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Nonprofit Organizations Offer Mortgages…One Stop Shopping

August 1st, 2010

The housing crisis and the mortgage meltdown have created more competition for our mortgage business. Non-profit organizations have entered the market.

For many years non-profits have been on the fringe of the mortgage industry. They have helped and educated consumers looking to buy their first house. They have counseled and guided frustrated homeowners facing the dismal reality of foreclosure. And they have assisted borrowers with understanding the GFE and the HUD-1 forms. So it should not come as a surprise that they are now getting more involved in mortgage brokering and loan origination.

One of the issues that has to be addressed is whether an employee of a non-profit organization that deals in residential mortgages is required to be licensed. The new SAFE Act says that while a license is required in a commercial context, the employee can be exempted when working for a non-profit organization. SAFE is leaving the decision up to the State where the employee works. And it is taken as a case by case basis.

SAFE would like the States to consider a few issues in making their decision.

>> where does the organization get its money.

>> does the organization have a tax exempt status.

>> is the organization helping borrowers get mortgages at below market rates.

>> is the organization charging fees and are the fees below standard market fees.

>> is the organization offering financial literacy and homeownership educational programs in conjunction with the mortgage origination.

Manna Mortgage is Washington DC’s first and only non-profit mortgage company and it is licensed. This organization offers reverse mortgages, refinancing and first time homebuyer mortgages. It is also a chartered member of NeighborWorks.   NeighborWorks America is a national nonprofit organization created by Congress to assist local nonprofits in revitalizing their communities.

The Neighborhood Assistance Corporation of America (NACA) is one of the major players in the nonprofit mortgage broker arena. NACA is currently on tour across the nation. “Save the dream tour” will touch 13 cities, and homeowner will receive same day solutions by having their mortgage payments permanently modified.

NACA is simple and to the point. They offer no-frills mortgages. There is one product. No downpayment, no closing costs, no fees and a below market mortgage rate. As I write, the rate is 4.25% for a 30 year fixed mortgage. All borrowers get the same rate. You could be super-prime or sub-prime, you get the same rate.

Nonprofit mortgage brokers may be better able to serve underserved communities.  The tightening credit market is a two edged sword. It may make nonprofit mortgage brokers more competitive or it may drive them out of business. Lenders are looking for higher credit scores and larger down payments.  Nonprofits can play a key role in finding and preparing borrowers for homeownership by educating them.
Nonprofits might be able to find borrowers, but will those borrowers be able to get a mortgage. And will they have the patience to work with the mortgage broker to get their credit scores to a point where they will get a good rate?

The key to success for a nonprofit mortgage broker is building on what he already has accomplished and established. If he has been counseling homeowners, providing information on foreclosure and conducting first time homebuyer education classes, he should take the next step and originate the loan. It would be extremely difficult to simply open an office and start offering loans as a nonprofit mortgage broker.

Lenders benefit from the nonprofits because a new client base is reached. There could have been language and cultural barriers that the lender could not overcome in the past. Also, lenders are able to satisfy their Community Reinvestment Act (CRA) requirements.

Research readings:

Nonprofit Mortgage Brokers: Small Step or Large Leap by Steven P. Hornburg

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How to select a mortgage broker

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• Mortgage ‘Sav-A-Thon’ Aims To Curb Foreclosure Crisis (npr.org)

Entry Filed under: Non Profit Organizations