State, Local MBAs Partner to Improve Missouri Guidelines & Lender Reviews

What began as a simple query at the 2018 Mortgage Bankers Association Independent Mortgage Bankers Conference turned into a cooperative effort among state and local MBAs in eight Midwestern states that resulted in changes to a Missouri program making it easier for first-time home buyers to obtain mortgage financing.

The collaboration resulted in the St. Louis MBA and the Missouri Mortgage Bankers Association successfully lobbying the Missouri Housing Development Commission into changing bond requirements for its first-time home buyers program. MHDC also eased reporting requirements for applicants, allowing participating lenders to streamline the applications process and increase revenues to lenders to make it a more viable program.

“This was a major victory for us,” said Joseph Bayer Jr., Executive Vice President with First Integrity Mortgage Services, St. Louis, and former President of the St. Louis MBA. “We were able to make a compelling case to MHDC, thanks to our relationships with other state and local MBAs and MHDC.”

In Missouri, the “First Place” program gives first-time homebuyers and qualified veterans assistance in purchasing a home through affordable interest rates, in combination with down payment and closing costs offered by MHDC. The “Next Step” program gives first-time homebuyers as well as non-first time homebuyers the opportunity to purchase their own home with higher income limits and purchase price limits. It also gives the borrower the opportunity to receive cash assistance for down payment and closing cost assistance.

The problem, Bayer said, was twofold. Lenders participating in the program said their back-end fees and penalties (which help to fund the program) were too high, discouraging lenders from participating. Additionally, Bayer said the paperwork required from consumers to participate served as a deterrent, leaving the programs underutilized. Additionally, Bayer said, revenues were significantly lower than in other states and significantly lower than similar loan programs.

The issue percolated at the 2018 MBA IMB Conference in Amelia Island, Fla. During a roundtable discussion, Bayer ask if any other participants were having problems involving revenue and costs with their state bond programs.

Jeff Brader, Regional Vice President with Union Home Mortgage, Westerville, Ohio, and former President of the Ohio Mortgage Bankers Association, offered that they’d experienced a similar problem and had worked with the State of Ohio to find a satisfactory solution. “I met with Jeff afterward to brainstorm,” Bayer said. “We discussed some specifics and strategies about how they got it to work in Ohio, and I was determined to try it in Missouri.”

At the time, Bayer was President of the St. Louis MBA (the second-oldest MBA in the country). “At the next board meeting I went after this,” he said. “The board agreed to try it. I worked with our lobbyist, Doug Nelson of Lathrop Gage, and took it to the state MBA and got their buy-in as well; they agreed to back us.

The next step was a meeting with representatives of the MHDC; Bayer was joined at the meeting with several St. Louis MBA Missouri MBA member companies. “The Commission heard our concerns and were receptive,” he said.

At the Commission’s request, and to bolster its case, the St. Louis MBA reached out to MBAs in bordering states, asking for comparative data. Seven states and several local MBAs responded; as a result, Bayer learned that of the eight states, Missouri ranked seventh in bond revenues–proof that lenders in the state were at a disadvantage.

“We offered the Commission suggestions to improve revenues for both MHDC and the participating lenders and get a better reception,” Bayer said. “We argued that it would give them more business, not us.”

The Commission was willing to be accommodating, but it requested more data, based on business at the lender level. That’s when Bayer turned to the national MBA in Washington. “Marina Walsh [MBA Vice President of Industry Analysis] provided the information we needed in four hours,” he said. “It was great–they pulled a rabbit out of the hat. They were wonderful!”

As a result, Bayer said, the Commission increased overall compensation by nearly a point and eased guidelines for lenders. Additionally, the Commission is working with the state’s master servicer, based in Alabama, to reduce approval times, easing burdens for both lenders and program applicants.

The programs are definitely more consumer-friendly, Bayer said. Starting in 2019 MHDC will no longer require tax returns for any of its programs. In lieu of tax returns the lenders will sign the new lender certificate (form #520) that will state that the lender has reviewed the credit reports from all three credit bureaus and has verified that no report has any indication the borrower has incurred indebtedness to a principal residence within the past three years. Additionally, MHDC will no longer have to count the income from any non-borrowing person other than a spouse. This means boyfriends or girlfriends not on the loan will not be counted as part of the household nor will we count their income for maximum income limits. However, a spouse living in the home will be counted as well as their income even if they are being left off the loan. Only biological children or adopted children of the borrower can be counted as a household member when counting number of persons in the house.

Bayer, who said he wanted the issue to be resolved before the end of 2018, when his term as St. Louis MBA President expired, said he was grateful to the Ohio MBA, the MBAs from Missouri border states and the national MBA for their help and cooperation, as well as local member companies that wrote letters of support.

“It’s all about relationships,” Bayer said. “We look forward to making 2019 a great year for homeownership in the state of Missouri.”