The Broken Delivery System
In the wake of the Great Recession, access to mortgage credit remains an unattainable goal for many first-time home buyers. This lack of access to mortgage credit is contributing to a growing divide in America of “have” and “have not” households by precluding many families from owning a home at a time when mortgage interest rates are affordable. The consequences are many. Lower income families cannot build net worth, and are forced to pay rent that often greatly exceeds the PITI costs for the very same homes. Neighborhoods hard hit by the crisis, and often where lower income and multicultural families live, don’t benefit from the stability and investment that comes with an increase in community stakeholders.
The reasons for this continuing dilemma are many – lack of borrower cash for down payment and closing costs, tight mortgage credit standards, new regulatory requirements regarding ability to repay and fair lending, fewer public subsidies, lack of lender expertise in affordable lending, hesitancy to make loans with perceived rep and warrant risk, and the high cost of originating atypical and sometimes complex high LTV, low value mortgages.
Relies on local relationships with few loan officers that often don’t have the time or incentive model for LMI borrowers or complex DPA loans.
- Banks struggle to manufacture LMI loans at a reasonable cost given the new regulations and niche market-based programs.
- CRA motivated investors and the CDFIs & other originators of those loan products don’t exist in all areas of the country – with Mortgage Brokers having been all-but regulated-out of the industry.
- Borrowers with loans less than $100K struggle to find any lender willing to assist them with a loan, and minority communities devastated by the foreclosure crisis remain the least served.