Connecting mortgage pros and homebuyers with down payment assistance programs

On this episode we cover the topic of down payment assistance (DPA) with Down Payment Resource’s EVP of Product and Operations, Sean Moss. With over 18 years of housing finance industry experience, Sean leads Down Payment Resource’s product strategy and operations, developing solutions that help housing professionals connect homebuyers with available DPA programs across the country. 

Sean explains how Down Payment Resource functions as a central DPA repository that helps mortgage professionals match up aspiring homebuyers with the down payment assistance funds they need (or don’t even know exist). Down Payment Resource has enterprise tools specifically designed for lenders to help them from a product management perspective, so they can more easily find, explore, track and monitor all DPA programs currently available.

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Transcript

Concepcion Guerrero (00:03):
Welcome to Mortgage Connect by M G I C, bringing you the latest industry insights from top mortgage professionals around the industry. I'm your host, Concepcion Guerrero, and joining me today is Sean Moss, executive Vice President of Product and Operations at Down Payment Resource. Sean has over 18 years of housing finance industry experience. He leads product strategy overseas organizational operations, and collaborates with partners to develop solutions that help housing professionals connect home buyers with assistant programs. Welcome Sean. Glad to have you join us today.

Sean Moss (00:37):
Yeah, thank you Concepcion, and it's great to be here.

Concepcion Guerrero (00:40):
Now I'm excited for the topic on hand because I think it's one, many of our listeners will learn a couple of things when it comes to down payment assistance. So let's dive into the conversation by having you tell us more about down payment resource. I like to say it is the match.com for all down payment assistant programs, but let's hear it from you, the expert. What is down payment resource and how does it help the mortgage professional?

Sean Moss (01:06):
So we founded down payment resource in 2008, and our CEO came from a long, uh, history of real estate and finance background. We are led by a team of passionate DPA experts that I am proud to work with. Uh, our founder, Rob Crane, saw the need to simplify DPAs, basically. Um, and he often says, Careful what you wish for. But nonetheless, our goal is to help you, the mortgage and real estate professional match up aspiring home buyers to the down payment help they need, or worse yet to the down payment help that they don't know exists. So anybody can go to downpaymentresource.com, you can search for down payment assistance there anywhere in the country. Uh, a client can do that, A home buyer, a lender can do that, a real estate agent, housing counselors and so forth. But we also have tools that are, are specifically designed for lenders to help them, uh, from a product management perspective, find and explore and track and monitor all of the down payment assistance programs that are out there.

Sean Moss (02:09):
One of the big challenges for lenders that want to or already participate in down payment assistance is just being aware of what's out there. And then of course, when they choose to participate in certain programs, you know, monitoring those for change, we make probably a quarter million changes or updates a year to this data set of, you know, 2300 programs. So from the product perspective, at an enterprise level, one of the big things that we do is help that product team, or maybe that's, you know, secondary marketing or capital markets, and we help them track and monitor everything that's out there, find new opportunities, uh, approach sales and figure out which are the best programs for, you know, new branches, new LO's, which can help provide competitive advantage. And then with that lender platform, we have other tools that can help loan officers, for example, match up an incoming borrower with company approved programs.

Sean Moss (03:04):
So, you know, as a borrower comes in and is maybe tight on cash to close, or, um, not getting the optimal AUS findings or ratios are tight, even then we can help them identify which, which DPA programs their company participates in that might be available for that client. And then we have some other tools too to help underwriters keep the pipeline moving and access guidelines about all of these down payment assistance programs. So you mentioned, you know, match.com for DPA. We've heard that before. We've also heard, you know, the AllRegs for DPA. And that's what we intend to do and continue to kind of refine is, you know, be the central source of truth or repository for all of this down payment assistance data and information that lenders need.

Concepcion Guerrero (03:53):
That's wonderful. Now DPR has a variety of tools to help lenders make decisions faster pertaining to the down payment assistance. Tell me more about the benefits your current customers are seeing as they use the enterprise tools and how are they leveraging them?

Sean Moss (04:09):
Yeah, so, you know, from the product perspective, one of the things that we help lenders do is cut down on the time that it takes to research and manage down payment assistance programs. So, you know, you know, product development staff, they're, they're well paid staff, right? And they have a unique skill set. What we want to prevent is manually researching, you know, programs back and forth with down payment assistance providers. We wanna expedite the process of finding and reviewing and understanding the programs and the products that are out there. So we can definitely help lenders do that. And we see that a lot of the, the DPA directory users are accomplishing exactly that. They're, they're uncovering new opportunities for competitive advantage to grow their purchase business, uh, but they're also spending less time tracking and monitoring and maintaining information about the programs they choose to participate in.

Sean Moss (05:00):
Because we already do that. We have a team of people that track and monitor all of these programs on at least a monthly basis, but we make changes in real time as these programs evolve. Uh, and you know, that's just the directory from, from the perspective of the sales force and sales leadership. Our loan office portal helps, first of all keep originators originating because a lot of lenders out there are, you know, they're tracking DPAs in a spreadsheet, and that's inefficient. And they, they struggle to maintain up to date information, but they also struggle to build awareness of these DPA programs. And, and not just that they're out there, but how to use them, when to use them, why to use a down payment assistance program. And so we helped the sales force with several tools, uncover these opportunities, raise awareness of these opportunities, match incoming borrowers, and we'll probably talk about, you know, saving declined loans.

Sean Moss (05:53):
Uh, that's a big part of what we, we accomplish as well is preventing declination for a number of reasons that a down payment assistance program can help with. And I guess, you know, right now markets change, right? But we're in, we're in a, a purchase market, uh, you know, inventory is limited, rates are on the rise. It's really hard to qualify, uh, buyers that even a year ago would've been probably well qualified. So we wanna help lenders grow their purchase pipeline. And part of the way to do that is through, you know, the product perspective. Do we have the products out there in the market that are gonna help these lenders compete and, and win business and create buyers or borrowers? So those are a few of the ways that we help. And you know, quite frankly, I could talk all day long about, uh, some of the other ways that we see lenders use our products, but building the purchase pipeline is a big part of it, and we have several tools that help with that.

Concepcion Guerrero (06:43):
Now, over and over again, I've heard that the biggest struggle for many first time home buyers is saving for that down payment. How can the loan officers and the referral partners leverage the tools down payment resource offers to help put more people into home sooner rather than later?

Sean Moss (06:59):
Yeah, and we love the sooner rather than later sort of mindset, you know, how many, how many income and credit qualified buyers are out there that we aren't meeting with marketing messages, that we aren't, um, educating about down payment requirements, not to mention the availability of down payment assistance programs. And a lot of consumers are still out there thinking that they have to have 20% down just to buy a home. And, you know, of course we all in the industry know that that's just flat out false. But that's not the problem. The problem is that perception is reality for so many renters and aspiring home buyers that don't know that there are, you know, 3%, three and a half percent, 5% down programs out there, but they also don't know that there's down payment assistance. So for loan officers, we have one tool in particular that, uh, is called Down Payment Connect.

Sean Moss (07:48):
And that is for loan officers to access a unique landing page that they can put out there to consumers in their social media marketing, their email marketing, their email signature, uh, on their website. We see a lot of creative uses on Facebook, Instagram blogs, uh, on their websites and so forth, where loan officers will use that tool sort of framed around educational content to say to a consumer whose eyeballs they've gotten on their social activity or on their website to say to them, Hey, you don't have to have 20% down. And we offer down payment assistance programs that can help you with the down payment obstacle, which of course we all know is one of the biggest obstacles for aspiring buyers. So we see loan officers use that basically to broadcast, you know, the, the, the true down payment requirements, but to provide a path to home ownership via down payment assistance and to provide a tool that the consumer can use to access those down payment programs that that loan officer can can offer them.

Sean Moss (08:51):
So that's sort of the loan officer perspective, but one of the unique advantages of the enterprise version of that tool, the consumer portal, is when the enterprise licenses the consumer portal, every LO gets that, that, you know, lead generating landing page where consumers search for down payment help and fill out a contact form and reach out to continue that discussion. But with the enterprise version, they can also choose to extend those unique landing pages to their referral partners. So essentially now you've got the loan officer that's out there telling aspiring home buyers, Hey, you don't have to have 20%, and I've got solutions for the down payment hurdle. They can also enable their real estate partners, real estate brokers builders to do the same, where they'll go out on their, you know, their property search websites or on their, you know, their real estate agent's webpage or in their social media activity.

Sean Moss (09:46):
And they'll use that same tool. So they're also educating buyers, and the real estate agent is also generating leads for themselves. But that loan officer and that, that lender that offered them the tool, they get to get, they get to be the, the loan officer in all of those transactions. So they're, they're extending their referral network and their, their lead generating pipeline. So, you know, down payment connect for the individual loan officer is a great way for them to get out in front of the consumer, educate them, let them know that help is out there, and literally give them a path to find that help and connect back to the lo. And then of course, the enterprise version of that allows the, the lender, the company to extend that network out to referral partners. And all of this is basically just to, to not just help the LOS build up their, their purchase pipeline, which we all know everyone's desperate for right now, but to do so in a creative and unique way that resonates with buyers who are maybe, like, think of this, think of a, an aspiring home buyer gets referred to a loan officer.

Sean Moss (10:49):
They're reading through their bio on their website, maybe they connect on social media, but they think they have to have 20% down. So they look at the Apply Now button on a loan officer's webpage, and they think, Eh, I don't think I'm ready. You know, I don't have 20% down. It would take me forever to save that. I'm not gonna, I'm not gonna apply. Or they see a contact me button, and they don't think that home ownership is within reach, so they're not compelled to reach out, right, to connect with that loan officer. But what this tool does, what Down Payment Connect does, or what the, the enterprise version our consumer portal does is put that, that hook in front of the buyer that does compel them to conversation, does convince them that, Hey, you know what, maybe home ownership is within reach. Let me talk to this loan officer about these down payment programs after I've done a search and found out that there are three or five or 12 or however many that I might even qualify for. So, uh, in, in that way, we're trying to help loan officers and by extension, the, the sales organization at a mortgage lender extend their reach and grow their purchase pipeline.

Concepcion Guerrero (11:56):
That's excellent. Now, when it comes to Down Payment Connect, it's really one of my favorite tools you offer because it gives that loan officer and or the real estate agent that opportunity to share a Brandable webpage to their mortgage ready borrowers so they can search for down payment assistant programs. So, you know, tell us again, you know, I know you talked about dpc, but just briefly tell us again, um, how are loan officers or real estate agents able to brand themselves while getting more leads in the process?

Sean Moss (12:24):
Yeah, you know, it's funny Down Payment Connect itself was actually born out of our support desk. We kept getting requests from real estate agents too, and loan officers who saw the, the enterprise opportunity, but maybe their company, you know, hasn't signed up yet. And so they wanted a way that, that specific way to go out to the consumer and say, Hey, you know, there's down payment help out there and you don't have to have 20%, but you know, they can put their, their team logo, um, they can put their headshot on there, they can personalize that experience, you know, that lo can personalize that experience. So when they're going out to the consumer, hey, they're saying, Hey, there's down payment assistance out there. They're, they're doing it as sort of, um, an extension of their brand as a, as a unique or value added service that they can offer.

Sean Moss (13:15):
And so in that way, they're sort of, they're, they're branding it as the unique experience. Um, and we also see, you know, I, I mentioned a few ways that gets used, but we have a whole webinar dedicated to down payment connect and, and how real estate agents and loan officers are using it creatively across the country. But we see, you know, e email signature, you know, add a, add a button in your email signature, and every email that goes out, the recipients or anyone, they forward that email to, they come to know that down payment assistance is out there as provided by XYZ loan officer, right? So your, your name is going out there with that value added resource resource attached to it. And so real estate agents see that and they think, Oh, okay, well, that, I remember that loan officer offers down payment assistance.

Sean Moss (14:01):
And, uh, same thing on social media. You know, you start putting that message out there and you attach the idea of a solution for the down payment obstacle to yourself, real estate agents see that, brokers see that. And of course, the consumer sees that. And I'll give you one more example too that, that I just love. Uh, we have in that, that down payment connect webinar, an example of a real estate team that co-market and, and co-branded a Facebook page and that co-market to aspiring home buyers. They have a large first time home buyer following, and they tell the story of past clients that they got, uh, down payment assistance for. So, you know, they might get permission to use the name, you know, photos of that, that, that home buyer. And they'll put out a message to the, the consumer audience on that Facebook page saying, Hey, we just, we just closed with Jasmine.

Sean Moss (14:55):
She got, you know, $12,000 in down payment assistance to get into her first home. And we helped her do it. And it's, this message is all broadcast by the real estate team who trusts and relies upon and co-market with the loan officer and, you know, the lending team that helps those clients with down payment assistance because that lender is savvy with those programs and offers them and wants that business. So, uh, that's, those are just a few examples of how we see loan officers really creatively personalize that message about help being out there for the down payment obstacle.

Concepcion Guerrero (15:29):
What an amazing tool, honestly, not just for the loan officer, but also for their referral partners. But, you know, switching gears here just a bit. I read an article that showed home the data representing mortgage loan applications of almost 4 billion. $4 billion total were declined due to insufficient cost to close or disqualifying debt to income ratios as potentially recoverable should there have been home buyer assistance applied on those loans? So how can mortgage professionals leverage down payment assistance money while using the tools down payment resource has to offer to avoid getting those loans declined?

Sean Moss (16:06):
Yeah. Well, so the backdrop is we, we've analyzed about 3.7 billion with a b in declined loan, uh, loan app data, essentially, uh, it was anonymized sent to us. We ran it through the down payment resource engine to determine were any of those loan apps eligible for down payment assistance when they were declined. And then we broke that down by declination reason or cause. So the outcome of that study, which is really a succession of studies, the outcome was that 33% of all declined loans met two critical criteria. And by the way, this is just purchase loan apps, right? Obviously we're not looking at refis here, but 33% of all declined purchase mortgage loans met two critical criteria. First, they were declined for a reason that can be directly addressed by a down payment assistance program, which are the two you just mentioned. That's cash to close and qualifying ratios.

Sean Moss (17:06):
Second, they were eligible for down payment assistance and in fact, in average of 10 programs, meaning that there wasn't just one down payment solution for many of those buyers, but on average a variety of potential solutions with myriad repayment terms. You know, that would be a mix of gifts and, and or grants rather, um, deferred loans, forgivable down payment loans and so forth. But they were all overlooked. And those line, those loans rather were eligible for DPA and an average of 10 programs, and they were declined for cash to close or ratios. So think about cash to close. Yes, obviously a down payment assistance program can assist with, you know, know a bigger down payment, covering down payment requirements, maybe even closing costs to reduce the cash to close burden. But this is often overlooked if ratios are tight, which is a big deal. Now with rates going up, um, you know, at some point if student loan, um, guidelines change and, and all of a sudden they have to be repaid again, you know, that that can all change too.

Sean Moss (18:09):
That all impacts ratios. And so when you apply a down payment assistance program while you lower the ltv, you are also lowering the loan amount, lowering the payment. And we love to, to talk about this example too. What if somebody's on the cusp of FHA qualification, but with the assistance of a down payment program, you can get them a bigger down payment, get them maybe to 5% down, drop the upfront mortgage insurance, reduce the monthly mortgage insurance cost, and then you've opened up conventional financing at a more affordable, in a more affordable scenario. So, uh, to the point of, of decline loans, uh, being eligible for purchase programs, we implore lenders, you've gotta look at your second review process. What's happening to decline loans, uh, before they are officially declined? Uh, is there a second review process? Is somebody taking a look at those through the lens of down payment assistance?

Sean Moss (19:06):
And what's your incubation strategy? Where are those borrowers going? I mean, if they were close, we shouldn't give up, right? That could be next quarters pipeline if we've got incubation partners in place that can help them get to the finish line. But, um, you know, how can mortgage professionals leverage these, these programs? So to answer your question directly, uh, the average LTV reduction when we did that study was 5.85%, almost a 6% loan to value reduction by taking the best available down payment assistance program for those declined loans and applying it to that loan. So that's huge, right? And so that's one obvious way that that mortgage professionals can leverage DPA programs and avoid loans getting declined, but sadly it's overlooked, right? We just think about cash to close. We don't think about ratios and, and ratios can, can go down there too. But you know, as, as with, um, ratios, you know, cash to close, we open the door for help with the down payment.

Sean Moss (20:09):
We don't have to ask the seller for closing costs. So loan officers, you could go to the realtors and say, Hey, look, we've got this down payment program, it's gonna cover some of the down payment, but there's some left over here that we can use for closing costs. So you don't have to go ask the seller. And now you've set up that buyer or that borrower to more competitively bid for that property, right? And maybe sellers are, are, uh, a little more prone to negotiate now than, than a year ago. And that's good, right? But the more competitive you offer, then the better chance of that, that buyer winning that bid. So helping with closing costs and not having to ask the seller is just yet another way that these programs can, uh, pay off. So I guess I'd wrap that up with, you know, look, any loan officer can after a purchase business needs to, not can, but needs to familiarize themselves with the down payment programs in their market, and you only need one or two, right?

Sean Moss (21:05):
You don't, you don't have to be an expert at 10 different DPAs, but if you know one or two or three really well, and you're working with your product development team to make sure that you've got the programs in place that are gonna give you that competitive advantage, then you've gotta leg up on the competition. And you can not just salvage the, the loans that are coming through the pipeline, but you can literally create more buyers because you can overcome ratios, you can overcome cash to close, you can overcome down payment with these programs. So I guess to kind of go back to some of the earlier messages, you know, meet those buyers and your real estate partners with the message that there's down payment help out there and that you can illuminate that path to, to down payment help.

Concepcion Guerrero (21:48):
Now, can you talk to me about how many programs are actually out there across, across the country? Are they all in a couple of major markets? Are they all for first time home buyers? Can you give us a state of dpa?

Sean Moss (22:03):
Yeah, that's a sort of a common misperception that all these programs are centralized in, you know, major metros and they're not, So I'll start with, uh, these programs are everywhere. There is literally no market in the country where there isn't some form of down payment assistance, in part because every state has at least one state housing agency. Every state has an official state housing finance agency, and they offer their programs statewide. And you know, one might think, Okay, well, in a higher cost market, you know, there's just no room for down payment assistance. Well, in a higher cost market, these programs have higher income limits and higher purchase price limits to keep the door open for a wider consumer audience. So that's, that's the start. The, the sort of geographic perspective. These programs are everywhere. There's, in fact, we're about to put out our latest home ownership program index in the next week, and that is a quarterly snapshot of the, the programs, the volume, the nature, what's out there and so forth, sort of the state of DPA quantified, right?

Sean Moss (23:06):
And that next index will show that for the fourth quarter in a row, there has been an increase in the volume of down payment programs available. So, so that's the geographic perspective. There are programs in markets all over the country, urban, rural, east, west, coastal, inland, and so forth, high cost and low cost too. Then you look at the nature of these programs, almost three quarters of them are down payment assistance or closing cost help. But even within that category, some are grants, some are for forgivable loans, some have deferred payments, some are just repayable, you know, monthly repayable, second mortgages. But we also track and monitor all of the affordable first mortgage products from state and local housing finance agencies where you can get below market interest rates, reduced mortgage insurance cost, higher LTV financing, and of course down payment assistance with that. And we track mortgage credit certificates, which are, they're awesome tax credit benefits where they are available in certain states.

Sean Moss (24:04):
And there are some other outlier programs too. But you asked about, um, first time home buyers. A another common misperception is that these programs are only for first time home buyers. In fact, about 38%, 39% of these programs do not have a first time home buyer requirement. And some will waive that requirement for veterans or those serving in the military. So there are plenty of opportunities out there for, you know, recent owners, uh, maybe even current owners to buy their next primary residents using down payment assistance. And I also wanna point out to the point of first time home buyers, you know, speaking to a lending audience, most would probably know this, but you're a first time home buyer if you haven't owned a home in the last three years. And there are some nuances and exceptions to that, but that's the general rule with down payment assistance.

Sean Moss (24:55):
So we have an influx of programs, we have a lot of diversity and the repayment types and the, and the availability of, of, you know, diverse, uh, types of down payment assistance or other home ownership assistance programs. And on top of that, we see that, you know, a lot of these will allow manufactured homes, condos, um, two to four unit properties. So when we think about expanding inventory, and back to your earlier question about how can loan officers leverage these programs, a lot of these programs will allow, uh, certain property types that people may not realize or appreciate. So that's another way we can leverage these programs to maybe open up alternative inventory sources or solutions for aspiring home buyers. And, and I guess lastly, I I would just, uh, I would round out the answer to that question. You know, sort of the state of down payment assistance.

Sean Moss (25:48):
There are a lot of programs, there are, there are more and more programs hitting the market over the last year for sure. There's a lot of attention on down payment assistance. This is literally a path to purchase business for lenders that are paying attention or savvy and that get it. But there's a lot of attention in DC and, and elsewhere on affordability down payment assistance. So these programs are not going away. Anybody that thinks that, oh, you know, DPAs, they all shut down, uh, they're not going away, they're not funded, not true. Quite the opposite. So we would encourage you, again, take a look at these programs for many of the reasons we've talked about here and increase that purchase business.

Concepcion Guerrero (26:27):
Donna, as we wrap things up here, I keep hearing talks about aspiring home buyers and the obstacles they phase or they perceive. So what are you doing at down payment resource to continue to raise the awareness of down payment assistance among home buyer hopefuls?

Sean Moss (26:43):
Yeah, great question. And, and a lot of what we've talked about so far is what we're doing for the lenders to assist those buyers or hopeful buyers, uh, when it comes to qualifying for home ownership. But we also have to make sure that aspiring home buyers are aware of these programs. So obviously we have down payment resource.com. Anybody can go there and do a search for down payment assistance. We also work with MLSs and real estate associations, so multiple listing services and real estate, uh, associations. And through them we integrate down payment assistance into property listing data. So as realtors and real estate agents are listing and selling properties and sharing them with aspiring home buyers, they are aware of the down payment assistance programs that are available at that location, at that purchase price or list price. And at that time, and of course we're, we're monitoring program change and so forth for those agents, but through the MLSs we reach hundreds of thousands of, of real estate agents who have access to this information through their mls.

Sean Moss (27:51):
And, and of course that's to expand awareness among real estate agents, of course, but also the home buyers that they serve and that they're sending listings to. We also just, just across our platform, kind of on the, the listing and consumer side, we get hundreds of thousands of engagements every month from consumers that are expressing interest in and learning more about down payment assistance. So migrating to the consumer awareness, you know, that's, that's down payment resource.com. That's also partnerships with companies like Zillow and Redfin and realtor.com who are, you know, either putting down payment assistance programs on listings as consumers search for properties in droves, or they're using a widget, as is the case on realtor.com, using one of our down payment resource, uh, eligibility tools on a, on a sort of consumer facing page to let consumers know these programs are out there. And in the case of Zillow and Redfin, to let them know that, hey, you know, while you're searching for a property, here's the down payment assistance programs that are available at that location.

Sean Moss (28:58):
So all of this is to raise awareness for the consumer and the realtor of these programs, but that is going to bubble up as more demand for down payment assistance when those agents and those consumers go to a loan officer whose help they need in, you know, getting this consumer, uh, set up to apply for not just the mortgage, but the down payment assistance. So I say all that to remind loan officers of, of really this one last comment that I'll make. Real estate agents are trying their best to generate purchase business and create buyers and build buyers, but they are desperate for help from loan officers who work with down payment assistance. And frankly, it boils down to three things. Real estate agents need loan officers that one, offer these down payment assistance programs. Two are good at them because they've read up on the guidelines and, you know, established relationships with the DPA providers and they're savvy with the program. But third loan officers that want that down payment assistance business or want that first time home buyer business. So if you offer DPA or willing to, if you're good at them or willing to become good at them, and you want more purchase business, especially from first time home buyers and those who who use down payment assistance, realtors are desperate for your help. And they come to us daily, literally daily begging for us to connect them with loan officers who offer these programs.

Concepcion Guerrero (30:31):
Sean, thank you very much for your time today, and thank you all for listening. If you're interested in learning more about the tool that Sean mentioned, go to downpaymentresource.com and for all its the latest industry insights. Subscribe to Mortgage Connects on Apple, Stitcher, Google Podcast, Spotify, Amazon Music, or go to mortgageconnect.com.