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© Freddie Mac 2015

2

It’s Still a Great Time to Buy

Today’s First-time Homebuyers

Bridging the Gap: Down Payment and Closing Cost Resources

Down Payment and Closing Cost Resources in Your Area

Putting These Programs into Action for Your Business and Your Clients

Today’s Presentation


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It’s Still a Great Time to Buy


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Low Interest Rates + Low Home Prices = Affordability

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Refinances Are Still High, New Purchases Increasing

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Today’s First-time Homebuyers


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First-time Homebuyers Today

Source -- National Association of REALTORS Profile of Home Buyers and Sellers 2014

2014 Homebuyer Profile

First-time Homebuyer – Demographic Characteristics

FTHB share is lower by five percent -- from 38 percent in 2013 to 33 percent in 2014

Married couples represent 54 percent of FTHBs

Single female buyers represent 18 percent of FTHBs

Single male buyers represent 11 percent of FTHBs

FIRST-TIME HOMEBUYER DEMOGRAPHICSFirst-time

Homebuyer 33%

Repeat Buyer 52%

First-timeHomebuyer

Repeat Buyer

Married Couple54%

Single Female Buyer18%

Single Male Buyer 11%

Unmarried Couple 15%

Other 2%

Married couple

Single Female Buyer

Single Male Buyer

Unmarried Couple

Other


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Age of First-time Homebuyers

Homebuyer Age

First-time homebuyers are youngerthan repeat buyers.

The largest demographic, 25-34 years old, continues at 56 percent.

Median age of first-time homebuyers is 31 years old.

Source -- NATIONAL ASSOCIATION of REALTORS Profile of Home Buyers and Sellers 2014

Age of First-time Homebuyers

Age 2012 2013 2014

18-24 9% 8% 9%

25-34 54% 59% 56%

35-44 19% 19% 19%

45-54 10% 8% 8%

55-64 5% 5% 6%

65-74 2% 1% 1%

75+ 0% <% <1%


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© Freddie Mac 2015

9Source -- U.S. Census Data 2008 and 2009

Population Growth 2010–2050

30.1

1%

33.4

6%

7.45

%

25.8

% 29.4

8%

6.69

%

22.2

6%

25.9

4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

White Black Asian Hispanic

Percentage Change

201020202030

20502040

White2010 246,630

2020 266,275

(7.97%)2030 286,109

(7.45%)2040 305,247

(6.69%) 2050 324,800

(6.41%)

Black2010 39,909

2020 44,389

(11.23%)2030 48,728

(9.77%)2040 52,868

(8.50%)2050 56,944

(7.71%)

Asian2010 14,4152020 18,756

(30.11%)2030 23,586

(25.8%)2040 28,836

(22.26%)2050 34,399

(19.29%)

Hispanic2010 49,726

2020 66,365

(33.46%)2030 85,931

(29.48%)2040 108,223

(25.94%)2050 132,792

(22.70%)

White2010 246,630

2020 266,275

(7.97%)2030 286,109

(7.45%)2040 305,247

(6.69%) 2050 324,800

(6.41%)

Black2010 39,909

2020 44,389

(11.23%)2030 48,728

(9.77%)2040 52,868

(8.50%)2050 56,944

(7.71%)

Asian2010 14,4152020 18,756

(30.11%)2030 23,586

(25.8%)2040 28,836

(22.26%)2050 34,399

(19.29%)

Hispanic2010 49,726

2020 66,365

(33.46%)2030 85,931

(29.48%)2040 108,223

(25.94%)2050 132,792

(22.70%)

Projected Population Increase – 2010-2050


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What Does This All Mean for You and Your Clients?

Low interest rates + low home prices = affordability.

2015-16: less refinances, more purchases.

There are opportunities out there to sell more homes to first-time homebuyers and grow your business.

Many well-qualified first-time homebuyers need your assistance to overcome fears.

Many first-time homebuyers will need to seek ways to bridge small gaps in down payment and closing costs.


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You Are the Critical Link

You are the critical link to helping well-qualified homebuyers achieve their homeownership objectives.

Help first-time homebuyers understand home financing in new market.

Guide eligible first-time homebuyers in choosing homes that they can afford and keep.

Result: First-time homebuyer dream realized – and more sales closed for you.


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Bridging the Gap:Down Payment, and Closing Cost

Assistance Resources


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Sources of Funds

Assistance from a variety of sources is available for mortgage-ready, well-qualified first-time homebuyers who need a little bit more to bridge the gap:

– Mortgage Credit Certificates; and

– Down payment and closing cost assistance (grants and deferred seconds) offered through either HUD’s HOME Investment Partnerships Program or the Community Development Block Grant Program that are used to administer programs on the state or local level. An example of a program is the Neighborhood Stabilization Program.

Assistance may be limited to first-time homebuyers and/or low- and moderate-income homebuyers, depending on the assistance program.

Homebuyer education counseling is often required, but not always.

Source – HUD and NCSHA


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Sources of Funds

Mortgage Credit Certificates (MCCs)

Issued by certain state or local governments (including state housing finance agencies), MCCs generally allow homeowners to claim around 20 percent of the annual interest on their mortgage as a federal tax credit every year for the life of the original first mortgage (details vary by state).

Amount of credit per mortgage loan capped by Internal Revenue Service @ $2,000 per year.

NOTE: Although MCCs are not a down payment assistance source, mortgage lenders often use the estimated amount of the credit on a monthly basis as additional income to help the potential borrower qualify for the loan.

Source – NCSHA and Wikipedia®


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Mortgage Credit Certificates (cont’d)

Homebuyers who wish to obtain an MCC must meet certain minimum guidelines (restrictions may be waived by issuing entity in certain circumstances):

– Must not have owned a home in the previous three years;

– Must meet income and purchase price restrictions; and

– Must use the new home as a primary residence.

Source – NCSHA and Wikipedia®


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How Mortgage Credit Certificates Work

Borrower receives an MCC for:

30% credit

$200,000 mortgage

30-year, fixed-rate

6% interest rate

Borrower receives an MCC for:

30% credit

$200,000 mortgage

30-year, fixed-rate

6% interest rate

Allowable Tax Credit:

Mortgage Interest Paid (First Year): $11,933

X

0.30 (30% MCC Credit)

=

Total Credit: $3,579

Allowable Tax Credit:

Mortgage Interest Paid (First Year): $11,933

X

0.30 (30% MCC Credit)

=

Total Credit: $3,579

Results: Total tax credit in this example exceeds

IRS limit of $2,000 Homebuyer reports a $2,000 credit on

tax return Homebuyer may continue to receive a

tax credit for as long as they remain in home and retain mortgage

Results: Total tax credit in this example exceeds

IRS limit of $2,000 Homebuyer reports a $2,000 credit on

tax return Homebuyer may continue to receive a

tax credit for as long as they remain in home and retain mortgage

For illustrative purposes only. Borrowers should always check with their tax advisor to determine any potential tax benefits.

Source – Wikipedia®


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Sources of Funds

Down payment and closing cost assistance

Most assistance is provided to the mortgage-ready borrower through grants and deferred seconds funded by states and local governments through:

– the HOME Investment Partnerships Program; and

– the Community Development Block Grant (CDBG) Program (which includes the Neighborhood Stabilization Program).

Source -- HUD


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Sources of Funds

Grants

Grants are funds that do not have to be paid back, but often have to be paid back if the borrower sells his or home within a certain period of time.

Deferred Seconds

Many down payment assistance programs come in the form of a second mortgage that has a low interest rate and/or deferred payments.

Source -- HUD


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HOME Investment Partnerships Program

Administered by HUD, HOME is the largest federal block grant to state and local governments (including housing finance agencies), and is designed exclusively to create affordable housing for low-income households (those earning 80 percent or less of the area median income).

HOME provides annual formula grants to states and localities that communities use – often in partnership with local nonprofit groups – to fund a wide range of activities that build, buy, and/or rehabilitate housing for homeownership or rental, or provide direct rental assistance to low-income individuals and families.

Provides participating jurisdictions with a line of credit to draw upon, as needed, to use for grants, direct loans, loan guarantees or other forms of credit enhancement, or rental assistance or security deposits.

Source – HUD and Wikipedia®


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HOME Investment Partnerships Program (cont’d)

States are automatically eligible for HOME funds and receive either their formula allocation or $3 million, whichever is greater. Local jurisdictions eligible for at least $500,000 under the formula can receive an allocation. Communities that do not qualify for an individual allocation under the formula can join with one or more neighboring locality so that members’ combined allocation would meet the threshold for direct funding.

Eligible jurisdictions receiving funds must provide 25 cents of their own funds for every HOME dollar received.

State and local government HOME grantees (or designees) administer these programs and accept applications from eligible mortgage-ready borrowers seeking funding.



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Down Payment and Closing Cost Assistance Example – [Add Type of Assistance Here]

XX City, XX State – [Add Name of Program Here]

Describe program here

Source – [Add Here]

[USE THIS SLIDE TO PROVIDE A SPECIFIC EXAMPLE OF A DOWN PAYMENT AND CLOSING COST ASSISTANCE PROGRAM

IN YOUR LOCAL AREA OR LENDING FOOTPRINT.]


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Community Development Block Grant (CDBG) Program

One of HUD’s longest-running programs (since 1974), the CDBG provides communities with resources to address a wide range of unique community development needs including affordable housing, anti-poverty programs, and infrastructure development.

CDBG funds are allocated to more than 1,100 local and state governments called “entitlement” and “non-entitlement” communities.

Entitlement communities – Annual grants to larger cities and urban counties to develop viable communities by providing decent housing, a suitable living environment, and opportunities to expand economic opportunities, principally for low- and moderate-income persons.



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Community Development Block Grant Program (cont’d)

With Non-entitlement Communities or State Administered CDBG (also known as the Small Cities CDBG Program), states award grants to smaller units of general local government for community development activities. Annually, each state develops funding priorities and criteria for selecting projects.

HUD determines the amount of each CDBG entitlement grant by a statutory dual formula which uses the needs of the community, extent of poverty, population, housing overcrowding, age of housing, and population growth lag in relation to other metropolitan areas.

CDBGs differ from categorical grants; they are made for specific purposes in that they are subject to less federal oversight and are largely used at the discretion of the state and local governments and their subgrantees.

CDBG grantees, or nonprofit designees, administer these programs and accept applications from eligible mortgage-ready borrowers seeking funding.



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Neighborhood Stabilization Program (NSP)

A component of CDBG, HUD provides Neighborhood Stabilization Program grants to communities hardest hit by foreclosures and delinquencies to purchase, rehabilitate, or redevelop homes and stabilize neighborhoods.

Grantees (government agency or nonprofit administering the program) develop their own programs and funding priorities, but must use at least 25 percent of the funds appropriated for the purchase and redevelopment of abandoned or foreclosed homes or residential properties that will be used to house individuals or families whose incomes do not exceed 50 percent of the area median income.

All activities funded by NSP must benefit low- and moderate-income persons whose income does not exceed 120 percent of the area median.

Source -- HUD


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Neighborhood Stabilization Program (cont’d)

Eligible NSP activities can include (but are not limited to):

– Direct purchase and rehabilitation of abandoned and foreclosed homes for sale, rent, or redevelopment;

– Establishment of financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties; and

– Demolition of blighted structures.

NSP funds can be used to help homebuyers purchase homes and the borrower must apply through the NSP grantee.

Source -- HUD


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Down Payment and Closing Cost Assistance Example – [Add Type of Assistance Here]

XX City, XX State – [Add Name of Program Here]

Describe program here


[USE THIS SLIDE TO PROVIDE A SPECIFIC EXAMPLE OF A DOWN PAYMENT AND CLOSING COST ASSISTANCE PROGRAM IN

YOUR LOCAL AREA OR LENDING FOOTPRINT.]


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First MortgageBorrower obtains a 30-year conventional

fixed-rate loan

+

Mortgage Credit Certificate (MCC),

when available

Money Out of PocketBorrower’s personal contribution towards

the purchase can be as low as 3% of the

purchase price

“Gap” LoanSilent second loan from a local government agency

requires no monthly payment and, therefore, is not

counted as a borrower’s debt during underwriting

Other Assistance ProgramsRemaining down payment or closing

cost assistance needed to close the loan

(can include seller concessions)

YOUR BORROWER’S NEW HOME

FIRST MORTGAGEObtain a 30-year fixed-rate conventional mortgage and

combine it with a Mortgage Credit Certificate to lower the borrower’s

monthly payment and maximize his or her purchasing power.

MONEY OUT OF POCKETBorrower’s personal contribution.

“GAP” LOANThese loans fill the gap between what you can qualify for on your own and the actual price of the

home. These loans don’t require any monthly payments.

Home Purchase Price+Closing Costs__________________________TOTAL REQUIRED TO CLOSE

Home Purchase Price+Closing Costs__________________________TOTAL REQUIRED TO CLOSE

OTHER ASSISTANCE PROGRAMSIf the “gap” loan isn’t sufficient to close the loan, these programs give extra help with the borrower’s down payment and closing costs. Seller concessions can be applied here.

How Government Grants and Loans Can HelpBorrowers Buy Their First Home


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Down Payment and Closing CostResources in

[Insert Location Here]

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Down Payment and Closing Cost Assistance Programsin [Insert Location Here]

Statewide and Regional Programs: [Add here]

City/County Programs: [Add here]

Municipal Programs: [Add here]

Counseling Agencies Providing HUD-approved Homebuyer Education: [Add here]

[CUSTOMIZE THIS PAGE USING INFORMATION FROM HUD’S WEBSITE @ http://portal.hud.gov/hudportal/HUD?src=/states TO

LIST DOWN PAYMENT AND CLOSING COST ASSISTANCE PROGRAMS OFFERED IN THE STATE, REGION, CITY, COUNTY, AND

MUNICIPALITY -- ALONG WITH THE LIST OF COUNSELING AGENCIES OFFERING HOMEBUYER EDUCATION.]


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[Lender: List Your Product Offerings Here]

[Name of product] – Description…

[Name of product] -- Description…


[CUSTOMIZE THIS PAGE TO SHOW YOUR MORTGAGE PRODUCT OFFERINGS, REQUIREMENTS, AND SPECIAL PROGRAMS.]


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Why Is Homeownership for Mortgage-Ready, First-time Homebuyers Still Important?

Owning a home still has its advantages, both personally and financially:

– housing costs are more stable if the first-time homebuyer obtains a fixed-rate mortgage (still available at historically low rates);

– tax incentives such as the mortgage interest deduction not offered to renters; and

– mortgage-ready borrower obtains a sustainable mortgage at an affordable rate using available down payment and closing cost assistance.


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Contact Information

[CUSTOMIZE THIS PAGE TO INCLUDE YOUR CONTACT INFORMATION, “800” NUMBER, NAME OF A SPECIFIC LOAN OFFICER, ETC.]

Documents

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