The voices of Urban Institute's researchers and staff
June 19, 2017

New FDIC tool can help community banks expand access to mortgages

June 20, 2017

It's too hard for millions of creditworthy borrowers to obtain a mortgage, but a powerful new tool created by the Federal Deposit Insurance Corporation (FDIC) seeks to aid community bankers in easing access to mortgages.

By taking advantage of the new Affordable Mortgage Lending Center and its Affordable Mortgage Lending Guide, community bankers can navigate and compare hundreds of federal and state lending programs that best meet their clients’ needs and help more Americans become homeowners.

Community banks suffer from an information gap

Community banks don’t have the resources of larger, national banks, so getting up to speed on the myriad of available mortgage lending programs can be an insurmountable task.

A national bank might originate over a million mortgages each year and have several hundred employees experienced in various lending programs. According to Ron Haynie, senior vice president for mortgage finance policy at the Independent Community Bankers of America, however, an average community bank may have only 100 staff and a handful of loan officers who collectively originate 300 to 400 loans each year. 

Community bankers pride themselves on their personal service, which allows them to get to know clients and understand their financial situations. At the same time, hundreds of lending programs at the state and federal levels can provide a range of supports throughout the homeownership process. Sorting through these programs to find one best suited for a client is an arduous task for a single loan officer.

As the lead federal regulator for community banks, the FDIC supports the vital role played by 5,800 community banks in the US financial system. During discussions with banks, the FDIC saw a need for an easy-to-use reference tool that would help loan officers find the best residential mortgage product for clients by quickly and easily evaluating and comparing federal lending programs.

The Affordable Mortgage Lending Center allows users to compare various current affordable mortgage programs in one stop. The Urban Institute’s Housing Finance Policy Center was a contractor for the center and the guides.

An easy-to-use, one-stop guide to mortgage lending programs

The Affordable Mortgage Lending Center and its Affordable Mortgage Lending Guide catalog every mortgage lending program designed to assist low-income and first-time homebuyers. The mortgage lending guide is divided into three parts:

  • Federal agencies and government-sponsored enterprises describes 26 programs offered by six government entities, including the US Department of Housing and Urban Development, the US Treasury, Fannie Mae, and Freddie Mac.
  • State housing finance agencies describes the products offered in each of 50 state housing finance agencies, including down payment and closing cost assistance and education and counseling programs.
  • Federal Home Loan Banks describes programs offered by each of the 11 Federal Home Loan Banks, focusing on liquidity access products and affordable housing grants. 

Each guide includes comparison grids so users can quickly see which programs are offered in various states and compare each program’s elements. 

The guide also walks users through the steps to access the programs and includes tips and advice from other bankers who have used the programs.

Community banks are well positioned to help expand mortgage lending 

Millions of creditworthy families lost out on homeownership over the past seven years. Given that homeownership is the best way for most Americans to build wealth, we need to do all we can to ensure the continued accessibility of homeownership for those who are ready for its responsibilities. 

Community banks are positioned to help expand mortgage access to borrowers having trouble accessing the current mortgage market, those with good but less-than-perfect credit. The personal nature of community banks means they are comfortable taking the time to get to know each customer.

Also, offering affordable mortgages helps banks deepen their customer relationships and gives borrowers the ability to participate in the mainstream banking system and improve their financial future. The FDIC’s new Affordable Mortgage Lending Center and Affordable Mortgage Lending Guide can support community bankers as they help more Americans become homeowners.

The First National Bank in Staunton, Ill., Wednesday, April, 8, 2009. Photo by Seth Perlman/AP.

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