slide1
Download
Skip this Video
Download Presentation
Neighborhood Reinvestment Corporation

Loading in 2 Seconds...

play fullscreen
1 / 41

Neighborhood Reinvestment Corporation - PowerPoint PPT Presentation


  • 141 Views
  • Uploaded on

Neighborhood Reinvestment Corporation. By Doug Dylla – August 11, 2004. Acknowledgements. Many thanks to the following people for their help with this presentation: Mark Duda, research Allegra Calder, research Nancy McArdle, research Michael Collins, editing Jim Houghton, graphics.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Neighborhood Reinvestment Corporation' - issac


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

Neighborhood Reinvestment Corporation

By Doug Dylla – August 11, 2004

acknowledgements
Acknowledgements
  • Many thanks to the following people for their help with this presentation:
    • Mark Duda, research
    • Allegra Calder, research
    • Nancy McArdle, research
    • Michael Collins, editing
    • Jim Houghton, graphics
slide3

Neighborhood Reinvestment Corporation

Key Topics

  • Review brief history of industry
  • Discuss key trends in homeownership, lending and counseling
  • Reflect on implications of these trends on our work
brief history of housing counseling
Brief History of Housing Counseling

1968 - HUD establishes housing counseling program

1972 – HUD certifies housing counseling agencies

1977 – HUD funds housing counseling programs

CRA and HMDA laws are passed

1989 - CRA and HMDA are amended

1992 - Affordable housing goals set for GSEs

1990s -Dramatic growth of partnerships with lenders

2001 – With recession, delinquencies rise

2002 - White House sets minority ownership goals

slide6

2200 BC

Egypt

Indications

that housing counseling occurred much earlier than previously thought

slide7

HUD 9902

Form

1455 AD

Mainz,

Germany

Johannes Gutenberg prints a second document after the Bible.

slide8

1993

New research reveals the typical brain of the first-time homebuyer

Feng Shui

slide9

2001

The first empirical study demonstrating the impact of homeownership counseling by Abdighani Hirad and Peter Zorn of Freddie Mac on reducing loan delinquencies.

what we know about homeownership
What We Know About Homeownership
  • Solid gains in homeownership – highest overall homeownership rates in U.S. history (69%) but still persistent racial gaps
  • Historically-low interest rates
  • Homeownership has been the key toasset-buildingfor working families
  • Minorities contribute heavily to household growth
slide12

Homeownership Rates Across the World

Percent

Note: China rate refers to urban areas only.Source: National Association of Realtors, U.S. Census Bureau, and Y.P Wang, Progress and Problems in Urban Housing Reform.

minority ownership rates have risen but still greatly lag white rates
Minority Ownership Rates Have RisenBut Still Greatly Lag White Rates

Percent

Source: Joint Center for Housing Studies.

historically low mortgage rates
Historically Low Mortgage Rates

Percent

Source: NAR and Freddie Mac

slide15

Minority Renters Have Very Low Levels

Of Net Wealth(Median Net Wealth: 2001)

Source: Joint Center for Housing Studies tabulations of the 2001 Survey of Consumer Finance.

minority and low income ownership growth strong
Minority and Low-Income Ownership Growth Strong

Millions of home owners

Notes: Blacks and Asians/others are non-Hispanic. Hispanics can be of any race. Low-income is defined as bottom quintile.

Source: Joint Center tabulations of Current Population Survey, March Supplement 1994, 2001.

slide17
Minorities Will Make Up A Substantially Larger Share of First-Time Buyers This Decade(Estimated Growth in First-Time Buyers)

Millions

Note: Assumes minority share of first-time buyers will increase at same rate in the 2000s as it did from 1991 to 2001.

Source: Estimates based on analysis of the American Housing Surveys: 1993-2001, HUD’s US Housing Market Conditions, Fall 2001,

“First-Time Homebuyers: Trends from the American Housing Survey,” and Homeownership Alliance’s “America’s Home Forecast.”

homeownership rate by citizenship status
Homeownership Rate by Citizenship Status

Higher Rate for New Citizens

Source: Harvard Joint Center

what we know about lending
What We Know About Lending
  • Huge consolidationin the lending industry
  • Technology advances
  • Boomin low-income and minority lending
  • Expansion of risk-based pricing and fringe financial services
  • Growing personal debt loads in U.S.
  • Weak economy straining many families as delinquencies and defaults rise
technology advances in lending industry
Technology Advances in Lending Industry
  • Credit Scoring
  • Automated Underwriting
  • Move towards Electronic Mortgage
  • Expedited Home Appraisal
  • Explosion of Aggressive Mortgage Products
  • Huge Growth of Mortgage Securitization
lower income lending outpaces others
Lower-Income Lending Outpaces Others

Growth in lending (index 1993=100)

Note: Lower (higher) income borrowers have income of less than (at least) 80 percent of area median in that year. Represents loans for home purchase only.

Source: Joint Center report, “The 25th Anniversary of the Community Reinvestment Act: Access To Capital In An Evolving Financial Services System”, Released March 20, 2002.

subprime lending growth 1993 2001
Subprime Lending Growth, 1993-2001

percentage change

Source: Harvard Joint Center, State of the Nation\'s Housing 2004.

the dual mortgage market

3%

15%

1%

81%

Higher-Income Borrowers

In Higher-Income Neighborhoods

Note: Lower (higher) income borrowers have income of less than (at least) 80 percent of area median in that year. Lower (higher) income neighborhoods have income of less than (at least) 80 percent of area median as of 1990.

Source: Joint Center report, “The 25th Anniversary of the Community Reinvestment Act: Access To Capital In An Evolving Financial Services System”, March 2002.

The Dual Mortgage Market

Share of Growth in Home Purchase Lending, 1993-2000

Manufactured Homes

Subprime

12%

25%

37%

Prime Loans

Subprime

26%

Govt. Loans

Lower-Income Borrowers

In Lower-Income Neighborhoods

america s debt challenge
America’s Debt Challenge

Source: Federal Reserve

what we know about counseling
What We Know About Counseling
  • Fragmented, labor-intensive, decentralized industry - estimates of 2,000+ agencies across nation
  • Highly dedicated counselors and trainers that have helped fuel the “homeownership boom” of the last decade
  • Lack of standards has hurt industry – “counseling” can mean anything from a phone call to 40+ hours of one-on-one work
  • Funding for work is piecemeal
the benefits of counseling
The Benefits of Counseling
  • Reaching underserved markets
  • Providing a “trusted advisor” to potential buyers in an increasingly complex process
  • Helping families gain access tospecial mortgage financing and homes they can afford
  • Informing potential buyers about the responsibilities of homeownership
  • Helping consumers build better money management skills
  • Reducing loan delinquencies and defaults
slide27

Classroom and Individual Pre-PurchaseCounseling Reduce Delinquency(Percentage by Which Counseling Lessens Likelihoodof Becoming 60 days Delinquent vs. No Counseling)

Percent

No Statistically Significant Effect

Source: Hirad and Zorn, A Little Knowledge is a Good Thing: Empirical Evidence of Effectiveness of Pre-Purchase Homeownership Counseling, 2001.

what s ahead
What’s Ahead?
  • Significant growth expected from 2005-2025
    • Households
    • First-time homebuyers
    • Minority and immigrant homebuyers
  • Without more counseling capacity, a significant “counseling gap” will grown over next 20 years
homeownership continues to grow over the next two decades
Homeownership Continues to Grow Over the Next Two Decades

Estimated owner and renter households, 2000-2025 (millions)

Note: Assumes constant homeownership rate of 69 percent over the entire period.

Source: Estimated from household projections in Masnick and Di (2004).

projected first time buyer levels average nearly 1 5 million annually
Projected First Time Buyer Levels Average Nearly 1.5 Million Annually

Estimated net new owners and first time buyers, 2000-2025 (millions)

Note: Assumes constant homeownership rate of 69 percent and ratio of 1.645 first time buyers for each net new owner over the entire period.

Source: Estimated from household projections in Masnick and Di (2004) and first time buyers figures in Drew (2002).

counseling gap for first time buyers exceeds one million annually
Counseling Gap for First Time Buyers Exceeds One Million Annually

Estimated counseled and un-counseled borrowers, 2000-2025 (millions)

Note: Assumes constant homeownership rate of 69 percent, ratio of 1.645 first time buyers for each net new owner over the entire period, and 15 percent share of new owners counseled over the entire period.

Source: Estimated from household projections in Masnick and Di (2004) and first time buyers in Drew 2002.

counseling gap concentrates among minorities as white share of 1 st time buyers declines
Counseling Gap Concentrates among Minorities as White Share of 1st Time Buyers Declines

Estimated un-counseled borrowers, 2000-2025 (millions)

Note: Assumes constant homeownership rate of NH White homeownership rate starts at 75 percent and increases 0.5 percentage points until 2020, assumes minority homeownership rate starts at 48 percent and increases 1.0 percentage points until 2025, assumes ratio of 1.645 first time buyers for each net new owner over the entire period, and 15 percent share of new owners counseled over the entire period.

Source: Estimated from household projections in Masnick and Di (2004), first time buyers in Drew 2002.

challenges to the counseling industry
Challenges to the Counseling Industry
  • Consumers increasingly overwhelmed by options
  • Technology and transaction speed may limit opportunities for counseling for many borrowers
  • Riskier loans inherently mean higher levels of loan delinquencies and defaults
  • Clustered foreclosures have significant negative impact on neighborhoods and communities
  • Community services that extends beyond loan origination to servicing, loan workouts, loss mitigation and disposition practices
opportunities for the counseling industry
Opportunities for the Counseling Industry
  • Marketing the value of counseling directly to consumers
  • Packaging incentivesand discounts to attract consumers to counseling
  • Embracing national standards and new technology to improve quality, reduce costs and broaden coverage across the U.S.
opportunities for the counseling industry35
Opportunities for the Counseling Industry
  • Engaging with other key partners in the transaction, especially with Realtors®, lenders, mortgage insurers and loan servicers
  • Working cooperatively to promote counseling as a standard part of first-time homebuyer process
  • Partnering with schools, employers and churches to use financial education as the first step
today s discussion questions
Today’s Discussion Questions
  • How can we build sustainable counseling capacity in the industry?
  • How can we expand the coverage of high-quality counseling across the nation?
  • How we make better use of technology and efficiencies of scale to reach more consumers and close the projected “counseling gap” in the decades ahead?
slide38

2003

HomeSight in Seattle uses an aggressive marketing campaign to reach prospective buyers

slide39

2005

The benefits of counseling are promoted directly to consumers along with incentives from partners such as free computers

slide40

2006

Consumers are willing to pay directly for counseling and in turn, get incentives from partners

slide41

2007 and Beyond

Mortgage Application Fee $400

Appraisal Fee $300

Unexpected Home Repairs $3,500

The Value of Counseling … Priceless!

ad