The Evolution Of Down Payment Assistance

CBC Mortgage Agency (CBCMA), a federally chartered housing finance agency, made headlines when it reduced interest rates on repayable second mortgages used for its down payment assistance (DPA) program. For underserved and first-time homebuyers, the rate reduction will minimize the dual impact of significantly higher first mortgage interest rates and increased home prices to help create more homeownership opportunities. The rate reduction aligns with the company’s mission to support families on their journey to homeownership. Lowering the cost of owning a home, especially on financing costs, can make a substantial difference for many borrowers, especially those in low-to-moderate income communities. We talked to the company’s president Miki Adams about down payment assistance industry trends.

QUESTION: How has down payment assistance usage changed over the past decade?

MIKI ADAMS: In 2013, roughly 30% of home purchases financed with FHA mortgages had down payment assistance. Last year, the share was closer to 40%. There are several factors behind this growth, one of which has been the steady rise in home prices over the past decade. As prices have escalated, the amount required for a down payment has also increased, thereby elevating the financial hurdle for potential homebuyers. As a result, more buyers are relying on DPA to bridge the gap between their savings and the funds needed to secure their dream home.

QUESTION: Has the growing share of DPA transactions impacted CBCMA?

MIKI ADAMS: It’s had a significant impact on CBCMA, as we’ve experienced steady growth ourselves over the past decade. During this period, we have had the privilege of providing DPA for more than 44,000 home purchases. Each transaction represents the story of a family or individual who, with our assistance, was able to overcome one of the biggest financial hurdles that once stood between them and buying a home. We look at our growth as a testament to the crucial role these programs play in supporting homebuyers, particularly those from low- to moderate-income families, in their journey towards homeownership.

We’ve also launched several initiatives over the years to increase homeownership in various minority communities. In 2021, we launched the Kani Initiative, a borrower outreach program that focuses on providing DPA and Section 184 loans to urban Indians wanting to transition from renting to homeownership.

QUESTION: What is your typical borrower profile?

MIKI ADAMS: Roughly three-quarters of our borrowers are first-time homebuyers, while approximately half are minorities. Most of our customers were the first in their families to become homeowners as well, which is important considering a home is the largest asset for the vast majority of U.S. households.

To that point, in 2020, we performed an internal analysis that revealed that homebuyers who utilized DPA from the Chenoa Fund experienced an average increase of nearly $27,000 in their home’s value. Additionally, 96% of our customers have seen price appreciation, creating an aggregate wealth increase of $469 million since our customers purchased their homes. We’re really proud of the difference we’re making in the lives of so many consumers—and for helping our lender partners expand homeownership opportunities to so many families.  

QUESTION: How has the company evolved since its inception?

MIKI ADAMS: When we first opened, we had a bare bones minimum staff. Today, our leadership team alone is 10 people. In addition, at the outset we were a male-dominated and run company. Today, 70% of our management team are women.

QUESTION: Who owns the company?

MIKI ADAMS: We are a wholly owned subsidiary of Cedar Band Corp., a federally chartered tribal corporation founded by the Cedar Band of Paiute Indians. As a native-owned, federally chartered, government agency, CBCMA also offers the Chenoa Fund independently of any other government agency or entity, which gives us the ability to create unique DPA programs that address the widest range of borrowers.  

We’re very proud of our company’s Native American heritage, by the way. In fact, the Cedar Band is one of five bands of the Paiute Indian Tribe of Utah. Suh’dutsing, the band’s Paiute name, literally means “cedar,” due to the many cedar trees found in the southwest region of Utah.  

QUESTION: Where does CBCMA fit into today’s housing market?

MIKI ADAMS: We see ourselves as playing a crucial role in today’s housing market. Because of our business structure, we are able to establish one set of nationwide rules that lenders can administer across their platforms without worrying about changes based on what state their borrower is in. This benefits both our respective lender partners and the consumers we serve.

Traditionally, the only route to DPA, other than government programs, has been through gifts from relatives. Such gifts, however, are not available to those who lack access to intergenerational wealth. Most low- to moderate-income and minority homebuyers do not come from families who have the financial ability to give a down payment, so these borrowers rely on the programs offered by governmental entities, including our own.

Ultimately, our programs complement the over 1,800 providers and products that offer DPA by serving a broad audience of consumers, driving a competitive market, and introducing innovative, yet responsible financial products.

INSIDER PROFILE

Miki Adams is the president of CBC Mortgage Agency (CBCMA), a nationally chartered housing finance agency and a leading source of down payment assistance for first-time homebuyers. She joined the Cedar City, Utah-based company in November 2016 as executive vice president and was promoted to president in January 2021. She has 30 years’ mortgage lending experience and has managed companies through calm and tumultuous markets. Her background includes credit and collateral underwriting, secondary marketing and portfolio asset management, regulatory compliance, and regulatory audit and examination management. Reach Miki at [email protected].