Queercents

The current “mortgage crisis” is a result of greedy, poorly regulated mortgage lenders granting irresponsible loans to ill-informed borrowers. Neither the loan officer nor the customer gave much thought to the consequences that would follow.

The U.S. is experiencing is a market correction. The housing market isn’t expected to stabilize until late 2010.

Look beneath the surface of this mortgage melodrama and you’ll find low-to-moderate income families whose low confidence just got a whole lot lower.

For how long did we hear predatory lenders barking like hucksters, “100% financing! Low, low rates! Easy credit?”

Government insured loans have for a long time offered 100% financing options that are safe and affordable. These loans require that the borrower demonstrate their ability to repay the note. (What a concept!) The default levels for FHA loans have been moderate owing to flexible loan workout solutions for delinquent borrowers. And you don’t have to be poor or a first time homeowner to benefit from these types of loans.

One of the positive outcomes of the mortgage crisis is a “flight to quality.” And that’s good news for all consumers and professions.

This current crisis is illustrative of the abysmal state of personal financial literacy in America. If consumers were better educated then much fewer people would have committed to a sub-prime loan. When people know better, they do better.

I tell everyone that I am in the business of building confidence. Legitimate lenders need help from legitimate professionals such as CPAs, attorneys, and financial planners to spread the truth and squash the myths.

“Low-to-moderate income” can range from $35,000 a year for a single person to over $90,000 depending upon family size. That translates into purchasing power from $140,000 to over $275,000 depending upon the program being used.

These “Emerging Market” consumers need legitimate professionals to point the way toward homeownership and financial security. It is also important that anyone seeking quality, once it is discovered, passes it along to anyone who will listen.

Below are seven myths from which prospective, first time homeowners suffer:

1. It’s a bad time to buy a home
It’s currently a buyer’s market and fixed rates are below 6 percent as of the date this article was published.

2. Renting is cheaper than owning
Not true. Ownership allows tax deductions. And with a little planning, a 30 year mortgage can be paid in full in 9 years without disrupting an average lifestyle.

3. I won’t be able to make my mortgage payment
Most renters already make a mortgage payment… just not their own.

4. I need perfect credit and I’ve had credit problems
Government loans are not credit score driven. Each applicant can explain circumstances beyond their control that may have damaged their credit. There are several legitimate non-profit organizations that help people to ready themselves for homeownership.

5. The whole process is long, confusing and complicated
Processing and approving a government loan takes no longer than a conventional loan.

6. I need a large down payment
Below is a list of just some of the ways a borrower can cover down payment:

Sweat Equity – Certain buyers can paint their own home or have someone to work on the construction crew who will “gift” their labor to the buyer.

State Bond Programs - Down payment Assistance Program - Qualified borrowers can borrow the down payment at an affordable rate.

Local HUD approved agencies – local HUD approved agencies can assist someone in overcoming over-obligation with their credit cards, cleaning up their credit, and/or learning about the homeownership process.

Local Government Support Homeownership – most cities administer some kind of homeownership initiative. These programs do anything from help citizens clean up credit, subsidize loans, issue forgivable grants for down payment, or offer government owned properties for heavy discounts.

Seller funded down payment assistance – This option is under review with HUD but as of the publication of this article, it is still available.

Federal Home Loan Bank HOP funds – Several times throughout the year, the Federal Home Loan Bank issues grants called “HOP” funds. HOP stands for Home Ownership Program. This is a matching program of $3 to $1. For every $1 a homeowner invests in a down payment the HOP funds will match it with $3.

Bona fide 100% Loans – this type of loan is a 100%, amortized loan with no prepayment penalty and the PMI is reduced if the borrower qualifies.

And finally, the last myth keeps more people from even trying more than all the others:

7. I don’t have a lot of information and no one will stay in my corner
When someone puts energy into a plan for him or herself and sees it through who isn’t willing to help? It only makes my job seem less like work when I help turn eager prospects into grateful clients and witness them achieve a life-altering goal.

It is more important than ever that everyone know the difference between a core, agency product like an FHA-insured loan and a predatory loan. It is critical that we continue to extend a helping hand to emerging markets. It is vital to teach any young people we can about personal finance. It is essential that we provide and support financial literacy programs in our communities and in our schools. And, it is paramount that we refer only qualified, legitimate professionals.

Fasten your seatbelts. The flight to quality is taking off.

Are you on board?

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Janice E. DeCuir, Senior Marketplace Lender for Emerging Markets, Fifth Third Bank, Lexington, Kentucky. You can submit questions to Janice by email at janice@queercents.com or visit her website at www.53.com/mlo/janice-decuir.