July 2016 - Lessons Learned

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 17 COVER STORY whether we're at the right level. We firmly believe that anyone who chooses to accept the re- sponsibility of homeownership, and can demonstrate their ability to repay the mortgage should have the opportunity—and educa - tion is key with that. I think as we discussed, there are people who are hesitant to enter the mortgage market, but the interest - ing dynamic is rents are going up. Housing availability is short, as far as affordable housing any- way, so we're experiencing an interesting dynamic right now. The best we can do is try to educate consumers, make sure they understand the true cost of homeownership: That rent versus buy—What really is the best deci - sion for their individual situation? I don't know that there's neces- sarily a number we need to try to be hitting, as long as we make the opportunity available. I think it goes beyond lenders to try to meet that, because you've got folks that feel that credit isn't available. That's really driven by the investors, which would be Fannie and Freddie. The other thing I really think about is that with the cost of developing new homes and new communities, the population actually rising, and the demand being there faster than we can build, it's going to be interesting to see how that's being addressed and problem-solved. I know that again in my particular city, Charlotte, there's a lot of rental units going up, but not so much in the way of single families. MREPORT // Tell us a little bit about what Bank of America is doing in terms of affordable housing initiatives. How are you problem-solving the shortage of housing, and educating potential homebuyers? KC // There's a lot that we are trying to get the word out on. So we'll start with the basic financial literacy piece. We're looking to get people prepared to buy and helping them understand their finances. We partnered with Sal Khan and Khan Academy a couple years ago on creating a website called Better Money Habits ( I invite you to go take a look at it. Khan Academy has been preaching for several years its free education. And it's separate from We did that on purpose. We don't want people to feel like they're being pressured into buying anything. This is really just to provide free financial literacy for any topic you can imagine—whether it's home - buying, buying a car, or student loan repayment. There's even a new section on how to work with your children on money, so it kind of spans the full spectrum of finances and generations. Another thing that we recently came out with was a program called Affordable Loan Solution. This is a program that's a 97 percent loan-to-value product and we're excited about this because, again you don't have to have perfect credit. This product is for credit-worthy borrowers, but I re - peat: You don't have to have per- fect credit in order to qualify for this. For this program, you have to earn no more than 100 percent of the area median income in order to qualify. The reason is we're trying to help the folks that actually need help to get into homeownership. And part of this program also accepts what's called non-traditional credit. So if you don't have a credit score that they're able to create from one of the credit bureaus, then what we can do is use things like your rental history, your cell phone payment history. You can build you a credit profile where we can then say "this particular buyer meets the qualifications of being a responsible borrower." So we can use other criteria other than a FICO score that comes from a private repository, which is exciting. And then finally we also have, and this is probably the industry's best kept secret: Down payment assistance programs. There are many down payment assistance programs out there that people can utilize within different mar - kets. And we support more than 1,000 within Bank of America. These are usually offered by housing finance agencies or non - profits. We have a new repository, it's mentcenter, where people can go enter their criteria and see which programs they may be eligible for. These are usually designed for first-time homebuyers and modest-income buyers. Not all of them, but some of them are just modest-income buyers where the income may be capped at either 80 percent of 120 percent so there may be some income restrictions. We're really focusing on trying to get all of these resources out there that new homebuyers have available to them, and telling them how they can speak with a skilled professional so they can give you what your options are. At the end of the day, we want our customers—or potential customers—to feel like they have found that trusted homebuying advisor. Kathy Cummings outside of Bank of America's Charlotte, North Carolina office.

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