Travis County Commissioners Court
August 22, 2006
Housing Finance Corporation
We do need the Travis County housing finance corporation, though. So I call it to order. Testimony number 1 and the only item is to review final report of the 2004-2005 down payment assistance program and take appropriate action to improve similar programs in the future.
>> good afternoon, him harvey Davis, manager of the corporation, with my colleague mike gonzalez. And the reason for this agenda item is to give final report on the 2004-2005 down payment assistance program. The program ended December 31st, 2005, the program was -- was designed to -- this was funded by a grant from Texas department of housing and community affairs. It was designed to provide 60 forgivable loans to first-time home buyers in Travis County. The -- the program was the source of the funds for the program was $300,000 from the state, a -- a $5,000 grant that we got from bankone that was used to assist for some home buyers below 60% of the Austin area median family income, then -- then $37,500 in funding from two builders, which was 12 -- 1250 per home buyer. That -- that these funds were -- were used as match when we applied for the grant, gave us extra points in order to -- to be successful in the grant. The program orange nated -- originated 34 of the 60 loans. The average income of the home buyer was $38,085. The highest income of a home buyer was a little over or $60,600 and the lowest income of the home buyer was $21,840. The program was limited to home buyers whose income was below 80% of the Austin median family income. Which -- which for family of four is -- is about $56,000 or one person family was $31,000. We did -- we were able to make 12 of the 34 loans to -- to families below 60%. Which -- which we were happy of. The ratio, makeup of the home buyers, was 18 home buyers were african-american, 10 home buyers were anglo, six were hispanic. A little surprised at the number of hispanics was as low as it was. Average cost was 114,603, the highest cost of a home was over -- almost $146,000 and the lowest cost of a home was 92,463. Five of the homes were under $100,000. The -- all of the homes were located in the eastern part of the county, almost all of them were in precinct 1. 16 were in zip code 78724, which all of that zip code is in precinct 1. 14 were in manor, 3 were in -- were in del valle and one was in Pflugerville. We did -- I don't know if you recall, maybe a year, year and a half ago, we came and we asked the board to approve a survey, which we did send out to the home buyers. We had 10 responses. Generally, the responses were positive. There were a couple of responses that were -- that were very negative. I think what really stuck out to us was that nine of the respondents didn't understand the forgivable provisions of our assistance. Six of them didn't understand that we had -- that the assistance was a second lien on the house. So this told us that we need to better community to the home buyers that -- communicate to the home buyers the nature of the assistance that they are getting from the program.
>> how do you plan on doing that?
>> what we plan to do is -- is add a flier to their closing documents. A color flier that will -- just a one page flier that will have this basic kind of information in it. Of course we would like to continue to -- to send the surveys to home buyers in future programs, in the surveys that makes them well aware of the provision of the programs. Naturally, we were disappointed that we didn't originate all 60 much the lopes and -- of 60 of the loans. I have outlined four reasons why we felt we weren't successful in using all of the moneys. $170,000 was retained by the state that -- that was not able to use. The first reason was the -- was we hired a consultant who both of the lenders that we used to the program had complaints about. Said he was not friendly and that he was not organized. You know, this perhaps made them less reluctant to continue to use our program. And what we have done to resolve that is to -- to hire a new consultant for the new program who -- who is doing quite well and is well liked by the lenders.
>> for the record, you were neither the old consultant nor the new one.
>> sir?
>> [laughter]
>> you were neither the old consultant -- nor are you the new one, right.
>> right. [laughter]
>> the old consultant was -- he lives in north Texas. The second reason was that we -- this program was limited to two builders who provided the assistance that helped us get the grant. And this -- this of course -- narrowed the availability of the program. One of the lenders did not -- of course both of them promised that they would use easily use all of the loans that they had. One of them didn't -- only used nine of the 30, that was a -- that was a big disappointment. And what we have done for resolve that is that -- to resolve that is that the board has been kind enough to provide the match and -- in the two programs that we have, the program that we have going now and the program that we hope to have going. So the match is being provided by the corporation and on the current program then of course it's open to everybody and that program is -- is doing very well at this point. The third reason is that -- that these funds come from h.u.d. And from -- from the state and they are subject to -- to their very complicated and documentation and underwriting that we -- in fact that's why we had to have a consultant to assist us, because it is massive amount of paperwork and work done for each of these loans. I've included in the backup the three page document from our current consultant that is given to lenders of what we have to have in order to -- in order to approve somebody for the program and if you look through the list, it is -- it is really amazing how much work the lenders have to do to -- to do these programs. And so -- so of course if they are able to put somebody that may have been -- they may have thought well qualified for the program, but able to put them in a home without using these funds, then their tendency would be to well save the extra work that they have. But it is -- unfortunately they have put -- they have I think put too many requirements on to us, but that's -- that's the rules that we have to live with. The final reason is that competing programs and they are -- they have been in recent years since the very late 90s, what's called gifting programs. This is where a seller of a home will -- will gift money to a non-profit entity who will turn around and make a gift to the home buyers for down payment and closing cost assistance. These were -- these gifting programs were approved by fha, and were used, have been used to, you know, to -- to -- have flourished nationwide and in Austin. These were -- these programs were much easier to access the documentation was -- was, you know, was not nearly as much required as for our programs. And so lenders were -- would, you know, somebody needed a down payment, well the -- the tendency was to just to -- to go and use a gifting program and instead of using a down payment assistance program. I think in the -- my backup I -- I related that -- that these gifting programs have come under question by i.r.s., have -- have -- as far as whether this activity qualifies the -- the gifting entity for the -- for the tax exempt status, 501 c 3, tax exempt status. This has become -- this has come under question, there was a -- there was a major article in the wall street journal about the gifting program, if anybody is interested, I have a copy of that article. But I was -- we talked last week with -- with somebody that was in charge of one of the gifting programs and she said by the year end that they were not going to be around anymore. So -- so these -- these gifting programs and -- and the article, the wall street journal article, they said in the last two years, that 625,000 home buyers have used the gifting program. So it -- it really flourished and was one of the factors in -- in, you know, the housing boom that we -- that has been around in the country. So -- so with -- with that, that's our report. Of the --
>> [indiscernible]
>> sir?
>> what ended the program?
>> the program by our grant ended on December 31st.
>> so as to the money, it was use it or lose it?
>> yes.
>> 27,000 back to the state.
>> right.
>> down payment assistance.
>> that's right.
>> our program that we have now, it provides $8,300, so it is a lot more assistance per home buyer and I think that helps to -- to make it more appealing to go through the paperwork requirements that we have. Plus the -- plus the questioning of the gifting programs then makes these -- these types of programs more appealing.
>> for those wondering about the consultant, he or she was paid after each closing.
>> that's right.
>> not based on the total possibilities of 60.
>> that's right.
>> so if we closed on 30, we made payment for 30.
>> that's right.
>> and then that's the same practice we have with the current consultant.
>> and it's a good practice.
>> it's a good practice.
>> questions? Comments? Thank you, mr. Davis, big bonus that we had in mind for you.
>> thank you.
>> let's put it on hold for a little while longer.
>> okay. [laughter]
>> thank you all very much.
>> thank you.
>> move adjourn.
>> second.
>> all in favor? That passes by unanimous vote.
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Last Modified:
Tuesday, August 22, 2006 7:33 PM