The Housing Development Fund of Stamford announced last month that it was expanding its services for prospective homeowners to Putnam County and the five boroughs of New York City. This was the latest evolution for the nonprofit counseling and lending agency that began operations in 1989 with a very different mission.
“We started off providing financing for developers of multifamily homes, and we continue to do so,” said Joan Carty, HDF president and CEO. “About 15 or 16 years ago, we started working with first-time homebuyers. We initially provided counseling so they could be better prepared to take advantage of the affordable home programs that the community banks offered.”
Carty said the agency soon realized it needed a new game plan. “We quickly discovered that this area is so expensive that people needed financial assistance as well. They needed assistance for down payment requirements and for closing costs.”
At first, HDF relied on philanthropic resources and federal and state grants to fund its work. As interest in its services grew, so did its footprint. The Long Island, Westchester and Rockland County markets were added and in Connecticut it expanded statewide from the Stamford area .
In 2005, the organization tapped the banking industry for help in a new approach. “We launched a bigger program called SmartMove that was capitalized by banks,” Carty said. “That has been our signature program for first-time homebuyers.”
In the federal SmartMove program, borrowers can receive a second mortgage at 3 percent interest that covers up to 20 percent of the home’s purchase price. Service fees vary according to the state.
Qualified applicants need to meet the program’s income guidelines, complete homebuyer counseling and education classes conducted by HDF or one of its partner counseling agencies and buy a home within the fund’s service areas.
Borrowers also must have their first mortgage from one of the 22 lenders in the SmartMove program and submit their second mortgage request to a pool of participating lenders that reviews and signs off on the application.
“We’re one of the banks that share a pool and vote on the loans,” said Judith Corprew, executive vice president and chief compliance and risk officer at Patriot Bank. “This helps us in lowering the risk level that could be associated with mortgages for first-time homebuyers.”
Carty said the rejection rate is between 5 and 6 percent for SmartMove applicants. The process is a win-win for participating lenders, she said.
“The first mortgage is going to be under 80 percent loan-to-value, so it is a safer first mortgage for the banks. It is a mortgage that is easier for them to sell into the secondary market. The second-mortgage pool is basically getting a loan that is made up from all of the different banks,” she said.
One person who can attest to HDF’s effectiveness is David Zamary, senior vice president of residential lending at Stamford’s First County Bank. Zamary is among the lenders participating in the second-mortgage approval process, which also touched him on a personal level.
“I’ve put my daughter through the program and she used it to purchase her house in Milford in 2013,” he said, adding that his daughter also benefited from the HDF counseling. “A lot of first-time homebuyers don’t understand how you can buy a house. They think you need an 800 credit score and put 20 percent into your
down payment. But that’s not the way
Bank participation in SmartMove and HDF’s counseling outreach also help financial institutions meet their federal Community Reinvestment Act obligations in serving the needs of their lending areas. But Michael Weinstock, M&T Bank’s market president for Connecticut and vice chairman of the HDF board, pointed out that the nonprofit’s mission was also vital to strengthening local economic empowerment.
“HDF works holistically with the individual,” he said. “Without their help, many people would have a hard time getting financing in the broader banking market. Not a lot of groups out there are doing that.”
To date, Housing Development Fund has leveraged more than $400 million in first mortgages and more than $110 million in second mortgages. Approximately 2,600 households in Connecticut has been helped by HDF but only about 30 households in New York have benefited since the nonprofit started operating in the
state in 2014.
Carty said that in addition to helping first-time homebuyers, HDF also helped save others who may have fallen into serious financial trouble during the housing bubble.
“In the early 2000s, real estate prices were doubling and tripling,” she said. “We had a lot of people who wanted our financial assistance, but they also wanted us to pre-approve them for a much higher mortgage than we thought was safe. Because we said no, people were kept away from a lot of those predatory-type mortgages. It vindicated our business model and reinforced how we look out for people.”