Studies Find that Down Payment Assistance Programs Don’t Affect Loan Performance
CBC Mortgage Agency President Richard Ferguson seeks to dispel misconceptions
that negatively impact thousands of borrowers
Nov. 11, 2019 – CEDAR CITY, Utah – A groundbreaking report released by the Harvard Joint Center for Housing Studies found that down payment assistance programs had little impact on loan performance. The center’s Working Paper, “A Cautionary Tale of How the Presence and Type of Down Payment Assistance Affects the Performance of Affordable Mortgage Loans,” found, among other things, that the performance of home loans was not significantly impacted when down payment assistance was used.
According to the study’s authors, “Our multivariate analysis indicates that the receipt of DPA (down payment assistance) is not significantly associated with default risk. In particular, while grant assistance from a government or community organization is marginally significant as a predictor of default risk in one of our model specifications, this effect disappears altogether when racial controls are incorporated in the model. Thus, the receipt of DPA appears to be unrelated to default risk.”
Down payment assistance can take many forms. In many situations, family members provide relatives with the necessary funds for a down payment. But in the minority community, especially among African American families, family members often lack the capital to help relatives with a home purchase. “This is where government down payment assistance programs help bridge the gap,” said Richard Ferguson, president of CBC Mortgage Agency, a nationally chartered housing finance agency and a leading source of down payment assistance.
A recent white paper published by CBC Mortgage Agency, found that more than 90 percent of down payment assistance recipients would not have been able to purchase a home without down payment assistance. More than half of buyers helped by CBC Mortgage Agency are racial or ethnic minorities.
“Down payment assistance programs have come under attack lately, with some arguing that all down payment assistance is bad,” stated Ferguson. “This view is likely the result of pre-crisis down payment assistance programs in which property sellers were allowed to pay the buyer’s down payment and raised the price of the property in order to cover the cost. Those seller-paid programs have been shut out of the market for years and are no longer an issue. Today’s programs must be economically viable without the help of a home seller. In recent years, loan performance on transactions in which the borrower received down payment assistance has been far better compared to loans under the former seller-paid programs.”
“Many individuals are unaware that they can achieve homeownership even though they are unable to save for a down payment,” Ferguson added. “This includes many who diligently make large student loan payments each month which leave them with little money to save towards a down payment for a home. Down payment assistance is the solution for these individuals.”
Reporters who would like to arrange an interview with Ferguson about down payment assistance or the reports mentioned in this announcement can reach out to Strategic Vantage Marketing and Public Relations.
About CBC Mortgage Agency
Founded in 2013, CBC Mortgage Agency is a nationally chartered housing finance agency. As a leading source of down payment assistance, the company helps low-income consumers, often in minority neighborhoods, achieve the dream of homeownership. CBC is a subsidiary of the Cedar Band Corp., a federally chartered tribal corporation founded by the Utah-based Cedar Band of Paiutes. More information can be found at chenoafund.org.