HFA Flexibility Drives New Demand for Down Payment Assistance

An interview with HilltopSecurities’ Housing Director Tonya Todd

This interview was first published in Down Payment Resource’s January 2020 Down Payment Report. To read the full report and subscribe to future reports, download it here.


Tonya Todd is a national leader in the affordable housing industry, including the first-time homebuyer and purchase mortgage markets. Ms. Todd works closely with housing finance agencies, their lenders, Fannie Mae, Freddie Mac, mortgage insurance companies and other industry partners to support down payment assistance programs across the nation.

She led the affordable housing team for over seven years at Mountain West Financial, a regional lender in California, and spent nearly nine years at Bank of America managing the Master Servicing of Housing Finance Agency programs with hundreds of participating lenders.

Ms. Todd is the recipient of the 2019 Beverly Faull Affordable Housing Leadership Award from Down Payment Resource.

Q. What can state and local HFAs do to increase demand for their programs?
HFAs can grow their programs with more down payment assistance (DPA) options and other financial structures to appeal to more borrowers. Not one size fits all when it comes to down payment assistance needs. Some borrowers may need 5 percent or more for a down payment, whereas other borrowers may only need 3 percent and would prefer a lower first mortgage rate. And in many markets, borrowers over the low-income limits (80 percent of AMI) are in need of down payment assistance. With TBA programs, HFAs can adjust their program income limits to further meet the needs of their communities.

To meet the demands of lenders offering more financing structures, HFAs can achieve lower rates and higher lender compensation. Lender compensation is certainly a driver in increasing the demand for the DPA programs due to the loan officer (LO) compensation rules, which require that each LO be paid the same on all of their production. Having competitive economics will increase lender participation and having a program structure that lenders support is one of the most crucial features of an attractive DPA program. Developing compelling programs will unleash the true potential for HFAs reaching many low-to-moderate income borrowers.

Q. Are tax credits an effective way to attract borrowers?
I believe a Mortgage Credit Certificate (MCC) is one of the greatest tax credits and secrets for first-time homebuyers. Because an MCC can save a homeowner some serious money over the life of their mortgage loan, MCC programs are very good to use with non-bond first mortgages to ensure our first-time homebuyers can take advantage of this special federal income tax credit.

Q. Should more HFAs require homeownership education?
Yes, homebuyer education is undoubtedly important, especially for first-time homebuyers, as it teaches them how to prepare for homeownership and how to finance and purchase the home, which all supports sustainable homeownership. The purpose of up-front education is to help individuals fulfill the dream of homeownership as well as understand the responsibilities that come with owning a home.

Many HFAs allow for interactive online homebuyer education courses so it makes planning the training easy and convenient. The courses really help first-time homebuyers understand the credit requirements and how to manage their money for their mortgage payment and household-related expenses.

Q. Are you concerned that the privatization of Fannie Mae and Freddie Mac will reduce their purchases of low down payment loans?
The changes to the GSEs undoubtedly will impact the affordable housing space. While Fannie Mae and Freddie Mac have been a key channel with their HFA Preferred and HFA Advantage programs, lenders are starting to shift their attention back to FHA programs, primarily due to Fannie and Freddie’s recent income limitations of 80 percent AMI on their affordable housing programs. There are many moderate-income borrowers who struggle with saving for a down payment, especially in high-cost markets, and with lower income limit restrictions, these borrowers will not have the same opportunity to utilize conventional mortgages as they once had.

Looking ahead, I do think it’s still a good year for first-time buyers despite industry changes. There are many DPA options, especially with HFAs who have alternate financing structures, such as TBA, that are available for borrowers, despite their income. I would encourage HFAs to continue to be creative so they can always stay relevant and top-of-mind when serving their communities.

There are numerous advantages to owning a home, especially with rising rents in many markets. First-time homebuyers have lots of options and with resources like Down Payment Resource, they can locate current programs in their areas that are currently available.


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