How do potential buyers determine if homeownership is the right financial decision for them? What influences their decisions to seek help with homeownership education and counseling, budgeting, credit management and foreclosure intervention assistance? What factors shape decisions on type of loan, home size and neighborhood?
Housing counselors and other nonprofit staff grappled with these questions at a NeighborWorks symposium, held December 8, in Washington, D.C., one of the main events at a week-long training institute that drew more than 1,700 affordable housing practitioners.
One of the lessons of the subprime mortgage meltdown was that advice from family and friends wasn’t always well informed and at times pointed to a business person who wasn’t trustworthy, according to symposium speaker Vada Hill, a principal at Kelton Research and former chief marketing officer at Fannie Mae. Word of mouth about “trusted advisors” didn’t typically connect the buyer to a credible source of information and people were taken advantage of.
And yet, Hill pointed out that family and friends’ connections should be a critical component of marketing strategies, particularly in Hispanic and African-American communities. “If you don’t reach them [first-time homebuyers] the bad guys will,” he said. He suggested specifically tapping into church and other community networks in conveying information about home purchase or foreclosure help, so that these friends and family have the right information to pass along.
Further, he said that in African-American and Hispanic communities it is important to reach the woman of the house when trying to influence major financial decisions such as home purchase. She is most likely to be managing the monthly expenditures, he said, advising to make sure to keep the male head of household in the loop.
Sendhil Mullainathan, professor of economics at Harvard, underscored the importance of considering “where the consumer’s mind is” when making decisions. Emotional factors weigh in as much as rational ones and those factors need to be considered in any marketing outreach, he said. On the list of Foreign Policy magazine’s top 100 thinkers in the world this year, Mullainathan and his longtime collaborator Richard Thaler, the University of Chicago economist, “have argued for more sensible policies toward struggling borrowers and defaulters: reshaping the mortgage code to avoid opaque language, restructuring existing mortgages, and staying in touch with panicked borrowers,” reports the magazine in this month’s issue.
Sandra Braunstein, director of the consumer division of the Federal Reserve System, also stressed using simple language when communicating to consumers about mortgages and other loans. For example, instead of using the term “finance charge” stating “fees and interest.” Braunstein explained some of the new regulations designed to protect consumers, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. She said clear disclosures are no substitute for the kind of hands-on assistance consumers need when making major financial decisions, such as the kind offered by many NeighborWorks organizations.
Jane Katz, from the New York Federal Reserve, said that a challenge for nonprofit educators is getting across the message that planning for the future is important. “The future doesn’t always take care of itself,” she said.
Kathy Crosby, senior vice president at the Ad Council, and David Almacy, a senior VP at Edeleman, both emphasized the importance of using surveys and social media to better understand and relate to the selected consumer audiences. “We went to foreclosure counselors to better understand the situations of people in financial trouble,” she said of the Ad Council’s campaign to help people facing foreclosure. Digital media such as online videos are a great tool for messages to public about personal decisions, said Almacy.
Some of the service provider panelists, such as Lewis Dancy from the Self Help Credit Union and Bridgette Russell from New Haven Neighborhood Housing Services, provided a neighborhood outreach view, offering tips for marketing materials and effective outreach campaigns.
Resources from the symposium will be available at www.nw.org/homeownershipsymposium.