Washington--The nation's biggest source of home mortgage financing is about to bring state-of-the-art computer technology to a segment of the housing market that's rarely seen it: Neighborhood-based community organizations and lenders across the country who specialize in turning lower-income and minority renters into first-time homeowners.
Dubbed the "Desktop Home Counselor," the system is the creation of Fannie Mae, the Federal National Mortgage Association. The idea is to use sophisticated, proprietary
software to help potential buyers analyze what they need to do to qualify for a mortgage they can afford.
The system allows consumers to access their credit reports electronically in seconds, compare their income and debts against the norms established for low down payment mortgage programs, and to work out financial plans that will get them into a home of their own -- even if it's months down the road.
Forty nonprofit community housing groups around the United States have just begun pilot-testing the Desktop Counselor, and another 360 or more will be offered the software -- free of charge -- as early as next January. Private sector, for-profit mortgage banking companies with active minority and lower-income outreach programs also will be offered the same system -- but at a fee of about $500 for the software -- next March. Fannie Mae will be encouraging mortgage lenders to provide personal computers to nonprofit housing organizations in their areas as a way to increase production of loans to minority and lower-income households. Fannie and mortgage bankers are under increasing federal government pressure to expand volume in this field.
The Desktop Counselor does not originate loans itself. Instead, it functions as an analytical tool for housing counselors to advise applicants on whether, how and when they can successfully apply for a loan from local lenders. The housing counselor could be an employee of a nonprofit group or an employee of a mortgage banking firm participating in the program.
To get a feel for how Desktop Counselor works, consider this hypothetical example involving Ernest Bass, a brick mason in the Cleveland area. He earns about $25,000 a year, pays $450 a month rent, and wants to qualify for an entry-level home costing about $55,000.
Using the program software, Bass' financial profile is spread out on screen. Next step: An affordability analysis for the lowest-down payment loan option available locally -- a Fannie Mae "3/2" "community home buyer" mortgage. The loan would allow a 3 percent down payment from Bass' own funds, supplemented by 2 percent down payment cash from elsewhere. The computer analysis reveals instantly that to qualify for the loan Bass wants -- $52,200 at 8 percent for 30 years -- he'll need to cut his current monthly non-housing debt from $235 to $125. That's to meet the maximum debt-to-income ratios permitted for the loan. Plus he needs another $1,800 to pay closing costs.
Fannie Mae expects the Desktop software -- along with donated personal computers -- to produce a big surge in affordable, first-time home purchase transactions, especially in urban neighborhoods. The program is tied into Fannie's new high-tech, "automated underwriting" initiatives scheduled for unveiling tomorrow. Borrowers who are helped to qualify via Desktop may be able to apply for -- and close -- their loans within three to five days via Fannie Mae's forthcoming automated underwriting system.
For information on the Desktop participant closest to you, call 1-800-7FANNIE.
Kenneth R. Harney is a syndicated columnist. Send letters car of the Washington Post Writers Group, 1150 15th St. N.W., Washington, D.C. 20071.