Q: Why are fewer of your borrowers delinquent or in foreclosure than borrowers in subprime loans?
A: CHFA’s current delinquency rate is 4.96 percent, and our default rate is 1.1 percent. CHFA requires and pays for all of our borrowers to attend homebuyer education. There are very few local servicers left in Colorado. At CHFA, we service all the loans we make. Our servicing operation is a very high-touch business.
CHFA offers 30- and 40-year fixed-rate loans. We have never done (adjustable-rate mortgages) or exotic mortgages. When others went to 100 percent financing, CHFA still required our borrowers to invest some cash in the deal. Even if they can only bring $500 or $1,000 to the table, we believe their dollars help to establish a personal commitment to the property.
CHFA offers down-payment assistance in the form of a second mortgage to protect the second lien position from predatory lenders. If CHFA has the first and second lien position, we have many more loss-mitigation options should a borrower experience an unforeseen default.
Q: What kind of products have you rolled out for the refinance market?
A: CHFA has three refinance products, one of which just launched. Our CHFA HomeStretch product can be used for new home purchases or refinance. It is an affordable 40-year conventional mortgage with lender-paid mortgage insurance. The borrower has access to an optional down payment and/or closing cost on a second mortgage, which is excellent for home owners who may not have enough equity to complete a refinance. This loan also has three years of free involuntary unemployment insurance.
CHFA’s newest refinance product is CHFA FHASecure. Designed by HUD, FHASecure is an FHA-insured 30-year mortgage. A borrower may be eligible for the FHASecure even if they are behind on their existing mortgage because of an interest-rate adjustment which caused their payment to increase.
The Hardship Refinance product is designed for a homeowner who has experienced a significant life event — death, disability, job loss, divorce — that has caused them to become delinquent on their mortgage. CHFA refinances the defaulted mortgage into a new loan. The homeowner needs at least 20 percent equity in their home to use this product.
Q: Does CHFA have enough lending capacity to make a serious difference in this tight lending market?
A: CHFA funds its operations and loan programs through the sale of bonds in the financial markets. On average we are authorized to issue up to $100 million annually in tax-exempt bonds. Through partnerships and sound financial stewardship, we leverage these dollars with other resources like taxable bonds to meet the demand.
CHFA has never had a situation where we were not able to serve a qualified family due to lack of funding. Our home-finance division is on track for 2007 to exceed a 2003 record production year.
Q: What efforts are underway to increase that lending capacity?
A: Sens. John Kerry, D-Mass., and Gordon Smith, R-Ore., introduced legislation that would increase the amount of tax-exempt bond-issuance authority granted to states by $15 billion in 2008.
Q: How would you respond to fears that government-supported lenders are putting taxpayers’ dollars at risk by jumping into the fray?
A: When a person loses their home, regardless of what the reason is, we all suffer with them, not just emotionally, but financially. CHFA’s disciplined approach to providing only high-quality loan products, requiring documentation of borrower income and expenses, customer-focused loan servicing, and homebuyer education is, frankly, what our state needs more of, not less.
Edited for length and clarity by Aldo Svaldi.
