By Karen Kroll
A 2024 report by Harvard’s Joint Center for Housing Studies reveals that residents in nearly half of U.S. metro areas now need an annual household income of at least $100,000 to afford the median-priced home.
Rising home prices means of course that many individuals and households with low-to- moderate incomes struggle to become homeowners. “The demand for affordable housing far exceeds the supply,” says Scott J. Boser, SVP of consumer and mortgage lending with Community Bank. Community Bank helps new homeowners access multiple government-sponsored and other affordable housing programs designed for non-traditional homebuyers, for just about any single-family property, Boser says.
Community Bank is one of an increasing number of banks developing programs to help more individuals and families gain the keys to their own homes. The Unlocking Home Ownership campaign, an initiative of the ABA Foundation, is also driving these efforts.
Benefits of home ownership programs
Helping lower- and moderate-income customers achieve homeownership can benefit not just the individuals directly involved, but the communities in which they live and the banks that serve them, says Lindsay Torrico, SVP, bank community engagement and executive director of the ABA Foundation. Programs that promote sustainable home ownership can boost the financial resilience of the families directly impacted and the local economy.
Homeownership assistance programs also offer banks opportunities to attract new customers and strengthen loyalty with current clients. “The customers see the bank as a partner in building wealth and financial stability for them and their families,” Torrico says.
Activities that help low- and moderate-income individuals obtain, maintain, rehabilitate or improve affordable owner-occupied housing may help banks comply with the Community Reinvestment Act. In addition to providing mortgage loans to LMI individuals or families, actions such as offering first-time home buyer counseling sessions may qualify.
While programs to help LMI individuals and families become homeowners can offer multiple benefits, several steps are critical to success. “It has to be part of the bank’s strategic plan and given a focused effort,” says Mike Wilson, director in the strategy practice with Cornerstone Advisors. The leadership team needs to put together policies and products that fit the organization’s risk appetite, he adds.
Check out a recent ABA Podcast describing Webster Bank’s innovative efforts on financial empowerment including design of its special-purpose credit program focused on homeownership.
The partnerships that Webster’s commercial loan officers and managers have fostered with affordable housing agencies, community nonprofits and other local organizations to facilitate financial literacy programs have also been important. Webster workshops cover topics such as credit, budgeting, saving and basic banking services, Griffin says. “We worked closely with community partners in creating this program to ensure the needs of our communities were represented,” he says.
Banks that connect with their communities from the outset are more apt to create or strengthen programs that reflect the communities’ needs and meet people where they are, Torrico says. Conversely, establishing a new initiative that’s not truly needed may end up diverting resources from existing programs.
The importance of education
As Griffin notes, education is essential to successful homeownership programs. Many individuals who are new to home ownership are better able to sustain their homes when they know all the costs associated with it, from the mortgage to utilities to appliance repair, Torrico says. “It’s an important investment for the bank,” she says.
To this end, banks may bring together realtors, lawyers and other industry experts to host homebuyer education programs. “What’s key is thinking holistically about buying and sustaining a home, and offering support, education and resources,” Torrico says.
Along with conveying important information, education sessions can help in building trust, Wilson says.
PNC Bank has a dedicated, affordable-lending mortgage team that focuses on understanding the unique challenges of LMI borrowers and working to proactively address them, says Wil Hendrix-Griffin, SVP and head of affordable mortgage lending. PNC partners with nonprofit housing organizations and offers workshops and seminars to educate prospective homebuyers. “Delivering comprehensive financial literacy education on the homebuying process is critical,” Hendrix-Griffin says.
Another important element is an ongoing review and enhancement of PNC’s products and programs, Hendrix-Griffin says. Actively listening to community members’ needs and offering creative solutions, like grants and other financial tools, also helps ensure the program’s effectiveness, he adds.
In several of PNC’s markets, more than one-third of total mortgage originations are from LMI borrowers, Hendrix-Griffin says, adding that PNC anticipates continued growth as it expands its efforts.
Committed loan officers are key
Before $2.5 billion Penn Community Bank launched its Home Opportunity Mortgage program in April 2023, bank management engaged in listening sessions to better understand the communities in which it works and the barriers to home ownership residents face, says Bernard Tynes, Penn’s chief experience and impact officer. Through the sessions, Tynes and his team gained information that they might not have otherwise, he says.
For example, they found that helping clients cover the down payment was critical in helping them into home ownership, Tynes says. The Home Opportunity Mortgage program offers, among other features, $0 down-payment options and reduced closing costs. The bank also partners with organizations, such as Clarifi and the Urban League of Philadelphia, to deliver grants that support home entry and to provide educational sessions.
As important as these components have been, the actual loan offers are the most critical element, Tynes says. The program’s effectiveness is a result of “loan officers that are passionate, understanding, and want to help,” he says.
In addition, the team at Penn Community Bank continually evaluates the program against the benchmarks it set for itself, assessing whether it makes sense to adjust the process or offerings to ensure their accessibility, impact and sustainability, Tynes says. For example, it became clear that getting program information to real estate agents and brokers working in communities of LMI households would increase direct access more effectively than hit-or-miss advertising, he adds.
So far, the Home Opportunity Mortgage program has issued nearly $7 million in loans and impacted several hundred lives, Tynes says. “It’s been exceptionally well received,” he adds.
Leveraging other organizations
Working in partnership with nonprofit organizations, real estate developers and government, Capital One provides capital to finance affordable rental housing developments that meet the needs of a range of households and communities. For instance, in 2023, Capital One provided 24 grants totaling $1.3 million to nonprofits that support housing stability, including homeownership and wealth building. Capital One also invests in an ecosystem of community partners, such as the New York Mortgage Coalition homeownership counseling program, which helps families gain the financial management skills to build credit, establish a budget and qualify for and access mortgages through counseling. The NYMC has provided mortgage counseling to thousands of families and helped originate over $1 billion in mortgages.
Through its work with developers and governmental agencies, Capital One also deploys capital in the form of debt and equity investments to finance affordable housing, primarily through the federal Low-Income Housing Tax Credit program. In 2023, Capital One financed more than $5.4 billion of affordable housing for low- to moderate-income households nationwide.
Balancing financial viability and impact
What about concerns that potential borrowers with low- to moderate-incomes present more of a risk than higher-income customers? Sound credit evaluations remain important, of course. However, studies have shown that a substantial percentage of these borrowers are mortgage-ready—after all, many are already paying rent—but may need assistance with their down payments, Torrico says. “Often, they’re well positioned to sustain that home,” she adds.
A successful affordable housing program includes a strategic approach that balances financial viability with social impact, Boser says. Community Bank loan officers may work with customers for several months to improve their financial health and prepare for home ownership.
Like many banks that work with LMI clients, Community Bank also collaborates with local governments, non-profits, housing authorities and community organizations to identify eligible candidates, pool resources and enhance the program’s reach. “Our specialized loan officers spend a lot of time meeting and speaking with various agencies to discuss the program and look for opportunities to help those buy houses, where otherwise they would be unable to,” Boser says.
The program has been well received, Boser says. “We’ve seen steady progress in providing affordable homeownership opportunities,” he says.
Similarly, in just a few months, more than 350 banks have signed up for ABA’s Unlocking Homeownership program, Torrico says. “There’s a huge appetite,” she says, noting that many banks want to help find solutions to the current housing challenges. “They recognize that this is one of most important issues in their communities.”
Karen Kroll is a frequent contributor to the ABA Banking Journal.
