As part of a broader effort to attract more potential borrowers to its 3% down payment home loan product, the government-sponsored Freddie Mac is reaching out to faith-based organizations to help preach the gospel of homeownership – particularly to low and moderate-income families who may think that owning a home is out of their reach.
“When we think about communities that we’re trying to access and the distrust of homeownership as a whole, it’s very important that the message of this opportunity be channeled through trusted advisers,” said Danny Gardner, Freddie’s vice president of affordable lending and access to credit.
Before the financial crisis, it was common for Freddie Mac to partner with faith-based groups and housing finance agencies, but many of those organizations refocused on foreclosure prevention after the crisis. Now Freddie is working to rebuild those relationships as it redoubles its efforts to make home ownership more affordable.
Rising home prices, stagnant wages, rent inflation and student debt remain have made it difficult for potential homebuyers to save for down payments. Even with interest rates at record lows, the U.S. homeownership rate dipped in the third quarter to 63.7% and is near its 20-year low, according to Census Bureau data.
A key initiative Freddie has undertaken is educating lenders about programs offered by housing finance agencies. For example, lenders may not know that potential borrowers can use 100% of the gift funds from a housing finance agency to cover the cost of the 3% down payment, so Freddie is working with lenders to match them with nonprofits offering such grants. Freddie also recently announced a partnership with Quicken Loans, the second-largest U.S. home lender, to co-develop products for millennials, first-time homebuyers and middle-class borrowers.
To appeal to nontraditional homebuyers, Freddie and Fannie Mae, which launched its own 3% down payment product last year, have eased some home loan requirements and now allow income from non-borrower household members to be included in debt-to-income calculations. Income the borrower collects from rent can also count toward his or her qualifying income.
Chris Boyle, Freddie’s senior vice president of single family sales and relationship management, said plenty of consumers are qualified to own a home — but they may not know it. “There are those that are qualified and can responsibly take on homeownership that aren’t coming to the table,” he said.
That may also be true in lower-income communities, and that’s where partnerships with faith-based groups could come in. The effort, which is just getting underway, will include financial education seminars and counseling sessions hosted by faith-based groups using materials provided by Freddie. “Especially in communities of color, in Hispanic and African-American communities, it’s the churches that are deemed trustworthy,” Gardner said.
