CFED Assets & Opportunity Scorecard
|First-Time Homebuyer Assistance|
States Offering Downpayment Assistance
States Offering Direct Lending Programs
States that Fund Homeownership Counseling
States Targeting Mortgage Credit Certificates Toward Low-Income Households
Even in today’s housing market, a home remains the primary asset for many American households. It is an integral part of the American dream and provides both physical and financial security. This is especially the case for lower-income and minority families, who have far more wealth concentrated in home equity than other populations. Yet low- and moderate-income families face a number of barriers to achieving homeownership. Some can afford the monthly mortgage payment, but struggle to save enough money for downpayment and closing costs. For others, the still tight prime credit markets make it difficult to obtain an affordable, consumer-friendly mortgage product. Still others enter the purchase process with little to no information about what to expect and how to protect their interests. States can support programs that not only mitigate these risks, but help first-time homebuyers overcome financing and educational challenges to promote successful homeownership.
What States Can Do
By offering direct grants and “soft second” mortgages (which are subsidized and/or forgivable loans to help boost a borrower’s equity) directly to borrowers, states can play a pivotal role in assisting first-time homebuyers in securing mortgage credit at fair rates and terms, which is particularly important in the current credit market. States can also fund homeownership education and counseling for prospective homebuyers and current homeowners, and reduce low-income homebuyers’ federal tax liability by offering mortgage credit certificates (MCC). The MCC program allows a first-time homebuyer to claim a percentage of the mortgage interest she pays as a credit on his federal income tax.
Strength of State Policies: First-Time Homebuyer Assistance 1
|Does the state provide downpayment assistance through grants, second mortgages or resources financed with premium bonds?||Does the state offer direct lending programs to first-time homebuyers?||Does the state fund homeownership counseling?||Does the state distribute at least 75% of its mortgage credit certificates to households below the area median income? 3|
|State||Downpayment assistance?||Type of assistance?||Direct lending? 2||Homeownership counseling? 2||Targeted MCCs?||Percentage?|
|Arizona||Resources financed w/ premium bonds||—|
|Arkansas||Direct grants; second mortgages||50%|
|Colorado||Second mortgages; resources financed w/ premium bonds||40%|
|Delaware||Direct grants; second mortgages; resources financed w/ premium bonds||—|
|District of Columbia||—||—|
|Florida||Direct grants; second mortgages; resources financed w/ premium bonds||—|
|Georgia||Second mortgages; resources financed w/ premium bonds||—|
|Hawaii||Direct grants; resources financed w/ premium bonds||40%|
|Idaho||Direct grants; second mortgages||75%|
|Illinois||Direct grants; second mortgages; resources financed w/ premium bonds||92%|
|Indiana||Direct grants; second mortgages; resources financed w/ premium bonds||50%|
|Louisiana||Direct grants; second mortgages; resources financed w/ premium bonds||—|
|Massachusetts 3||Second mortgages||—|
|Mississippi||Direct grants; second mortgages; resources financed w/ premium bonds||51%|
|Montana||Second mortgages; resources financed w/ premium bonds||91%|
|Nebraska||Second mortgages; resources financed w/ premium bonds||—|
|New Hampshire||Direct grants; second mortgages; resources financed w/ premium bonds||—|
|New Jersey||Second mortgages||—|
|New Mexico||Direct grants; second mortgages; resources financed w/ premium bonds||—|
|New York||Direct grants; second mortgages||83%|
|North Carolina||Direct grants; second mortgages||96%|
|North Dakota||Direct grants; second mortgages||—|
|Ohio 4||Direct grants; second mortgages; resources financed w/ premium bonds||—|
|Oklahoma||Resources financed w/ premium bonds||—|
|Oregon||Resources financed w/ premium bonds||—|
|Rhode Island||Direct grants; second mortgages||—|
|South Carolina||Direct grants; second mortgages||—|
|South Dakota||Direct grants; resources financed w/ premium bonds||—|
|Texas||Direct grants; second mortgages; resources financed w/ premium bonds||90%|
|Utah||Direct grants; second mortgages||—|
|Washington||Second mortgages; resources financed w/ premium bonds||50%|
|West Virginia||Second mortgages||—|
Notes on the Data
1. State HFA Factbook: 2011 NCSHA Annual Survey Results, (Washington, DC: National Council of State Housing Agencies), Table 8 in Administration & Budget and Table 8 in Mortgage Revenue Bonds.
2. Note: "-" indicates data is not available.
3. Even though Massachusetts' state housing finance agency does not directly fund homeownership counseling, it is an active participant in the Massachusetts Homeownership Collaborative, which supports and promotes homebuyer education throughout the state.
4. Although Ohio offered mortgage certificate credits in 2011, information on where these credits were targeted is unavailable.
What States Have Done
Overall, although nearly every state has taken some action to encourage first-time homeownership, many states still have room for improvement in developing a comprehensive package of products and services for first-time buyers. Nearly all states offer downpayment assistance in one form or another, but fewer than half—18—offer direct lending. Forty-one states provide funding for homebuyer education. Only seven offer mortgage credit certificates and target them to households with incomes below the area median.
Making the Case
Since 2007, CFED has provided tips to help advocates build a campaign to advance asset-building policies. Although the specific policies featured in the Scorecard have changed over the years, the strategies discussed in this section are still applicable and can be used to make the case for a number of related policies.
Three Guidelines for a Successful Campaign
1. Build a coalition of partners. In many states, coalitions of housing or asset-building stakeholders already exist, making partnership much easier. Think creatively about who should be represented, paying particular attention to entities that have a vested interest in first-time homeownership. While it is important to secure the support of partners already active in the housing industry, you should also consider going beyond the obvious candidates and reaching out to nontraditional allies in public, private and nonprofit sectors. For example, VHDA has a close working relationship with the Redevelopment and Housing Authorities and local Housing Authorities. VHDA works closely with these organizations on revitalization efforts in their communities – as well as providing Financial Fitness and Homebuyer Clubs to assist borrowers in transitioning from public housing into homeownership, which have proven to be successful efforts. For MaineHousing, partnering with the Maine Association of Realtors, the Maine Association of Community Banks and the Maine Credit Union League made the most sense in creating their Gift of Green program.
Cultivate your coalition’s profile and engage your partners through creative opportunities for action and information-sharing. For instance, you might consider sponsoring regional hearings, creating new studies, crafting new ways of talking about affordable housing or developing relationships with the media. One excellent way of energizing and attracting attention to your coalition is to tell the stories of individuals and families (in their own words, wherever possible) who would benefit from programs to help first-time homebuyers.
2. Keep the message clear. You will need to develop basic themes and approaches for talking about affordable housing and first-time homeownership, which may include background information, communication themes, talking points and supporting arguments. These arguments include the economic and community-level benefits of homeownership; the positive impact of homeownership on education, health and community engagement; and/or an explanation of the need for affordable homeownership in your state. With the foreclosure crisis still fresh in the minds of policymakers, it is important to formulate a strong argument that defends a home as a significant source of wealth and supports homebuyer education so that potential homeowners take on safe, consumer-friendly loans and that they buy only what they can afford.
Because many different members of your coalition may be meeting with policymakers to educate them about the benefits of promoting first-time homeownership, you may wish to create a set of standard meeting guidelines that includes all the key messaging elements that should be communicated during each interaction. This will help your campaign maintain a unified message and ensure that policymakers are receiving consistent, accurate information.
3. Know your audience, and strategize accordingly. Many first-time homebuyer programs are funded and managed not through the legislature, but by state housing finance agencies, which receive substantial federal funds for housing and homeownership and have significant leeway as to how those dollars are spent. Thus, generating support for first-time homebuyer programs may more frequently occur through policy advocacy within the executive branch than by lobbying elected officials in a purely legislative setting.
Of course, the two approaches both occur in a highly political context, so they have much in common – but there are a few important differences. First, when advocating on the administrative level, it is important to be well-versed in what funding sources are available to a state and who controls them. In addition, advocates need to participate actively in the public input processes that these funding sources may require.
As with any advocacy strategy, advocates must have a compelling message and the support of a broad constituency. However, the traditional public-campaign aspect of a legislative advocacy strategy may be less appropriate or effective when dealing with the executive branch. Instead of rallies and billboards, advocates might opt for a less adversarial, behind-the-scenes approach: developing relationships with both program and policy staff at the agency, and being responsive to the political pressures under which they sometimes must operate; organizing stakeholders (including prospective homebuyers) to attend and speak at public meetings of the housing finance authority; and providing useful research and information resources to help allies within the agency make the case to leaders.
Since 2007, CFED has provided case studies that capture detailed stories of noteworthy state policy changes. Although the specific policies featured in the Scorecard have changed over the years, these case studies still serve as instructive lessons drawn from both policy victories and defeats.
Maine Programs Thrive Despite Economic Downturn (published October 2011)
The start of 2009 found the nation’s housing and financial industries still reeling from the effects of the subprime lending debacle and in the midst of a severe economic downturn – creating a grim climate for potential homebuyers. However, MaineHousing, which serves as Maine’s Housing Finance Agency, managed to create and run an extremely successful first-time homebuyer program at a time when other state HFAs had either severely reduced or, in some cases, suspended their programs. Click here to read more.
Innovative Outreach Strategies in Virginia (published October 2011)
The Virginia Housing Development Authority recognized early on that “one size does not fit all" for homebuyers, and that a variety of flexible, diverse homebuyer programs was essential. As a result, the agency has responded nimbly to changing conditions; it maintains its core products while also adding and removing programs as the market environment has shifted. Click here to read more.
Organizations and Experts:
- American Planning Association
- Fannie Mae
- Federal Housing Administration
- Freddie Mac
- Habitat for Humanity
- Housing Assistance Council
- Mortgage Bankers Association of America
- National Association of Home Builders
- National Association of Housing and Redevelopment Officials
- National Association of Realtors
- National Council of State Housing Agencies
- National Housing Conference
- NeighborWorks America