Message Heard Through Housing Forum – Banks Still Want to Lend

 On June 2nd the Atlanta Regional Commission hosted its quarterly Regional Housing Forum, which focused on the availability of mortgage products in the metro area, and what affect this is having on stabilizing metro neighborhoods. Moderated by Bill Bolling of the Atlanta Community Food Bank, June’s forum was attended by more than 100 people and featured the following panelists discussing the issue of single-family mortgage availability for metro neighborhoods: Catherine “Candy” Lasher, Fannie Mae; Brigitte Killings, Bank of America; Jeanne Goldie, Wells Fargo; Debra Robinson, FHA.

Throughout the conversation, a common theme described by both panelists and attendees was the difficulty and complexity of the situation. All agreed that mending the damage done by the foreclosure crisis is a complex problem, and credit availability will indisputably be a part of the solution. And while it may appear to many that lending has virtually slowed to a snail’s pace, panelists were adamant that loans were being made, including loans to low and moderate income borrowers.

Panelists explained that the credit market is undeniably a different animal than it once was, and the requirements for working within it have changed. So, while required credit scores are higher than in the past and potential borrowers are now evaluated on their entire credit portfolio, the message from panelists was clear: Potential buyers who are serious about homeownership and were willing to take the necessary steps to qualify, will be able to receive a loan.

While panelists admitted that some potential borrowers are just not  credit-ready, they said that if those home buyers are serious about and take advantage of existing agencies and/or educational courses, their goal can be realized. Brigitte Killings, representing Bank of America, spoke of several classes and programs that exist to help clients with credit problems who still want to take on a mortgage. She went on to say that Bank of America tries to steer clear of a flat-out “no,” instead saying “not now.”

And while all panelists agreed that there is an overall focus of putting homebuyers into homes, the most important focus is making sure they are putting clients in homes to stay, and this requires an additional layer of processes that were not used in past years.

All panelists agreed that one positive outcome of the recession is the relationships formed among organizations that did not previously exist. Before the recession, many lenders looked at partnerships as sponsorships. They would give money, and everyone went their own way. Now, with everyone doing more with less – less grant money, less loan money – banks and other organizations are striving to work together to find creative solutions that will have the most impact on the complex problems being faced. For example, Fannie Mae has developed a unique partnership with Freddie Mac, normally a competitor, to establish new data standards relative to loan data and the verification process that will help ensure lenders have improved certainty around loans. This new tool will help guarantee that loans are good, and will wring out fraud.

Fannie Mae’s representative, Candy Lasher, reiterated that the credit market is challenged, and one of their biggest tasks is to rebuild confidence in that market. Lenders have found themselves unable to sustain lending activities, and Fannie Mae has done everything they can to provide the tools, resources and capabilities to some of the financially-challenged lenders in order to keep them active and lending in communities. Ultimately, the purchase money market is still challenged, and there is an overall absence of robust activity in lower credit scores and high loan-to-value lending. Fannie Mae is trying to ultimately attract private capital back into the mortgage market. Fannie, Freddie and Ginnie are in the secondary market – therefore they need robust secondary market investment. This will require a rebuilding of confidence in the quality of loans.

Lasher also spoke of a recently conducted national housing survey aimed at assessing potential borrower attitudes. Through this survey it was found that two-thirds of Americans still prefer owning over renting, but that ultimately people are more cautious about homeownership and what that entails. Of those surveyed, 60 percent of respondents felt they would face a harder time getting a mortgage.

Fannie’s focus is the promotion of primary residence purchases. Fannie’s First Look Program, which reserves the first 15 days of a foreclosed property listing for owner occupants, is considered successful by the organization. And of Fannie’s foreclosure dispositions, 70 percent went to owner occupancy or public entities.

At the same time, Lasher stressed that private capital is needed to be sustainable in this business. While many in the audience had questions concerning the presence of investors purchasing large swaths of homes in several neighborhoods and what this could mean for neighborhood recovery, Lasher stressed that there are some responsible investor groups that should be supported. As an organization, Fannie does a considerable amount of due diligence on investors who want to buy blocks of homes, and overall, they feel this has been fairly successful.

Likewise, Debra Robinson of FHA told attendees that vacant properties that come through HUD’s inventory are advertised to people who will be owner occupiers. And while they are mandated to advertise to owner-occupied purchasers, there is an overarching requirement to occupy these homes and put them back on the tax roll. These homes cannot be kept on the market indefinitely, and therefore it cannot be guaranteed that an investor is not purchasing the homes.

All panelists stressed that homeowners who are in trouble, or are potentially heading for trouble, should immediately call and let their loan servicer know. Products and services available for these homeownersare constantly changing and there are a number of modification programs for current homeowners struggling to pay mortgages, said Jeanne Goldie, the Regional Diverse Segments Manager at Wells Fargo.

During the forum, Lasher also offered some compelling insight into some of the predictions and observations made by Fannie Mae’s Economics Department. They expect that purchase originations will increase, and refinance initiations will slowly decrease – more specifically, the origination market in 2010 is expected to be just over $1trillion. Home sales temporarily surged during the homebuyer’s credit, and are expected to increase 5.5 percent in 2010. It was also predicted that home prices will decline slightly further before stabilizing, but it was pointed out that home price declines have become a story of geographies versus the national story it once was, as declines are now continuing in certain areas but not across the board. 

 Protection that is available to renters who are in homes entering foreclosure was also discussed during the forum. Attendees were informed that a new law provides this security by protecting a renter’s lease – meaning the tenant could stay at least until the end of the lease, and month-to-month tenants would be entitled to 90 days’ notice before having to move out.

Overall, the  message from all the panelists was that lenders still want to provide money, but the requirements are different and constantly changing. To illustrate this changing market, Wells Fargo’s Goldie  told the audience that in less than a year, 253 separate policy changes were made. It was also heard that there is a good amount of counseling, training and education available – but it was agreed that the message has had a hard time getting out, as many homeowners do not know where to turn to find these services. Ultimately, there is no easy or quick way out of this situation.

The Atlanta Regional Housing Forum

The Atlanta Regional Housing Forum is an informal gathering of those who are interested in the business and/or issues associated with the field of affordable housing in the metropolitan Atlanta region.  The Forum seeks to educate and spur action by working through alliances of business, government, and nonprofits and by encouraging programs, policies, and funding to advance this common agenda.

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