In wake of home crisis: buyer education

By Nick Carey

MEMPHIS (Reuters) - Concerned by foreclosures but keen to take advantage of sliding home prices, a growing number of prospective buyers in the United States are signing up for a different kind of class: home-buyer education.

"These people have seen what's happened around them, to their neighbors, their friends or their family," said Tim Bolding, executive director of United Housing, a nonprofit lender that offers such classes.

"They want to buy but don't want to end up like the people they see around them, so they're coming to us."

Memphis, where United Housing is based, had the 13th highest rate of foreclosures among U.S. cities in 2007, with 22,654 filings, or 2.1 percent of homes in foreclosure, according to RealtyTrac.

And, in the first quarter of this year, the median sales price for an existing family home in the Memphis area was down 18.5 percent from a year earlier, at $110,800 compared with $135,900, according to the National Association of Realtors (NAR).

Attendance at United Housing's home buyer classes -- mainly for low income borrowers -- has jumped some 30 percent this year as a result, Bolding said.

"Most of the questions we get from prospective buyers are focused on how to avoid adjustable rate mortgages and other problem products they've heard about in the media," Bolding said. "Everyone wants to avoid a bad loan."

This is a far cry from the property boom, when fast-and-loose lending principles meant low-income borrowers could get loans instantly with little or no documentation -- and had little need for nonprofit lenders like United Housing.

"During the boom, our home loan business trailed off to nearly nothing," said Bob Boyle, head of Justine Petersen, a nonprofit lender based in St Louis. Its home ownership program consists of building up a prospective home buyer's credit rating and financial acumen over six to 18 months before giving them a mortgage.

"When borrowers could get a loan instantly regardless of income or credit rating, why would they wait?" said Boyle.

Now the housing crisis has pushed home prices down -- median prices in the St Louis area were down nearly 10 percent in the first quarter, according to NAR data -- but credit standards have tightened, hopeful first-time buyers have returned to nonprofit lenders like Justine Petersen.

"There has never been a better time to be a first-time buyer," said Sheri Flanigan-Vazquez, Justine Petersen's chief operating officer. "If you can get access to credit, that is."

But while demand for home buyer education is spiking in some areas around the country, nonprofit groups say their resources are stretched so thin by providing foreclosure prevention counseling they have few resources left to help prospective homeowners.

"We're swamped right now," Bolding said.

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