Outlier: MassHousing Homebuyer Counseling Success as a Result of Circumstance

1. Outlier: MassHousing Homebuyer Counseling Success as a Result of Circumstance

2. Historic Context • Massachusetts is a strong pro-consumer state • Counseling agencies carry a significant amount of political influence • In the early 1990’s a strong MRB market gave MassHousing a compelling mortgage advantage in the market • In collaboration with Citizen’s Housing and Planning implemented a policy of voluntary homebuyer counseling for all first-time homebuyers • Allocation set aside and preferred pricing

3. Historic Context • Success of the program evolved to a mandatory program in late 1990’s • Early and ongoing lender resistance • Worked to create working partnership between lenders, counseling agencies, and down payment and closing cost assistance programs • Worked well for borrowers pre-purchase and sale • Timing and access issues when needed post purchase and sale

4. The Perfect Storm • The mortgage crisis attributed to uninformed borrowers getting bad loans • MassHousing product offerings provided a safe, affordable and attractive mortgage product for first Time homebuyers • More borrowers elected to attend homebuyer counseling pre-purchase and sale • Realtors required pre-approvals prior to purchase and sale agreements • Lenders recognized value in working with counseling agencies and MassHousing

5. Mutually Beneficial Relationships • Lenders supported homebuyer counseling agencies in exchange for business endorsement and referrals • Non-Profit counseling agencies received financial support from institutional lenders and fees from borrower • Borrowers became qualified, prepared and empowered by homebuyer counseling and preapprovals • Downpayment and closing costs assistance linked to homebuyer education • MassHousing mandatory homebuyer education • Realtors had better qualified, confident and motivated homebuyers

6. MassHousing’s The Road Home • Inconvenience of mandatory homebuyer counseling for homebuyers who are well into home buying and mortgage process drove borrowers away from MassHousing • FHA, Subprime, and conventional Alt A, and exotic ARM programs • MassHousing created online education program “The Road Home” • Offered free access to counseling agencies for MassHousing borrowers • Counseling agencies earned fee income • Lenders had a simple and easy solution for last minute counseling for homebuyers

7. Proof of the Value of Homebuyer Education • Delinquency, Default and Foreclosure Rates • Subprime 18.2% • FHA 9.9% • Conventional MI 7.6% • MassHousing 3.5% • Feedback from Consumers • Dramatic increase in Homebuyer Counseling Enrollments pre-purchase and sale • Buy in from quality partner Non-profit counseling agencies, Lenders, Realtors

8. What we Learned • There must be a compelling value proposition for all parties for program to succeed • Borrowers get a better mortgage product, down payment and closing cost assistance, home buying empowerment • Lenders are able to offer a great mortgage at competitive terms and benefits from relationships with Non Profits, Realtors, and MassHousing • Realtors get better qualified, ready and motivated home buyers • MassHousing is recognized for its leadership and benefits from relationships with all business partners, and consumers