Home Buyer
Education
Kenneth D. Wade
CEO, Neighborhood Reinvestment Corporation
Tuesday, November 9, 2004; 2:00 PM
The NeighborWorks Campaign for Home Ownership is the largest
initiative of its kind to bring families of modest means into
the economic mainstream by helping them achieve one of their
primary goals in life: buying a home.
As chief executive officer of Neighborhood Reinvestment Corporation,
Kenneth D. Wade oversees the corporation's multimillion-dollar
grant programs and training activities in support of the national
NeighborWorks network of affordable housing and community
development organizations. He joined Neighborhood Reinvestment
in 1990, and has over 25 years of experience in community
development. Kenneth most recently served for five years as
Neighborhood Reinvestment's director of national programs,
initiatives, and research.
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Silver Spring, Md.: Why don't banks pay for the education
and training you do? It would seem to help their pre-screening
process?
Kenneth Wade: Good question. In fact, commercial lenders have
gotten the message that pre-purchase counseling is good for
business. Several major banks and mortgage insurance companies,
including Bank of America, Wachovia, Wells Fargo Bank, Mortgage
Guaranty Insurance Corporation (MGIC), Citibank and other
lenders offer financial incentives to first-time homebuyers
who complete counseling and education programs. Research and
experience has shown that the more individualized the counseling,
the more successful the results for consumers and lenders.
We need to make sure education and counseling programs are
high-quality -- recognized and respected by both buyers and
lenders.
_______________________
Washington, D.C.: So much attention is paid to urban neighborhood
development. Is anything being done to serve rural housing
needs?
Kenneth Wade: Yes absolutely, Neighborhood has a rural initiative
that focuses on rural communities and we have developed specific
training at our training institutes to address rural development
issues.
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Washington, D.C.: How can a homebuyer know if the counseling
and training is reputable and not just a realty or banking
marketing effort?
Kenneth Wade: This is an area of concern for us at Neighborhood
Reinvestment, that's why we are spending considerable effort
to certify homebuyer counselors. If they have our certification
you can be assured that they have the appropriate training
to provide quality counseling. In addition, most local cities'
housing departments would be the best local resource to get
referralls on quality Housing Counseling.
_______________________
Alexandria, Va.: I'm not sure it's a good idea to push more
people into homeownership if foreclosure rates continue to
increase? Why is this the focus of your organization?
Kenneth Wade: Your caution is certainly understandable. In
addition to the litany of perils that befall low-income families
who find themselves unable to keep up with mortgage payments
and/or in a house whose value rapidly deteriorates, low-income
families are also prime targets for predatory lending. But
our experience working with more than 2,300 communities across
the nation tells us that the answer is not to put on the brakes.
Rather, we must do more to ensure that the biggest investment
of a prospective homeowners lives is successful by better
preparing, educating and counseling prospective buyers about
the responsibilities of homeownership.
Studies show that credit and pre-purchase homeownership education
and counseling can lower mortgage delinquency rates by up
to 34 percent. Despite these benefits, only 15 percent of
first-time homebuyers receive quality training in advance.
You are correct to point out that the American Dream requires
much more than wishful thinking, but education and counseling
can turn wishes into wealth. Low-income homeowners (those
making less than $32,000) had a net worth twelve times that
of renters at the same income level.
_______________________
Arlington, Va.: Why wasn't homeownership a bigger issue in
the 2004 campaigns? What do the results mean for housing issues?
Kenneth Wade: Good question. While housing was distinguished
by it's absence from the 2004 campaigns -- I'm hopeful. Here's
why. According to the July 2004 National Housing Opportunity
Pulse poll, housing ranks as voters' third greatest concern,
just behind health care and the economy. The poll found that
81 percent of registered voters want to see elected officials
place a higher priority on housing needs for both renters
and buyers.This represents a virtual mandate for those taking
office to ensure more housing opportunities for low-to-moderate
income households.
In addition - after one of the most bruising and divisive
campaigns in history, the nation needs a healing balm and
focus on an issue that unites. Affordable housing can be that
issue. Plenty of direction can be found in a recently released
report published by the Joint Center for Housing Studies entitled
Opportunity and Progress: A Bipartisian Platform for National
Housing Policy. Authored by two former HUD Secretaries —
Henry Cisneros and Jack Kemp, and the Joint Center's Nicolas
Retsinas, the report presents 12 common sense recommendations
for improved housing conditions.
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Washington, D.C.: How can you tell if the counseling you are
receiving is unbiased and not paid for by one mortgage company
or a realtor?
Kenneth Wade: You ask an important question. Generally nonprofit
organizations are the most likely to be unbiased and trustworthy.
That said, be aware of guidance that seems to steer you in
a single direction and doesn't appear to be customized to
your individual needs.
Another good piece of advice is to use the rule of three —
shop around. When you are making a purchase this large and
important, identify at least three opinions or bids on a service
or product.
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Washington, D.C.: What about the supply of affordable housing?
What good does it do to counsel and educate people about homebuying
if they can't find a house in their price range?
Kenneth Wade: That's a very good point. Federal, state and
local political leaders are challenged to find more ways to
expand the supply of a full-range of affordable housing options.
I see two paths toward improving the vitality of our nation's
housing: working to increase the supply of affordable housing
and to empower demand with educated consumers who are well-prepared
for the responsibilities of homeownership. Neighborhood Reinvestment
is working to wrest more power for consumers by placing an
educated thumb on the demand side of the scale. If successful,
our work to fortify demand will provide more leverage in increasing
the supply of affordable housing in America.
_______________________
Washington, D.C.: What do you make of the current housing
market? Isn't this a bad time to be pushing people to buy?
Kenneth Wade: This morning I read that the Mortgage Bankers
Association is now forecasting only modest increases in interest
rates in the near future. Experts seem to be backing off from
predictions that there is a housing-value bubble ready to
burst. Even Greenspan, does not believe a housing bubble exists,
given the housing market's size and diversity.
Economic conditions, including low mortgage interest rates
and healthy income and employment growth, will continue to
invigorate demand. That's why Neighborhood Reinvestment Corporation
is focusing so much of our time and resources on education
and counseling.
_______________________
Washington, D.C.: Not everyone is in a position to buy a house.
Aren't these policies and efforts focused wholly on homeownership
going to result in a future train wreck of defaults?
Kenneth Wade: You're right. Not everyone is in a position
to buy. Recognizing the importance of viable rental housing
with rents affordable enough for occupants to accumulate savings,
the NeighborWorks® network continues to significantly
address the problems of affordable rental housing. Today,
NeighborWorks® organizations own more than 45,000 affordable
rental homes to low- and moderate-income families. In addition,
those same organizations are preserving and developing at
a pace of approximately 2,500 affordable rental homes per
year. Rental housing is not only an incubator for future homeowners,
but research shows that the strongest communities feature
safe, stable rental housing as part of a full complement of
housing options.
We view rental housing as a critical rung in the ladder of
asset-building. That said, few things build equity for a family
as well as owning their own home.
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Arlington, Va.: How do you tell the difference between predatory
lenders and subprime lenders? Is there a "better business
bureau" where you can report predatory lending?
Kenneth Wade: There is no consistent easy way to differentiate
predatory lenders. I would use the local Better Business Bureau
and the local Consumer Protection organization to see if there
are significant complaints against a particular company. In
addition, there are certain practices that consumers should
generally be on the look out for inlcuding, high pressure
sales tactics, high fees, single premium life insurance, balloon
payments, etc. More information on this will be available
from your local consumer protection organization.
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McLean, Va.: Mr. Wade,
I recently graduated college and saving up for a townhome(w/
my fiance) within a year and a half. Meanwhile, I am living
at home and intend to have up to $25k saved. If my fiance
can save up an additional $10k, what are my options? I hear
it's cheaper for first time buyers. We have very good or perfect
credit. Thanks for your time.
Kenneth Wade: Good credit is a great start and given that
you have that much saved is a great start also. Most lenders
have attractive programs for first time homebuyers so you
would need to inquire specifically about that as you decide
to look for a mortgage. In addition, I would also suggest
that you find an organization that can provide homebuyer education.
Start with your local city's housing department for suggestions.
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Richmond, Va.: First, let me say I enjoy reading your work
and appreciate you taking our questions.
We have a home which is increasing in value at a nice rate.
Currently the principle owed is 125K and the house would probably
sell for $200-210k. There is a possibility that over the next
two years I may move because of my job. I would really like
to keep this current house because it is a great investment.
How hard would it be to keep this house (and rent it out)
and then get another mortgage for another home? What would
be the likely terms on a second home? Any tips and advice?
Kenneth Wade: Housing can be a sound investment particularly
in a market with strong appreciation. The main thing that
a lender is going to look for in qualifying for another home
if you still own an existing one is whether you have the income,
taking into account the amount you receive in rent compared
to the expense of that home in addition to your other debt
compared to your income. This is of course if you have good
credit. Given all of that it shouldn't be too hard to qualify
for another mortgage. However a major question you would need
to face is the challenge of being a long distance landlord
if you are moving away.
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Falls Church, Va.: Are there Web sites or books you would
recommend for prospective buyers?
Kenneth Wade: I would say the best right now would be Fannie
Mae, Freddie Mac and MyFico.com would be good starting places.
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Alexandria, Va.: Do you or any of the groups and people you
train offer distance learning courses for people who may not
be able to commit to a class?
Kenneth Wade: I am not familiar with distance learning opportunities
that exist now although we along with a number of groups are
working on it.
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Washington, D.C.: What do you think is going to happen in
the Brightwood Park neighborhood in D.C.? I am thinking of
buying there (its still affordable) but unsure of the future
of the neighborhood and as a first time homebuyer very apprehensive
of buying in a developing neighborhood. Thanks!
Kenneth Wade: I am not very familiar with the neighborhoods
in D.C. I, I just moved here 6 months ago myself. I would
check with a local counseling organization to get a sense
from them about the different neighborhoods. In addition,
from a real estate perspective realtors should be able to
tell you how housing prices have done over the past couple
of years in a specific neighborhood but as in most large urban
neighborhoods that can vary signicantly from street to street
within a neighborhood. Also see if there is a neighborhood
association serving that neighborhood and talk to some of
the members.
_______________________
Washington, D.C.: Neighborhood Reinvestment works with Community
Development Corporations around the country. Some of D.C.'s
CDCs do not have much to show for what they spend. What can
be done to get D.C.'s underperfoming CDCs to move forward
and generate affordable housing that is desparately needed.
Kenneth Wade: As stewards of taxpayer money and advocates
for our most needy neighbors, we must make sure our investments
are working in ways that truly make a difference. It's not
good enough to talk about simple counts of housing units produced
or dollars leveraged. We must be willing to hold ourselves
accountable for results. If banks and actuaries can refine
their investment and insurance packages with increasing accuracy
and sophistication, we also must find new ways to measure
the impact of our work. This year Neighborhood Reinvestment
will begin using the success measures data system as one important
tool to help answer the question: are we making a difference?
This state-of-the-art program can measure dividends such as
changes in safety, property values, levels of civic engagement
and the quality and performance of schools and healthcare,
helping us to work smarter in serving the real and present
needs in our communities.
_______________________
Washington, D.C.: I am single, 27-year old woman who makes
a modest income. I really want to buy a home or condo in the
near future. It seems like most home buying programs are geared
to either families or people who make less than I do. Are
there programs to help people like me?
Kenneth Wade: Most programs that are for first time homebuyers
are pretty flexible on who can access the counseling although
the often times the financial assistance may be limited or
scaled based on your income. In addition, banks typically
will not be as limited with the loan products that are geared
to first homebuyers.
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Washington, D.C.: Can employers play a role in employee retention
by offering homebuyer education and counseling to its employees?
Kenneth Wade: Absloutely, in fact more employers are recognizing
this and we have examples with our NeighborWorks groups that
are playing that role with local employers. Fannie Mae and
Freddie Mac help employers set up these types of programs.
_______________________
Washington, D.C. (Southeast): Will we ever reach a saturation
point with homeownership?
Kenneth Wade: There is still plenty of demand for homeownership
particularly given the ownership gap between minorities and
non-minorities.
_______________________
Washington, D.C.: Will the election results help or hinder
the work that you do through the NeighborWorks Campaign for
Home Ownership?
Kenneth Wade: There is broad based bi-partisian support for
homeownership. A poll conducted in July 2004 National Housing
Opportunity Pulse poll had housing ranked third among voters
concerns behing health care and the economy. We look forward
to this being an issue that can garner bi-partisan support
going forward.
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Alexandria, Va.: Hello Mr. Wade:
I have a question that's not totally unrelated. I'm preparing
to purchase my first home and I'm currently attempting to
get pre-approved for a mortgage. My credit is decent but I'm
baffled that my FICO scores from each of the three credit
bureaus are so different from one another even when the data
on each report is virtually identical. Scores ranges from
660 on one report, 690 on another and 715 on the third.
Like I said, the data is almost identical. I don't understand,
nor do I trust the scoring models used.
Kenneth Wade: The different credit bureaus each have slightly
different models for arriving at their credit scores even
though you might have near identical information. Because
of this most lenders use a merged score that takes into account
the score from more than one bureau.
_______________________
Washington, D.C.: How do you identify families who might be
eligible for your programs?
Kenneth Wade: Typically each local organization in our Network
determines who is eligible for the variety of services that
they provide. Most of this is determined by the source of
funding they receive.
_______________________
Washington, D.C.: Once a family has secured financing for
a home, and has settled in, what happens next? Does your organization
provide on-going support and guidance?
Kenneth Wade: Most of the local organizations in our Network
provide post purchase counseling and many also provide home
maintenance training also to assist homebuyers in maintaining
their homes. We believe in the need for providing pre and
post purchase counseling and assistance.
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Washington, D.C.: I have never heard of your organization...are
you like Habitat for Humanity? Do you partner with them?
Kenneth Wade: We were created by Congress in 1978 to support
a network of community based organizations that are engaged
in community revitalization and affordable housing preservation
and production. Our website at www.nw.org has a wealth of
information about us. Our local affiliates often partner with
Habitat.
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Trenton, New Jersey: My husband and I are closing on our first
home on Nov. 19. We've been lucky, but I feel like we've just
been lurching through the process. I've researched home buying
on the internet but I still don't feel well-informed. What
other resources do you suggest?
Kenneth Wade: I would check with your local city's housing
department to get the names of local organizations that provide
homebuyer counseling in your area. It's great that you did
some research on your own. It is our experience that the more
individualized the counseling is the better.
_______________________
Kenneth Wade: Thanks this has been great. Sorry I didn't get
to all of the questions, hope to get another opportunity.
For additional information on Neighborhood Reinvestment and
the NeighborWorks Network go to our website at www.nw.org.
Good luck. |
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