The Mortgage Go To Guy!!

The trials and tribulations of affordable housing in the State of Florida are well reported in the local and national news. Thanks to the soaring prices of real estate and land speculation from 2003-2006, affordable housing is a huge task for local governments.

One of the pillars of Affordable Housing Loans have been the 95%, 97% and 100% loans. Today FHA offers 97% loans with Full Documentation. This is great because it opens the door to those people who have decent income and debt but just haven’t been able to save enough money to put down a sizable deposit for a conventional loan.

One of the problems comes when you qualify said borrower for their PITI payment - Principle, Interest, Taxes and Insurance… PLUS Homeowners Association and PMI!! These are all part of the “Front End DTI ratio”… the Housing Expense Ratio. Just $100 per month in PMI could disqualify many buyers that are tight on income.

Buyers that are eligible with veteran status can receive VA loans which are guaranteed by the US Government and Veterans Administration. Lenders see these loans as less risky than the FHA and Fannie Mae (FNMA) and Freddie Mac (FHLC) loans at high loan to values… plus it is a “perk” for those people who served in the Armed Forces, Reserves, Coast Guard and their families. (plus there are no income maximums!)

Buyers living in eligible geographical areas are eligible for USDA Rural Development guarantees that work similarly to the VA in that they do not have Mortgage Insurance and can be combined with grant monies to come up with $0 Down loan scenarios. The USDA guarantees the loans so PMI/MPI/MIP are not necessary.

These programs give buyers a real leg up in qualifying for a home.

There are local governments, municipalities, charities, non-profits and even public/private partnerships that offer grant monies to homebuyers that reduce the closing costs, deposit requirements or sometimes significantly reduce the price of the home… I have seen grants as high as $75,000 in Palm Beach County Florida!

Let’s take the State of Florida run SHIP program - State Housing Initiative Partnership Program. This program provides monies at the County Level to be used as grants to homeowners. Disbursements are assessed annually and paid out quarterly. The problem is that at the dollar amounts needed to actually assist a homebuyer in South Florida, those pools of funds do not last very long. They’re great…but they often fall through just because of timing.

What may be a good alternative is to back out of the large sum grants and into a more qualification driven and guaranteed program that is State, County or Municipally backed … perhaps even by bonds.

1. Step One would be to use state funds for 3-5% buyer grants to bring the FHA and Fannie Mae type loans up to 100% Loan to Value. Seller Concessions could pay for closing costs and miscellaneous out of closing third party fees could be rebated at closing.
2. Step Two would be to use state or local funds to pay for or eliminate Mortgage Insurance up front so as to build that guarantee. A State or Government run guarantee program could be backed by Public/Private Partnerships that could re-route the affordable housing towards this program and incent local and nationally chartered banks to move forward with their affordable housing loan programs like CHAMP, GAIN and MyCommunity.
3. Step Three would be to work with builders and developers. Some of the Affordable Housing Ordinances in place are creating a disincentive to developers because of the forced affordable set-asides. They do not want to build affordable units inside higher-priced developments so their “impact fees” should be used to sponsor and guarantee affordable loans. This could also be used to help fund land banking for developers who want to build affordably but land costs are out of control.
4. Step Four - my most controversial measure - this would begin with the certification process of the Realtors & Loan Originators that would be allowed to work with these programs. I believe Florida Department of Financial Services and the Florida Real Estate Commission would benefit the populace by creating a Continuing Education mandated certification for Florida Affordable Housing Professional. Mortgage Brokers should get preference for this over bank employees as it adds two things
   1. • An already educated loan originator that would be able to prequalify the borrower through a consultative interview process.
      • An “arms-length” 3rd party between the Borrower and the Lender who already acts as a Fiduciary Agent of the borrower only.

The features above need to be further explained with the benefits below … besides that affordable housing would be more easily available to those that need it, here are the benefits of each step.

1. $75,000 is a lot of money and taps out SHIP and other Grant funds very quickly. Highlands County Florida’s $900,000 would be tapped out by just 12 homebuyers!! 3-5% of $150,000-200,000 purchases would be $4,500-10,000 grants which would cover 90 first time home buyers instead!
2. PMI can be as little as 2% of the loan amount. 2% of a $150,000 purchase using a 95% Fannie Mae MyCommunity loan is a $2,850 payment. This money could be put in an insurance fund to guarantee the loan.** Note, so far we’re only spending $7,350-$12,850 per first time homebuyer!! more than 1/6th of what is currently doled out!
3. Impact Fees on affordable housing units should without a doubt be waived but commercial and higher-priced developers can more easily absorb their costs. Other public/private partnership programs and State of Florida budget funds could be used to build this account even larger, thus reducing the needs for huge impact fees which could damage overall growth… but the combination of the two would build a great war chest.
4. The furthering of the Fiduciary Role and Certification of Mortgage Brokers will cause banks to back down from their position of control in these programs and allow the state licensing boards to control state funds rather than banks.

With the State of Florida currently reviewing a $6.2Billion Economic Stimulus package with earmarks for Affordable Housing - these suggestions might be a great place to start honing the programs and building a real system that will benefit Florida’s Affordable Home Buyers.

For more featured articles, follow this link -o->http://themortgagegotoguy.com/category/featured-articles/

For more articles on Affordable Housing in Florida, follow this link -o-> http://themortgagegotoguy.com/category/affordable-housing/

More Florida Real Estate Industry News You Can Use from
David A. Podgursky, MBA
TheMortgageGoToGuy.com

Your Full Service Solution for Residential and Commercial
Real Estate Sales & Mortgage Loans in Florida