Credit risks could get mortgage help

January 23, 1994|By Staff Report

The Center for Affordable Housing, a nonprofit group that helps people with tarnished or no credit become mortgage-worthy, is negotiating with about 20 lenders to originate and approve mortgage loans.

Such a move could make it easier for qualified clients of the center to obtain mortgages and buy homes, and could help lenders extend credit to poor and minority areas, said Charles Jeffries, executive director of the center.

"Banks haven't been able to reach these community members," Mr. Jeffries said. "We are next to them. If we can say we feel confident with this loan, they'll fund it."

Banks are already required to lend to people from poor areas if the banks accept deposits there, under the federal Community Reinvestment Act (CRA) of 1977. But community banks have been accused by consumer groups of neglecting inner cities, despite the law. President Clinton has vowed to strengthen CRA provisions.

"If you're a bank, this is a great way for you to have a one-stop CRA strategy," Mr. Jeffries said.

Mr. Jeffries, who has been talking with lenders since September, has yet to get any to sign up. But he said the program could begin this spring. Mr. Jeffries said he is negotiating with about 20 community banks and savings and loans and one major bank in Baltimore but would not say which bank.

J. Scott Lindsay, controller with Heritage Savings Bank in Lutherville, said that having the center originate and underwrite loans could save time for his bank and center clients.

The center already conducts credit checks and verifies members' financial records in the course of the counseling provided there. As part of the new loan underwriting program, the center would also order appraisals, write loan-risk evaluations and complete disclosure documents to ensure that the lender would fund the loan.

"The loan process would be streamlined if the bank then didn'have to do the same thing," Mr. Lindsay said. "The banks would love for that to happen."

He also said that linking up with a group like the center would make it easier to reach low-income families.

"One of our problems is we can advertise all we want, but unless they come up and see us, we don't have any way of them making an application with us," Mr. Lindsay said. "[The center] already has a base that qualifies."

Ruth Crystal, executive director of the Maryland Low Income Housing Coalition and Information Service in Baltimore, said that other nonprofit community housing groups in Baltimore offer the same type of counseling as the center.

They also try to link low-income residents with banks that issue mortgage loans. But Mr. Jeffries said his organization is the first that would actually originate loans and get them approved -- with the banks' blessing -- in his offices.

Paul Cashover, a vice president and CRA compliance officer with Rosedale Federal Savings and Loan Association in Baltimore, said Rosedale would probably not participate in the center's program. But he said he could see how other banks would like the idea.

"We would probably still prefer to do [loan origination and approval] alone," Mr. Cashover said. "But I don't think its a bad idea at all. He'd be providing a good service if he can link together a group of banks" that would agree to his originating and underwriting mortgage loans for center members.

William Freeman Jr., vice president and CRA compliance officer with the Bank of Baltimore, said that he had not heard of the center's loan origination program. "It's hard to say whether we would support something like that," Mr. Freeman said. "It would be unfair to say it couldn't be done, but I don't know. Bankers are conservative. We want to know as much as we can."

Jeffries said that putting all the steps to obtaining a mortgage under one roof reduces the uncertainty and intimidation many homebuyers feel.

"If you call up a big bank, you're not going to find the same person taking your checking account and your mortgage and making decisions on your loan," he said. "With this program, your loan doesn't go into some black hole. It goes down the hallway. We'd do all the approval right here in our offices."

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