TheMReport — News and strategies for the evolving mortgage marketplace.
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18 | TH E M R EP O RT COVER STORY in February, a conforming loan designed to provide low- and moderate-income homebuyers access to mortgages with only a 3 percent down payment. In partnership with Self-Help Ventures Fund and Freddie Mac, the mortgage program, available through all of Bank of America mortgage sales channels, also offers counseling from Self-Help and BofA mortgage officers. The top four banks will sell the loans, including servicing rights, to Self-Help, which will provide post-closing counseling for any borrowers. Loan servicing will be immediately transferred after origination to Self-Help's des - ignated specialty servicer, who will handle all loans regardless of future performance. Nimble, fast, and with a proven team of experts, BofA has the ability to implement programs like this that provide flexibility and add to the company's growing array of products for borrowers. Continued in the Affordable Loan Solution makeup, Freddie collaborated with Self-Help and BofA to define credit terms, and recently approved Self-Help as a seller/servicer to facilitate the roll - out of this offering to borrowers. A notable part of the program, Freddie Mac will purchase all of the eligible affordable mortgages originated via the Self-Help and BofA partnership. Borrowers may use second - ary financing, such as an afford- able second loan, grants, or cash on hand. The Affordable Loan Solution program will also consid- er non-traditional forms of credit to demonstrate credit history. Though one-third of BofA's mortgages attract the low- or moderate- income homebuyer, participation by Freddie and Self- Help was critical in the develop - ment of the program because the bank wouldn't take on some of the riskier loans that other lenders might to gain market share, says Dave Stekel, a Bank of America product management executive. "We tend to be a little more conservative in our [mortgage] product offerings than some other lenders; we have a very moderate risk appetite. Therefore, our credit offerings may not be as competi- tive as those of some of the more aggressive large and small lend- ers," Stekel said, adding that most of the lender's issues during the market downturn were a result of the Countrywide acquisition. "From the mortgage crisis for - ward, we have known what our niche is," Stekel said. That niche is conservative mortgage lending that stands to benefit from the bank's vast array of products and nationwide foot - print. According to Stekel, BofA has a financial relationship with one out of every two people in the country. Beyond the Affordable Home Solution program, BofA partici - pates in other programs designed for low- and moderate-income families. In March of 2016, the top four lender launched the Bank of America Down Payment Resource Center, an online resource of more than 1,000 down payment and closing cost assistance programs. Prospective homebuyers need to answer only five questions to learn instantly which federal, state, or local down payment and closing cost programs they could be eligible for. Wells Advances Sustainable Homeownership and Neighborhood Recovery A lso a provider of several spe- cialized mortgage programs, Wells Fargo offers an exclusive Union Plus Mortgage Program, featuring special benefits, a dedicated program structure, and a trained salesforce for eli - gible union members, including spouses and domestic partners, their parents, and children. The program is available for up to 59 subscribing international and national affiliated labor unions and 30,000 local unions. In collaboration with NeighborWorks America, its local affiliates, and city officials, Wells offers LIFT programs to support sustainable homeownership and advance neighborhood recovery. The program includes down payment assistance and programs designed to meet the housing needs of local communities. As of April 1, 2016, more than 11,000 new homeowners would have been able to achieve the dream of homeownership with the support of LIFT programs. Regional Lenders: Specificity in Solutions for Niche Markets T he key to any special pro- grams that large, regional, or small lenders alike might take on is finding a way to handle the risk of loans that have little or no secondary market, says E. Thomas Booker III, Managing Director of Washington-based The Collingwood Group. MiMutual Mortgage, the retail arm of Michigan Mutual, has expanded beyond its regional footprint to become a recog - nized national lender. However, MiMutual's business is still largely concentrated in the company's home state of Michigan. The lender works with regional or community banks in differ - ent areas to offer many con- ventional loans as well as loans that fit market needs but are not offered by national lenders, says Daniel Jacobs, EVP of Retail for MiMutual. In markets where building is booming, MiMutual is offering jumbo and construction loans. Vale, Colorado, and Park City, Utah are ripe for these loans, where the loan-to-value (LTV) sits at 70 percent versus the typical 80 percent, according to Jacobs. MiMutual also offers a Native American lending program that features 2.25 percent down pay - ments, 1.5 percent in upfront mort- gage insurance, and 0.15 percent monthly mortgage insurance—all lower than Federal Housing Administration Mortgages. Additionally, no FICO score is re- quired and the loans are manually underwritten to make generous allowances for lack of credit his- tory, past credit problems, or other circumstances that don't fit normal lending parameters. Each loan application is considered individually, and is personally underwritten by a HUD 184 Home Loan Program representative. This enables many Native Americans who would not qualify for conventional loans to obtain a HUD 184 Home loan. Another MiMutual program is designed for foreign nationals, using unconventional identifica - tion to meet the needs of those without social security numbers. Instead, the loans require a copy of the borrower's passport and visa; income and employment verified with tax returns and accountant letter, and proof of business registra - tion; assets verified with banking reference letter and three months of income (home country assets al- lowed); and foreign credit report or at least two letters to establish cred- itworthiness from the United States or the borrower's home country. Local Lenders Benefit From Building Trust and Cultivating Personal Buyer Relationships U nlike the big lenders that lost much of their mortgage business as a result of the financial crisis, community banks and credit unions maintained their market share, according to AEI's Pinto. By keeping the loans in their portfolios rather than selling them to the secondary market, local lenders can make exceptions when warranted to "standard" under - writing guidelines. Community banks have another advantage over big lenders in that they have a bet- ter perception of trust than their larger cohorts, The Collingwood Group's Booker adds. Though big lenders may have more programs, including ones that offer slightly lower interest rates, consumers tend to see a level playing field among the variety in lenders, according to Booker.