The Myth of “Skin in the Game”

When discussing the future of housing finance, nothing stirs more passion than the question of what sort of down payment is appropriate when buying a home- 0%? 5%? Maybe 10% or even 20%? It’s called “skin in the game”.

While all sides believe their positions are rooted in fact, hard data is rarely cited. For those in the ‘bigger is better’ camp, opinions are ‘supported’ by vague incantations like ‘low down payments caused the real estate crisis’ or, the government is ‘wasting’ tax payers’ money by subsidizing home ownership. Many of these advocates for larger down payments and no down payment assistance- typically homeowners themselves- fail to acknowledge that they too benefit from a significant federal subsidy- the home mortgage interest deduction.

The level of emotion and sometimes outright hostility engendered by this debate can only be explained by deeply held opposing world views on who is qualified to own a home. It’s certainly an important debate as housing policy is reconsidered. It would be interesting to understand more about the forces that shape these views, but we’ll leave that to social scientists and other academics.

You’ve probably figured out by now that we believe high loan-to-value lending is safe and sustainable when executed responsibly. keep reading

Update: Recent industry conferences examine the future of housing finance

10% down “affordable”?

We’re back after attending two excellent real estate conferences. Not surprisingly, the major concern permeating each was the future of housing finance and especially, what the real estate industry and consumers have to look forward to regarding down payment requirements.

At the NAR Midyear Legislative Conference in Washington, D.C., we held dozens of meetings with key multiple listing services (MLS) and REALTOR® Association executives. Their number one concern is how confident their members, as well as buyers and sellers, can be that the homes they buy or sell will be financed and closed.

This is understandable given the current challenges of financing home sales. However, issues today may look like child’s play compared to what could happen if certain measures proposed in Congress and the U.S. Treasury are enacted. Here’s what the real estate industry knows today:

  • Rapidly changing credit and collateral standards over the last few years have reduced the percentage of homes closed in relation to the number of sales contracts written.
  • The move-up market remains grid-locked without more first-time homebuyers.
  • The May 19 Campbell/Inside Mortgage Finance HousingPulse Survey showed the proportion of first-time homebuyers in the housing market fell to 35.7% in April compared to 43.4% a year earlier.
keep reading

Affordable Home Ownership: Facts & Myths

This is who we are and our goal for this blog:

Workforce Resource was launched in 2008 with the mission to connect people with hard to find financial resources for better living. Our first product, Down Payment Resource(SM) (DPR), makes homeownership a reality for more people by connecting eligible homebuyers and eligible properties with government-funded down payments, affordable mortgages and rehab loans.

We collect and organize the confusing array of information about these programs for potential homebuyers and the real estate professionals who influence their buying decisions. These professionals include, REALTORS®, mortgage lenders and homeownership counselors.

We are paid by Multiple Listing Services and REALTOR® Associations who make DPR available free of charge to their members, real estate agents and brokers. Lenders are beginning to see the value to their business and will become our next customer channel.

Housing Finance Agencies, local municipalities, non-profits and sometimes employers are the primary administrators of these programs. In an age of dwindling resources, they are looking for new ways to get this money in the hands of those for whom it is intended. DPR does this for them in ways they only dreamed of and we do it at no cost to them. keep reading