Borrowers encouraged to receive counseling


November 22, 1992|By JoAnne C. Broadwater | JoAnne C. Broadwater,Contributing writer

Sheritta Barr wanted to buy and renovate a house in Northeast Baltimore. But before the Bank of Baltimore would give her a loan, the 33-year-old social worker had to attend classes on owning a home.

"I didn't mind," said Ms. Barr, who had been renting an apartment in the same neighborhood before she moved into a town house in December. "I have no family here, and I was glad to have the extra support. I wanted any kind of help I could get. I had never done this before, and I was really scared to take on such a venture."

Ms. Barr went to the St. Ambrose Housing Aid Center -- near Charles Village in Baltimore -- and learned how to fix up her home, how to pick a contractor, how to shop for a house, how to get a loan, how to keep a budget and how to save money.

"I kept thinking, 'I can't afford this.' . . . I always thought you had to be married," said Ms. Barr, who is single. "The counselor showed me on paper that I could."

Banks are increasingly requiring or encouraging low- and

moderate-income borrowers to receive counseling on managing money and maintaining a home. Recent laws require banks to make more loans to people who, in the past, would not have qualified for a loan. Counseling is one way to try to ensure that the loan is paid back.

Banks are also trying to find new customers and, with counseling, they can transform what appears to them an unattractive applicant into a credit-worthy borrower.

"The banks are finding counselors to be a valuable resource," said Tracy Durkin, director and loan counselor for Belair-Edison Housing Service. "Both have the same goal, and that is to help persons with obstacles to become homeowners."

For example, all applicants for the Bank of Baltimore's "Housing Acquisition Rehabilitation Program" -- the program Ms. Barr applied for -- must go through counseling. The so-called HARP loan, also available through Signet Bank, combines funds to buy and repair a house in a single mortgage.

Other loan programs that target low- to moderate-income first-time homebuyers either require or encourage counseling.

Maryland National Bank's "Home Ownership Made Easy" program -- with a slightly lower interest rate and no down payment -- offers a discount of one-quarter of a percentage point off the origination fee -- the upfront "points" paid on a loan -- if

counseling is completed.

NationsBank requires counseling for its "affordable mortgage" programs. The bank has its own four-hour "Community Homebuyers Training" program; or applicants can go to a professional counselor, who usually does not charge a fee, and NationsBank will donate money to the counseling agency.

"We have a commitment to first-time homebuyers," said Molly Olbrich, vice president and regional community investment coordinator for NationsBank. "We want to get more people interested and help them to discover that they could be homebuyers."

Banks are also sponsoring seminars for potential homebuyers even before they enter the bank. And NationsBank and other lenders are donating money to non-profit groups that offer counseling.

Maryland National Bank gives grants of as much as $12,000 to each of 25 non-profits throughout the state to "encourage and promote homeownership counseling," said Barry Blumberg, vice president and community reinvestment officer. He said the bank has co-sponsored 53 homeownership seminars and has made information available to consumers in Spanish and Russian.

"Counseling is the educational piece of community development that has really paid off," Mr. Blumberg said. "Since 1987, we have in this one department put 540 families into homes. If you take a look at the mortgages, you'll see that we have a low delinquency rate and a nominal foreclosure rate. One of the reasons for that, I think, is that a lot of time has been spent counseling people so they can make good, thoughtful decisions on mortgages.

"We want to not only have people have the dream of homeownership. We'd also like them to stay in that home and grow in that home and not be in a situation where they have to give it up."

The developing relationship between bankers and counselors may seem like an unlikely partnership. But banks are coming under increased pressure to provide services to all the communities where they do business.

Under the federal Community Reinvestment Act, banks must lend money to -- and not just take deposits from -- all segments of the community. Housing counselors, with strong ties to the their communities, can help banks reach out to these people.

In addition, banks are finding that cultivating this new pool of potential borrowers makes business sense.

"I think banks have become more aware of the role that counselors might play and more anxious to lend money to unsophisticated borrowers," said Frank Fischer, director of counseling for St. Ambrose Housing Aid Center.

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