|By Eileen Fitzgerald|
Chief Executive Officer
We encourage lenders, government sponsored enterprises, state housing finance agencies, USDA, VA and FHA to create meaningful incentives, such as higher loan-to-value requirements, or other preferred terms or rates for consumers to take advantage of pre-purchase education and counseling well in advance of applying for a mortgage. We also strongly urge these entities to track which borrowers receive homebuyer education and counseling and report on the performance of those borrowers in aggregate. This would provide all of us with a much better understanding of the impact and value of homebuyer education and counseling.
Core support for a homeownership education and counseling infrastructure is critical so that broad access can be available across the country. Standards of quality are essential for housing counseling agencies, and the current National Industry Standards provide a strong framework. The HUD Counseling Grant dollars and the new HUD Office of Counseling play a key role in ensuring access and standards of quality. However, HUD or any other governmental funding will be insufficient to meet the scale of the need for quality homebuyer education and counseling. So it is essential to integrate a market perspective. Lenders should provide significant product incentives or rebates to counseled borrowers to reflect the value the lender is receiving — a quality new borrower who is prepared, less risky and ready to go. If the market reflects the value of this service through incentives, then potential new homeowners will be more willing to pay a larger portion of the cost of the homeownership education and counseling since they will be refunded that cost and more (through additional product incentives).
There are many variations of this concept — different splits in payments between potential homeowners and the lenders, payments funded through the transaction and reflected on the HUD-1, or full cost recovery to the counseling agency, but with a small portion of the funds held back for two to three years and paid to reflect borrower performance.
Sustainable homeownership is essential to prevent a repeat of the current housing crisis. Homebuyer education and counseling is a critical element, and we must determine how to use a small amount of core federal dollars to leverage a market approach that will achieve greater scale and create more successful homeowners.