For most people, buying a home is the American dream. It can open doors beyond the welcome mat.
"People are looked at differently by financial institutions when they own," says Marcia Griffin, president of HomeFree-USA, a nonprofit organization that helps people in underserved communities buy homes.
She says money you invest in your home can be used later to send your children to college. And you can borrow against the cost of your home to open a business. Essentially, the purchase of a home is an investment in yourself and your family, she says.
But "for African-Americans . . . there was no hope [for years] of most of us getting a home because . . . many of us didn't know the importance, and many of us didn't have the down payment, so didn't meet the requirements," says Jacqueline Johnson, a HomeFree member. "[I]f you did know the importance and you had the down payment or met the requirements, then the racism when you got to the loan table would cut you off."
But things are changing. There are stricter laws against discrimination, and the mortgage industry is realizing that there's a relatively untapped market available. HomeFree is bridging the gap between lenders and low-income groups.
"Underserved communities are looking for a helping hand, not a handout," Mrs. Griffin says. As a black woman and someone with a background in mortgaging, she sees the potential benefits from both points of view. People in underserved groups need someone they trust to educate them and to give them hope. She also knows that a tremendous business potential exists for lenders.
HomeFree is run by experienced mortgage professionals, and its goal is to create loan success "not by lowering mortgage requirements to meet people, but by elevating people to meet mortgage requirements," according to information published by the group.
HomeFree has attracted most of its 680 members through church outreach programs. During the past month, 51 members have received pre-approval letters for mortgage loans.
After double-digit hours of educational programs and personal counseling, HomeFree members are able to secure loans by reputable lenders. HomeFree keeps track of its members for at least two years after the purchase to ensure that they are successful homeowners.
"One of the most important things that they offer is information in the form
of seminars, guidance, one-on-one interviews and sessions where you have groups as well," Mrs. Johnson says.
The group also conducts follow-up activities. "They protect the fruit that they have planted through that seed," Mrs. Johnson says.
"We feel that none of our people will default," Mrs. Griffin says. So far, none of the 53 buyers has done so. She says the education and motivation HomeFree members receive are the reasons for the success record.
Freddie Mac, which buys loans from lenders, has aligned itself with HomeFree's pilot program. It has provided software and training to HomeFree's staff and has agreed to purchase the loans issued to HomeFree members. This alliance provides an incentive for lenders to work with underserved groups.
"We'll take the responsibility for bringing the lenders to the local table . . . going to city government with HomeFree, going to our other institutional players, where it's appropriate," says Dan Russell, vice president of community-development lending at Freddie Mac.
HomeFree's lending partner is Chevy Chase Bank, which is offering a down-payment and closing-cost assistance program. Buyers must have at least $3,000 to make a 97 percent mortgage. HomeFree members can receive as much as $4,500 as a grant toward their down payments and closing costs. Or they can get $2,500 as a grant and a pay a lower interest rate. A third option has no grant but an even lower interest rate.
Purchasing a home is a complicated process that can easily intimidate buyers. …