Friday, May 01, 2009

The Homebuyers Club

While many people want to blame the current housing crisis on programs that helped low income people become homeowners, they usually have no clue what a person has to do in order to become eligible for these programs. For the last fifteen years I have administered and taught a program called “Homebuyers Club.”
This program has helped over 550 families become homeownwers. I know it has changed lives. It has taken people out of ghettos and placed them in neighborhoods. It has made people change the way they think and the way they deal with money. It has made irresponsible people become responsible. It has given low-income people the skills that middle-income people take for granted. Most of the people in this program came from a background of generational poverty. It gave them the American Dream.

Below is a condensed version of an except from my annual HUD grant application. If you are with a non-profit agency or just someone that wants to create a program that helps lift people out of poverty, maybe this will help you design a program. If you want to be better informed of how low-income people become homeowners, I hope this helps.

Homebuyers Club
Homebuyers Club is an in-depth year-long program that combines one-on-one housing counseling and group sessions. It is in serving the Homebuyers Club clients where we use a lot of volunteers. Below are the important elements of this program.

The time element: The curriculum is one-year long but many clients stay in a Homebuyers Club for two to three years. Clients may enroll, drop out and reenroll several times. One can learn what one needs to learn about buying a house in an 8-hour workshop. However, if one has serious obstacles to buying a house, one cannot overcome those obstacles in a short time period. Spotty work history, poor credit, excessive debt, and changing bad habits, and changing attitudes take time. Learning money management skills and establishing savings takes time.

Combined one-on-one and group sessions. HBC members get both group sessions and one-on-one sessions. All HBC members get an initial one-on-one session called a “Front Door” at which time we evaluate the clients potential for homeownership and help the client develop an “Action Plan” designed to get the client from where they are at to homeownership. Most clients also get a follow up one-on-one session where we work on cleaning up credit, and another one-on-one where we help the client develop a written budget, and another session where we reevaluate the progress the client has made and develop a second Action Plan. Also one-on-one phone sessions occur with clients to discuss specific problems or to answer questions. Once a month, the client attends a one- and-half-hour group session.

Peer counseling and support. In a Homebuyers Club a group of 12 to 15 people bond and mutually encourage each other. The atmosphere of a Homebuyers Club more closely resembles that of an AA meeting or other self-help group rather than a typical home buying education workshop. Clients advise and encourage each other. They openly discuss their trials and battles and celebrate each others successes and triumphs. Sometimes the class may go off on a tangent and members may discuss how to deal with relatives that ask to borrow money or friends that belittle them for trying to improve their lives. If the class wonders off-topic, we allow it. The group counseling, peer support, and group bonding are important elements of what makes the Homebuyers Club a success. While the Homebuyers Club is a series of twelve workshops, it is much more. It is also a dynamic support group.

Expanded Curriculum. The curriculum covers all of the normal topics of a pre-purchase workshop, but due to the fact that our customers are from the lower end of the economic scale and many of them are moving from public or subsidized housing to homeownership and most of them are single mothers, we tailor our curriculum to address the special needs of our clients. Topics which may be covered in our class but that may not be covered in the curriculum of other housing counseling agencies are classes on getting child support, life insurance, basic banking, and being a wise consumer.

Relationship building. We become friends and mentors to our clients helping them with other issues they may face which affect their ability to become homeowners. We become a resource to help them with a wide variety of issues. Even after they become homeowners, many of them still call us for advice and referrals with both housing related issues such as refinance and home repair as well as referrals and advice on other issues such as taxes, insurance, child support, and employment and education. This post-homeownership relationship has kept some of our clients from defaulting on a loan or helped them avoid refinancing and getting a predatory loan.

Layered financing and grant assistance: In the WCO Homebuyers Club, we not only educate the client and help them get mortgage-ready but we work with the client to get the grants and loans and assistance they need to buy a home. One of the tools we sometimes use is we help the client accumulate funds in a matched savings program called Individual Development Account (IDA). Other programs may be products for people that qualify for specific programs such as Section 8-to-Homeownership. Another tool is partnering with another non-profits such as a church that will build a house for the client and the clients provides sweat equity. We search for the product that will help the individual client and get creative in developing the package of products to move someone into homeownership.

Staff Support: Much effort is expended on client retention. Prior to each club meeting or counseling session the client gets both a reminder card and phone call. The clients in this program often move and often change phone numbers. A constant effort is made to keep addresses and phone numbers current. A lot of rescheduling of sessions occurs. Also, many clients get discouraged and may start skipping class. When that happens we call the client and try to determine the problem and give them a pep talk. Another service we must provide to our Homebuyers Club members that would not have to be provided to clients in a typical homebuyer education program is child care. Most of our clients have minor children. Without child care, they could not attend the classes. This is an additional expense that most other pre-purchase counseling programs would not incur.

Holistic Approach/Other Services. While our clients are striving to get mortgage ready and achieve homeownership they may have other obstacles or needs that are either more immediate or are larger obstacles than can be addresses in our Homebuyers Club. We provide a broad range of services that are available to our Homebuyers Club members as well as other low to moderate income people. These services are provided here at the Woodbine Center. These services are not exclusive to HBC members and are not included in the budget of Housing Counseling Department, but many of our clients use these services. These services include the following:

o Volunteer Income Tax Assistance (VITA). Prior to membership in our HBC, our clients may have been accustomed to going to a commercial income tax preparations firm that charged them a high fee for a relatively simple income tax preparation, convinced them to get a “rapid refund” at a interest rate that may equal 500%, and then charged them for cashing the refund check. Not only are we providing them with a valuable service, but discussing income tax preparation in class gives us a change to discuss attitudes about delayed gratification, being a wise consumer, and interest rates.

o Child support advocacy. We discuss child support issues with our clients who are single mothers and will refer them to someone who can provide them with assistance in getting child support if they desire to pursue it.

o Job Resource Office. This is a partnership with Goodwill Industries and last year 290 people were placed in jobs, including some of our HBC members.

o GED. We have several students in this class. This is provided at our center in partnership with Metro Schools.

o Referral. In addition to services here at our center we routinely provide referrals to other social service providers.

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    Wednesday, April 29, 2009

    Don’t Blame the Housing Crisis on Poor People

    Whether you are a gardener or a physician or an auto mechanic or whatever, you have probably had people share their uninformed but strongly held opinions about your area of expertise. A lot of people have strong opinions about things they know little about.

    I am a housing counselor and have helped many low-income people become homeowners. I routinely hear people assert that the reason we have a housing foreclosure crisis is because the government had programs that helped low income people become homeowners. I have heard Rush Limbaugh make this assertion and our local Rush-want-a-be and lot of other people say this.

    It is true that a large part of the housing crisis was caused by lenders making loans to people who should not have gotten loans. It is true that there were many irresponsible borrowers. There were a lot of people who bought houses with no money down. Some of these people were low-income but many of them were not. These people who were low income did not get these bad loans due to government assistance programs.

    Those low-income people who got government assistance for down payment probably were less risky borrowers than the typical borrower. There have been a variety of programs that helped low-income people become homeowners over the years.

    In recent years the most widely available program was the Bush Administration’s program called American Dream Downpayment Initiative (ADDI). Under this program, the borrower could get into a house for an out-of-pocket cost of only 1% of the sale price and the balance of the closing cost and downpayment was provided in the form of a grant or a loan.

    To take advantage of this program, the first mortgage had to be an FHA loan, or VA loan, or conforming conventional loan. This meant that the borrower could not get a “liar’s loan,” also know as a “stated income” loan. They could not get a negative amortization mortgage or an interest only mortgage or the really bad adjustable rate mortgages. The borrowers had to have decent credit and could not have excessive debt and their housing cost, including escrowed taxes and insurance, could not be over 32% of their gross monthly income.

    ADDI is but one of a number of similar programs that I have been familiar with over the years that were designed to help low income people become homeowners, but almost all of them had these same requirements. Most of these programs also required that the borrower attend homebuyer education programs. These borrowers were better informed homebuyers than the average buyers.

    Another reason that low-income people who become homeowner using down payment assistance programs are not likely to default on their mortgage is because the agency that assisted them usually ends up holding a second mortgage on the property. The second may be in the form of a “due-on-sale” mortgage, which means the assistance will be paid back if the property is ever sold. It may be a “forgivable loan,” where for example, 20% of the downpayment assistance is forgiven each year for a period of five years. The assistance could simply be a low-interest, long-term second mortgage.

    If one wishes to refinance a first mortgage, one cannot do so without paying off the second mortgage, unless the second agrees to subordinate. When the non-profit agency holds the second mortgage, they can prevent the homeowner from refinancing into a bad loan or persuade the borrower that it is not wise to do so. Many borrowers end up refinancing when it is not in their best interest to do so, but borrowers who got downpayment assistance usually can’t do this.

    I think that programs that help low-income people become homeowners is money well spent. It helps lift people out of poverty rather than subsidizing their life in poverty. These programs have genrally been sucessful.

    While it may be popular to blame the housing crisis on government programs that helped poor people become homeowners it is simply not the truth.

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    Monday, April 27, 2009

    Reading Wine

    I love wine. I love to drink wine and try new wines and read wine labels and shop for wine and read wine reviews. I love going to wine tastings. I would not consider myself an expert, but I have learned a little about wine over the years. I don’t “cellar” wine. I don’t invest in wine. I cannot bear to pay over $20 for a bottle, except when dinning out and then $20 is a good price.

    It is hard to tell someone what something taste like or smells like. You can say something is tart or sweet but most often you have to resort to comparing one taste to something else with which one is familiar in order to convey what something taste like.

    I have experienced enough wine to know what to expect from some wine descriptions. If a white wine is described as having “apple” on the palate, I sort of know what to expect. I understand “oaky” or “citric” or “minerally.”

    A red wine may be described as “blackberry” or “dark fruit” or “strawberry.” I sort of know what to expect from those different descriptions. The terms “tobacco,” “coffee,” or “leather,” I think describe the same aroma and I think I know what that means.

    Some descriptions of wine leave me totally baffled. Sometimes I think the writer is not trying to describe the wine but is a frustrated poet writing flowery prose. Sometimes I think the wine writer is putting us on. Just like I sometimes wonder if an artist really thinks his box of dirt is a work of art, I wonder if the wine writer is really trying to describe a wine or just trying to see how far along he can sting the reader.

    Frank Sutherland, a former editor of The Tennessean, writes a regular wine review column for The Tennessean. He and a panel of experts compare four to six wines of the same category and then Sutherland writes the review, describing the aroma, palate and the panel’s verdict of the wine. I always enjoy reading his column.

    One time Frank described a white wine as tasting of “Texas pink grapefruit.” Now, I could understand “grapefruit” or even “pink grapefruit”, but “Texas” pink grapefruit? Honestly now, how many of you can tell a Texas pink grapefruit from a California or a Florida pink grapefruit.

    He once described the aroma or the taste of a wine as “dusty tomato stems.” I don’t know what dusty tomato stems smell or taste like.

    In a recent review of Pouilly Fuisse, he described the palate as “flavors of apples, pear skins, tangerine peel, apricots and wet stone.” Ok, I can’t detect all of those flavors, but I accept the apples, pear skin, tangerine peel and apricots, but I draw the line at “wet stone.” What does wet stone taste like?

    He described the aroma of a 2007 Rodney Strong Russian River Pinot Noir as “bacon.” Ok, maybe so. He described the aroma of the 2007 Benot-Lane Pinot Noir as “yellow cake batter,” and “green banana skins,” and the palate as “cotton candy.” The aroma of the 2006 Spindrift Pinot Noir was “Luden’s Cherry Cough Drops.” Not just cherry cough drops mind you, but “Luden’s” cherry cough drops.” He wouldn’t want us to think that the wine had the aroma of Vicks Cherry Cough Drops or Smith Brothers Cherry Cough Drops; no it has the aroma of Luden’s Cherry Cough Drops. I myself am just not that much of a connoisseur of cough drops.

    Maybe my tastes are just not that sophisticated and discerning or either Mr. Southerland is putting us on. I don’t know that I am learning that much about wine from reading his column, but I am being entertained. I will keep reading Frank’s Wine in Nashville column.

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