How to Save Up to One-third of Failed Mortgages

What would you do if one-third of the loans that you worked on could be saved? How many families would you help become homeowners? How much would it grow your income?

A recent Down Payment Resource (DPR) study found that 33% of declined mortgage files were eligible for down payment assistance—down payment assistance that could have saved the file, but, regrettably, was never applied. What’s more, the majority of these files met the requirements for at least 10 different assistance programs, which means that savvy loan officers have a plethora of options to expand their toolkits with, provided the company they work for works with those programs.

As might be expected, many declined loans that could be saved with down payment assistance were declined because of a lack of cash-to-close. The runner-up category was debt-to-income. Now, it’s probably obvious how a down payment assistance program can help save a loan that’s primarily lacking cash to close—it’s the goal of a down payment assistance program to offer additional funds, after all. But how does down payment assistance help save a file that was declined primarily because of a high DTI?

Many down payment assistance programs allow borrowers to provide funds in addition to what the program provides in order to make a larger down payment. For loan files where the borrower can already afford the minimum down payment and closing costs, forgivable, grant, and deferred payment down payment assistance is a convenient way to put more funds on the table without adding an additional loan payment, thereby lowering the LTV and mortgage monthly payment. Per DPR’s data, the down payment assistance available now could reduce declined loan LTVs by an average of 5.85%, which goes a long way to make a loan recoverable. Per DPR, “The large share of loans potentially recoverable with homebuyer assistance highlights a significant, low-cost opportunity for lenders to increase purchase volume.”

Unfortunately, not every lending company (and loan officer) has the time and energy to apply for and memorize the requirements of 10 or more down payment assistance programs, even though doing so could save many declined loan files. Fortunately, CBC Mortgage Agency provides a solution!

The Chenoa Fund down payment assistance program, provides forgivable and repayable loans in every US state (except for New York) with the same guidelines in every state. That’s right, lenders can apply to become correspondents of Chenoa Fund and only have to learn one set of simple guidelines to offer Chenoa Fund across the US. Chenoa Fund is also a borrower-friendly program, accepting credit scores as low as 600 and DTI ratios that meet AUS requirements, as well as accepting manually underwritten loans. Borrowers can receive up to 5% down payment assistance, and borrowers that choose to add personal funds on top of that can get LTVs for their loans as low as 90%. Chenoa Fund hits it all—nationwide accessibility, simple requirements, and increased buying power and flexibility for the borrower.

Lenders can learn how to become a correspondent by visiting CBC Mortgage Agency’s website. Future homeowners with questions are encouraged to reach out to our Information Team to learn about the program and request a list of lenders in their area that offer Chenoa Fund down payment assistance.

“It is my hope that this information [about the down payment assistance market] will help lenders better serve their communities by showing that qualified homebuyers who need down payment assistance are not a niche market, but a major market that continues to grow.” —DPR CEO, Rob Chrane

* Please note that this article is intended for industry professionals and is not directed at or intended for consumers.

CBC Mortgage Agency™ – NMLS 1186381

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Illinois Residential Mortgage License #MB.6761292. Illinois Department of Financial and Professional Regulation, Division of Banking, 100 West Randolph, 9th Floor, Chicago, IL 60601 – 1-888-473-4858. Georgia Residential Mortgage Licensee, License # 1186381