An estimated 5% of homebuyers get help with their downpayment and closing costs from a formalized assistance program, according to a recent LendingTree survey. But Freddie Mac is out to change that.
The secondary market company has launched a program lenders and housing counselors can use to find appropriately matched programs and then download the results to share with borrowers.
Called DPA One, the software aggregates and showcases up to three DPA programs at a time, side-by-side, so lenders can review them and make a quicker, more informed decision on which their customers might like to pursue.
According to Down Payment Resource, a firm which keeps tabs on assistance programs nationwide, more than 2,300 programs are offered throughout the country. Assistance takes many forms, including lower mortgage rates, silent second mortgages and grants that need not be paid back.
DPA One, which was announced this weekend at the Mortgage Bankers Association’s Annual Convention and is online now, currently lists assistance programs that are available from housing finance agencies in 48 states. State HFAs operate the bulk of assistance programs, but some come from the borrower’s employer.
The new Freddie Mac tool also lists local and municipal program offered in Texas and Minnesota. By year’s end, local programs offered in California, Florida, Kentucky and Virginia also will be listed, with the remaining local program set to be added throughout 2024.
In announcing DPA One, Sonu Mittal, Freddie Mac single-family senior vice president of acquisitions, noted the difficulty homebuyers have in finding and comparing the “many available programs and their guidelines.” He called the task “challenging.”
But government sponsored enterprise wants to make it so assistance becomes just one more part of the lending system. “Our goal is to make it so simple that loan officers can tell which programs are available and whether one or more might work for the borrower,” Mittal told National Mortgage Professional. “That’s the journey we are on.”
First-time buyers, particularly GenZers age 18 to 26, are the most likely candidates. But Millennials age 27 to 42 and GenXers age 43 to 58 also are big users. Even a relative smattering of Baby Boomers get help, according to LendingTree. And according to DPA, nearly 40% all programs are for repeat buyers who have owned a home in the last three years.
But Freddie Mac’s Mittal told NMP that “a lot” of programs go unused, even though accumulating a downpayment is the largest single hurdle home buyers must overcome.
Billed as a “one stop shop” for downpayment assistance, DPA One (DPAOne.FreddieMac.com) allows lenders to enter client eligibility parameters, receive a fast response and compare appropriately matched programs. By reviewing the side-by-side results, lenders can make more informed decisions on programs they can pursue of behalf of their clients.
The site also helps reduce submission errors and questions from lenders by using a single, standardized format. And it allows providers to manage, edit and update their programs in real-time as requirements change.
