing the issue. Additionally, CIC Credit provides tools such as the “What If Simulator” and “WayFinder” that shows how scores can change when specific credit is cleared up, the percentage of credit balance usage that results in a higher credit score and what happens when new credit is added. With these tools, the housing counselor worked on my client’s credit and showed him on her computer screen exactly how different options could work to improve his credit. This extra step was the “Eureka!” moment where the client could visually see how his work to improve credit could help him in the long run.
4. Bank mortgage loan originators are aware of benefits of working with housing counselors because banks often provide Community Reinvestment Act (CRA) funds to pay for housing counseling services and encourage their loan originators to work with Housing Counseling Agencies (HCA). But independent loan originators at mortgage companies don’t have CRA funds to pay for housing counseling services upfront. Therefore, a method was needed and developed so that independent loan originators could provide a financial benefit for clients who need housing counseling.
The payment method is called a “Fee for Service.” The client pays a pre-set fee upfront for determined services outlined on a Memorandum of Understanding (MOU) that is signed by the loan originator and the housing counseling agency. The MOU is an agreement that if the client returns to the loan originator/signor, they will receive a credit for upfront housing counseling fees towards closing costs on their mortgage. This ensures that payment of housing counseling services for a client is available whether the client works with a bank loan originator with CRA funds or through a “Fee for Service” method with an independent loan originator where upfront costs are credited towards closing costs at their mortgage closing. This method is already available to clients who have income that is above low to moderate income (LMI) and can encourage more above LMI clients to utilize housing counseling services.
5. Having professional housing counseling services available to assist clients in areas that need more attention than I can give or have experience with has enabled me to provide an option for almost every client I speak with. It has also increased communication with referring real estate agents who are interested in the clients’ progress.
As we find more areas of client need from loan originators, this can be considered as an additional focus of support. The current goal is to provide a step-by-step method that introduces not only the independent mortgage loan originator industry, but the real estate agent industry to upfront assistance that housing counseling can provide for clients with issues and who need assistance to become “Mortgage Ready.”
This article originally appeared in the July 2019 print edition of National Mortgage Professional Magazine.