The Three Percent Solution

TheMReport — News and strategies for the evolving mortgage marketplace.

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20 | Th e M Rep o RT Feature housing counseling nationally while others offer it regionally. A typical pre-purchase hous- ing class at one of these agencies often is a day-long event. As part of these classes, candidates learn about the total costs of ownership, from monthly mortgage payments to utility bills, home maintenance fees, and even lawn-care costs. They cover essential household expenses like food, gas, car loans, and payments on other debts. They also teach consumers to put away some savings. A Unified Technology Platform W hile this collaborative approach is very attractive, it will be crushed under its own weight unless execution is cost-effective and barriers for entry are minimal. The variety of stakeholders within each segment—originator, housing counselor, consumer, and respective proprietary systems—demands a neutral, unified communications platform to ensure efficiency, transparency, and accessibility across multiple parties. The same challenge of mov- ing data, documents, and communications among disparate parties to facilitate processing foreclosure alternative applications may be leveraged to assist origina- tors, housing counselors, and con- sumers in the new marketplace. Mortgage companies partici- pating in this partnership stand to see their pool of applicants increase significantly. There are three other key benefits for any mortgage company: • Better Performance, Fewer Losses. As mentioned before, research shows that people who work with housing coun- selors have better repayment and lower default rates and suggest that these programs offer a pathway to sustainable homeownership. • Borrower Loyalty. By referring applicants to credit counselors, the company is offering them a way to help build financial capa- bility and security. They are also building institutional loyalty by showing a commitment to help candidates achieve their goals. • Improved Underwriting and Credit Quality. This program addresses the challenges posed by regulatory requirements, including the Community Reinvestment Act and the secu- ritization market. It also offers a way to receive an objective third-party assessment of the ability to repay. Is There Really Any Downside? T his approach offers valuable benefits to lenders, nonprofit credit counseling organizations, and, most of all, consumers. But there are also some barriers that need to be addressed. Potential borrowers must understand that they need to genuinely improve their finances and spending habits to qualify for a mortgage, as well as closely follow whatever type of budget that credit counselors recommend. Naturally, lenders will want to see a return on their investment. If they send potential borrowers counseling agencies and few, if any, qualify for a loan, this approach simply won't work. And nonprofit credit counseling agencies need to know that mortgage companies are making concerted efforts to send them a steady stream of candidates before giving these applicants high priority. Consequently, mortgage companies and counseling agen- cies can develop strong working relationships that help consumers learn how to finally qualify for mortgages, assist lenders in devel- oping a larger pool of responsible borrowers, and boost the number of people credit counselors serve. The old way of doing business is not going to help grow the housing market. We have the expertise and the resources to make this new approach work. Rather than accepting the status quo, it's time to consider a new solution that works for mortgage originators, nonprofit credit counselors, and individuals who want to own a home. Application submitted to lender Industry-Wide Applicant Preparation Service Higher Risk Applicant Ability to Repay (1-2 weeks) Declined Applicant Long-term Rehab (12-18 months) Declined Applicant Short-term Issues (1-6 months) 1 Applicant assessed and assigned a service level 2 Applicant info uploaded into industry-wide technology platform and assigned to a HUD–Certified Counselor near applicant's location 3 Applicant coached/counseled with results recorded in platform (regular updates may be shared with lender if applicant approves) 4 Lender works with applicant to complete loan 6 Certificate issued to applicant 5 Industry-Wide Applicant Preparation Service CaMillo (CaM) T. MelChiorre, a former vice president of servicer relations at Freddie Mac, is currently the president and CEO of Hope LoanPort (HLP), a neutral, national, nonprofit, Web-based platform bringing efficiency, standardization, and transparency to the processing of all types of foreclosure alternatives. He has overseen development of HLP's servicer and counselor portals, as well as its consumer-direct portal, Homeowner Connect. Source: Home LoanPort

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