PERSON OF THE WEEK: Down payment assistance (DPA) programs have skyrocketed in popularity during the past two years, in response to the erosion of affordability resulting from higher mortgage interest rates and high home prices.
These programs aren’t new, of course, but in the past they have been overlooked by buyers, or not proactively offered. But today these programs have proliferated – and are offered through a wide range of providers. That’s because today, the inability to make a down payment is a major obstacle for a much larger swath of potential homebuyers. To learn more about how these programs have evolved, MortgageOrb recently interviewed Miki Adams, president of CBC Mortgage Agency (CBCMA), a nationally chartered housing finance agency offering down payment assistance for first-time homebuyers.
Q: How has down payment assistance usage changed over the past decade?
Adams: According to HUD’s most recent numbers, DPA usage has gone up steadily since 2013. Back then, roughly 30% of home purchases financed with FHA mortgages had down payment assistance. Last year, the share was closer to 40%.
There are several reasons why a greater proportion of first-time buyers are using DPA. The biggest reason is that home prices have increased by more than 50% over the past decade, and with interest rates significantly higher than they were two years ago, housing affordability has become a serious problem. In fact, the price of a single-family home sold in the U.S. 10 years ago was in the low $300,000’s, according to HUD. Last year, HUD reported the median sales price to be $418,800 as of September 2023. This is making homeownership increasingly less affordable without some form of assistance to help borrowers over the down payment hurdle.
Q: Where did last year’s DPA come from?
Adams: Most down payment funds come from a borrower’s family members. In fact, more than a quarter of FHA purchase transactions during 2022 involved DPA from an eligible family member, while nearly 14% of FHA purchase financing utilized DPA from governmental entities, including CBCMA.
It’s worth noting, however, that government sources of DPA represent the fastest growing type of DPA. Since CBCMA was founded 10 years ago, the annual number of FHA-insured purchase loans in which government-sourced DPA was used has practically doubled, from 50,000 loans to nearly 95,000 in 2021. Given how much home prices and interest rates have increased, we expect this trend to continue.
Q: What is CBCMA’s role in housing finance?
Adams: CBC Mortgage Agency (CBCMA) is a wholly owned subsidiary of the Cedar Band of Paiutes’ Cedar Band Corporation (CBC). CBCMA was founded in 2013 with the goal of offering DPA and financial literacy programs to provide prospective and new homeowners with the tools they need to be financially successful. Through its Chenoa Fund program, CBCMA has successfully assisted more than 45,000 borrowers across the country with their down payments.
Unlike state and local housing finance agencies whose programs often depend on federal, state, or local funding, CBCMA’s programs are privately financed, which means that it is able to provide ongoing and consistent support to homebuyers across the country.
CBCMA’s innovative, but responsibly designed and managed mortgage programs help first time, minority, and low- to moderate-income homebuyers achieve the American Dream of homeownership with down payment support and financial education programs. The funds generated by CBCMA’s mortgage programs support important projects and employment for the Cedar Band of Paiutes community.
Q: How many transactions has CBCMA funded?
Adams: Since we opened our doors in May 2013, we have funded more than 45,000 transactions involving both an FHA first mortgage and a DPA second mortgage. Each one of these transactions represents the unique journey towards homeownership for thousands of deserving borrowers who might not have been able to realize their homeownership dreams, either because they lacked the funds for a down payment and weren’t able to get assistance from a family member. And more than half of our customers are members of a minority group, while many of them were the first in their family to achieve the dream of homeownership. We’re proud that we’ve made a huge difference in the lives of thousands of families over the years and are committed to increasing our impact in the years ahead.
Q: What was the reason for opening the company?
Adams: The launch of CBCMA 10 years ago came from a genuine desire to serve low- to moderate-income families who had struggled in their homeownership journey. Our mission was to provide the support and assistance they need most, which is help with their down payment as well as the tools to sustain homeownership.
That mission hasn’t changed. We believe that everyone deserves the opportunity to own their own home, and for the past 10 years, we’ve been striving to make this dream a reality for the families we serve. That includes going beyond providing DPA – we also provide comprehensive pre- and post-purchase education and counseling to ensure first-time buyers are well-equipped to navigate the responsibilities that come with owning a home.
Our recent rebranding campaign symbolizes our ongoing commitment to our mission. The work we do doesn’t just benefit individual buyers – we’re contributing to the economic stability of families and communities. At the end of the day, we’re proud of the role we play in the housing market and are looking to expand that role in the years ahead.