By Jon Buerkert
One seemingly insoluble problem in the housing market over the past several years is the inability of many middle-and lower-income Americans to buy homes. In many areas around the country, the price of renting has soared to the point where it makes much more financial sense to own than to rent, but a large number of people who want to make that leap have been kept out of the market, either due to insufficient income, poor credit, or both. In fact, the homeownership rate recently dropped below 63 percent, a nearly 48-year low, even as interest rates hover around historical lows.
This state of affairs is especially frustrating for those people who lost their homes to foreclosure after the real estate market crash. Many of them have been able to rebuild their finances since then and are ready to get back into home ownership, yet the doors to residential real estate remain closed to them.
And it’s a big potential market. A record 11.4 million renter households spent at least half of their income on rent in 2014. It could be a lot cheaper for them to own their homes, never mind get the opportunity to start building home equity wealth, if they could only get the chance.
Leasing homes with an option to buy provides renters a second chance at homeownership. It gives them the time necessary to rebuild their credit and financial strength, and eventually regain future ownership of a home.
Many lenders know all this, but most are leery of entering a market they see as extremely high-risk. And it certainly is—if the lease-to-own process is done improperly. There are enormous differences between the lease-to-own market and the conventional mortgage market. One of those very important differences is customer service.
Indeed, in order to succeed in the lease-to-own market, lenders and servicers must have an extreme focus on building a one-on-one relationship with their customers. Once someone finds a home they’re interested in and submits an application, they should deal with one person—and one person only—whose job it is to make sure the house is going to be a good fit for them and that they can handle the associated responsibilities.
After the lease agreement is signed, the individual is assigned an advocate in the customer service department, who is responsible for working with them to make sure their payments are submitted each month. In the event the customer runs into a problem and they can't make their payment, they know who they can call.
As we witnessed during the mortgage meltdown, homeowners who had trouble making their payments often refused to talk to their mortgage servicer, either out of embarrassment or fear, even when the servicer came to offer a helping hand or to simply find out what the matter was. How many people could have saved their homes from foreclosure if they had at least listened to what the servicer had to propose? Unfortunately, many didn’t consider negotiation as a plausible solution.
We have found that eviction is never a good option for anyone, so our goal is to help our customers stay in their homes. We will bend over backwards to avoid eviction.
It’s critical in this market that servicers build a supportive, communicative relationship with customers the minute they start the leasing process. That builds a bond of trust between the servicer and the customer so that if problems do arise, they can be resolved quickly to the satisfaction of both parties, most often with the clients remaining in the home and, eventually, purchasing it. That’s a successful resolution that benefits our entire industry and country.
Millions of people have a real desire to become homeowners, despite whatever problems they may have had in the past. Thanks to innovative homeownership solutions and open minds, we as an industry can still provide that opportunity to them, whether it’s through lenders or lease-to-own specialists.