Utilizing Tech to Curb the Affordability Crisis 

As mortgage rates continue to leap skyward, more and more prospective buyers are choosing to wait out the storm of inflation and the current rate environment before traveling down the path to homeownership.  

The Bureau of Labor Statistics reported that the unemployment rate has risen to 3.7%, yet another fear tepid buyers have when entering into a contract for what is often the largest financial purchase in their lifetime.  

MReport was able to chat with Joe Puthur, a 20-plus year vet of the mortgage space to discuss the topic.  

As President of Mortgage Coach, Puthur helps lenders provide the best possible loan advice to every potential borrower. For more than 20 years, Puthur has instructed mortgage professionals on how to best tap into their full potential, with a little help from technology. 

Puthur entered the mortgage tech space more than 20 years ago with Lasso Technologies (later known as Encompass Anywhere). In 2005, Lasso was acquired by Ellie Mae, and Puthur remained with the firm as Director of Sales Excellence and Director of Hosted Services before leaving for the Bright School Inc., a media online software solution that provides schools the ability to track student performance, leverage the intelligence the data provides, and facilitate effective communication with parents and teachers, serving as CEO.  

As President and Chief Technology Officer for Mortgage Coach, Joe is a passionate leader and public speaker for a number of professional and interest specific organizations, with ability to effectively communicate a message to a large group or market of people. Mortgage Coach’s Total Cost Analysis platform is trusted by thousands of independent mortgage banks, mortgage brokers, credit unions, and depositories, delivering transparent mortgage insight to millions annually.  

Joe recently shared his thoughts on the nation’s housing affordability issues with MReport, discussing several ways in which to curb the issue.  

The housing affordability issue seems like a vicious cycle as inflation and the rise in rates are forces acting against first-time buyers looking to purchase. What needs to change in order to remedy this issue and break this cycle?
Puthur: In the wake of inflation and rising interest rates, inventory, real estate agent education and consumer financial literacy are three forces compounding housing affordability challenges, especially for first-time and underserved homebuyers. Luckily, mortgage lenders are in a position to move the needle on the latter two–at least in their immediate sphere of influence–and help more people get into homes. 

The largest issue outside lender control is inventory, which long-term must adjust to market needs to make real headway on affordability. Builders are not constructing enough homes for first-time homebuyers because the margins are not there and a reluctance to retrofit commercial to high density housing is unnecessarily present. 

A significant issue every lender can help correct is persistent negative Realtor sentiment about lending programs, such as FHA and VA loans, which are designed to give underserved and first-time homebuyers a lift. Stigmatizing entire swaths of lending programs and setting a “cash is king” policy erodes the ability of homebuyers to compete despite secured financing.  

Most important and immediate, basic consumer financial literacy remains a challenge. Even today, many consumers believe they need to put 20% down to purchase a home. Here lies the best opportunity for lenders to increase purchase volume by committing to step up and educate communities about programs such as Freddie Mac’s Home Possible mortgage and Fannie Mae HomeReady mortgage, which are designed to provide a pathway to homeownership.   

Do you foresee housing affordability issues lingering throughout the remainder of 2022, or do you think the issue will extend beyond?
Puthur: Affordable housing will continue to be an issue for the foreseeable future, and we must take formulated measures now to improve the prospect of homeownership, and secure the wealth-building opportunity that accompanies it, for the generation that lies ahead.  

Short-term, policy-makers can continue to make moves to support a fair market, many are asking regulators to reexamine the “rules of the road” for investor pooling when entire neighborhoods are being converted to rentals. When inventory is taken off the market by private equity, this depletes affordable options, and can offset homeownership for entire communities. 

Long-term, we need more housing options in nearly every community. Generating enough dwellings to meet demand requires a multifaceted approach that includes major inventory incentives, repurposing commercial property for high-density housing and continued innovation in manufactured and 3D printed housing.  

Besides renting, what are some options you would suggest to a buyer currently shopping in this ever-competitive market?
Puthur: Unfortunately, just like in our healthcare system where patients must advocate for their health, borrowers must advocate for their financial well-being. Luckily, when partnered with a lender that knows how to navigate the market and has a clear understanding of all loan options available, borrowers can be their own advocate and win offers with their trusted advisor. There are many innovative lending products today, including programs that appear to be cash and products that eliminate mortgage insurance, that can make the difference between owning and renting. 

Even in a constricted market, low inventory is not no inventory. Picking a mortgage professional who can formulate a competitive financing strategy that aligns with borrower needs and the local market is key. The best thing that lenders can do to help borrowers with affordability challenges is to educate them about their options and proactively advocate on their behalf.  

Are downpayment assistance plans and first-time buyer plans feasible options to turn to in this market?
Puthur: Winning a home with down payment assistance is feasible even in a highly competitive market with the help of an advocate professional–a mortgage lender that realizes that the lending product they're offering, combined with down payment assistance, is just as good as cash in pocket. A lender who understands lending programs and can proactively communicate with Realtors can beat out other offers that may otherwise be unfairly be looked at as superior. 

For many people, down payment assistance provides the best pathway to homeownership. If somebody has the ability to repay, they should have the ability to benefit from the wealth building benefits of homeownership and the ability to invest in things like better neighborhoods, better education and better life outcomes. 

What advice would you give to a prospective buyer forced to sit on the sidelines due to affordability concerns?
Puthur: Lenders should always do whatever they can to keep borrowers off the sidelines, starting with identifying where a borrower's personal finances are causing affordability concerns. In many cases there are lending programs available to help borrowers with a demonstrated ability to pay. As a consultative professional using technology, it is now easy to provide increased affordability with solutions that reduce student loan debt, create affordability through debt consolidation, provide increased purchasing power to self-employed borrowers, qualify using alternative credit, and leverage other lending innovations, all to help more people benefit from home ownership.  

To the discouraged first-time homebuyer, I would say do not get distraught and do not accept the first ‘no’ as an absolute. I've talked to too many prospective homebuyers with complex financial backgrounds that think they need to sit and wait—and they do not. There are a plethora of affordable loan options available today, but the number of professionals that know how to explain affordable scenarios is not as high as the industry needs to see. In today’s market, all home buyers need to continue searching until they can find an advocate professional.