Counselors Seek Partnerships with Lenders to Close Racial Gap

How to scale up services at housing counseling agencies to close the racial homeownership gap?

That was the topic discussed by participants this week at an online symposium hosted by the Department of Housing and Urban Development.

Eric Johnson, information officer at the California Housing Finance Agency, said sustainable funding is a key component to ensure HCAs are not only staffed but also have enough chairs, telephone lines and internet access to support their clients.

Johnson noted that most of the HCAs in California use their funding to subsidize counselor salaries.

Also, some CalHFA agencies use their funding toward transportation and Wi-Fi for their clients. “If people can’t get to your doors, to your screens, they’re just not going to do it,” he added.

Lautaro Diaz, vice president of housing and financial empowerment at Unidos US, a HUD intermediary, said, for HCAs, “finding a revenue stream consistent enough to provide scaling of technology has always been a challenge.”

Unidos is developing a call center program to complement its housing counseling program, Diaz said, adding, “Fee for service can lead to scale.”

He said typical fee-for-service models require lenders to be involved in the process, and that the HCA community needs to make such engagement easy for lenders. “We want to make this pervasive in the industry,” he added.

He said programs outlined during the HUD symposium, like the Comptroller of the Currency’s Project Reach, could serve as roadmaps.

Also, lenders’ regulatory concerns over partnering with HCAs have to be addressed, Diaz noted.

Hermond Palmer, vice president of outreach and inclusion at the National Foundation for Credit Counseling, said one benefit of using the fee-for-service model is that it can provide greater access to unrestricted revenue streams.

“We love grant funding,” Palmer said. “[However], challenges arise when funding is restricted on how it can be deployed. With fee-for-service, there are no restrictions.”

In some partnerships, the lender pays an upfront fee for pre-purchase counseling and a follow-up fee once there’s an alert the mortgage is ready, Palmer said. NFCC is working to identify strategic partners among banks, credit unions and other lenders.

“If we could build awareness and build a foundation of trust, the opportunities are endless,” Palmer said. “It doesn’t matter how great the resources are if you can’t reach the people.”

Palmer suggested HCAs explore strategic partnerships with faith-based institutions and large employers and labor unions.

He said lenders who partner with HCAs gain access to qualified homebuyers, which they can target by population segment, geography or the type of counseling service used.

In addition to pre-purchase services, HCAs can also offer post-purchase, refinance and home maintenance counseling, he added. Lenders also gain public relations and goodwill benefits through partnerships with HCAs, Palmer said. 

Meanwhile, the Mortgage Industry Standards Maintenance Organization is calling for participants in its new development work group tasked with creating “a unified dataset aimed at making the housing counseling process more efficient and effective for borrowers and lenders with the goal of facilitating greater access to homeownership.”

The new MISMO dataset would deliver greater portability of client data to facilitate the exchange of consistent data between originators and servicers, the standards setting organization said.

“It will benefit originators by curating higher quality loan candidates and lower data entry requirements, while creating shorter turnaround times on loan packages,” MISMO said. “It will benefit servicers by providing better connectivity with counseling organizations to reduce default and foreclosure.”