CINCINNATI — The Tri-State’s largest bank is making it easier for low-income people to buy homes, as well as people buying homes in low-income areas.
For qualifying homeowners, Cincinnati-based Fifth Third Bank has begun paying up to $3,600 of the down payments for the home loans it makes.
Buyers must also qualify for Freddie Mac’s Home Possible Advantage program that funds a loan of 97 percent of the value of the home purchased. In some cases, the homeowner won’t have to make a down payment at all. They will have to pay mortgage insurance premiums, however, something most borrowers who make a down payment of less than 20 percent typically have to do.
A down payment is one of the hardest obstacles to home ownership, said Kevin Mackiewicz, director of mortgage marketing at Fifth Third. “So we put together a program to aid folks in overcoming that obstacle,” he said.
It’s the first program he knows of in which a bank actually pays part of the down payment, he said, but it seems to be part of trend of banks offering help to home buyers.
In February, one of the nation’s largest banks, Bank of America, began offering mortgages with down payments of as little as 3 percent. The sweetener for that program is that borrowers don’t have to pay mortgage insurance.
Other banks have offered similar incentives for some time. Columbus-based Huntington Bank, the No. 4 bank in Greater Cincinnati, has been waiving fees for buyers in low-to-moderate-income census tracts for about 18 months now. Those fees vary according to the size of the loan but can be as much as $2,500, said Tim Skinner, the bank’s sales and service manager.
The program has increased the bank’s lending in those census tracts, he said, and has worked better than expected. The bank declined to share specific figures on how much lending had increased or how much the program had cost to date.
To see if an address qualifies for Huntington's program, search for it at https://geomap.ffiec.gov/FFIECGeocMap/GeocodeMap1.aspx, click on Census Demographic Date and read the first field in the box that pops up, Tract Income Level.
In April, Leah and Chris Potts, who work for Great American Insurance Group, used the Huntington Bank program to buy a home in Westwood. Because they were first-time home buyers, they also qualified to make a down payment of only 5 percent.
That was a huge benefit, Leah said, and not having to pay fees also helped.
One reason banks offer these programs is that, under the terms of the federal Community Reinvestment Act, they have a duty to invest in the low-to-moderate-income neighborhoods they serve. The Potts' Westwood home is in an area considered to be a low-to-moderate-income neighborhood.
In November 2014, the Office of the Comptroller of the Currency downgraded Bank of America’s CRA rating from “outstanding” to “satisfactory.” Earlier this month, in a review of operations from 2011 to 2013, the Federal Reserve gave a “needs to improve” rating to Fifth Third for its CRA compliance. That rating is just one step above the lowest rating, “substantial noncompliance.”
In a statement about the downgrade, Fifth Third said rating represented “certain legacy issues that the bank has remediated and put behind us some time ago.”
Do programs like Fifth Third’s help low-income buyers? They might help some who have some means and are not homeless or destitute, said Leslie Moorhead, director of development for the Greater Cincinnati Homeless Coalition. She worries, though, that they might enable some borrowers to get in over their heads and simply increase an already high rate of foreclosures in the city.
On the other hand, Jim Simpson, president of the Northern Kentucky Association of Realtors, likes such programs because, “The more the public has access to being able to buy a home, the better it is for the economy and the local community.”
Some buyers have the creditworthiness needed to buy a home, he said, but lack the cash for the down payment.
Right now, however, lack of buyers isn’t the problem. It’s a seller’s market, with more buyers out there than there are homes for sale.
According to the association, the median home price in Northern Kentucky increased from $140,000 in the first six months of 2015 to nearly $150,000 in the first six months of this year. The average home price rose to $183,282 in June, the highest ever for that month.
Cincinnati’s seeing a similar market, according to the Cincinnati Area Board of Realtors. The inventory of homes for sale as of June 30 was 6,896, nearly 22 percent fewer than the 8,807 of a year ago.