More than 11 million Americans now pay more than half their monthly income on housing, an increase of 30% over the past five years, according to the Monroe Group. High home prices and rising interest rates are fueling the affordable housing crisis, making it extremely difficult for first-time homebuyers.
In many areas of the country, essential workers like first responders and teachers are being priced out of their communities by high home prices. They, along with degreed professionals in other occupations, often find it impossible to save the required down payment for a house, turning them into a class of permanent renters. These two groups can’t find affordable housing in the very communities which they serve.
To remedy this situation, Arch MI created its AMGC Community program, an insurance program for portfolio lending that makes it possible for lenders to accept low down payments for eligible borrowers who have good incomes and credit profiles.
“At Arch MI, we strongly believe in the importance of homeownership to strong communities and the need for them to achieve a mix of income levels and skills for stability, longevity and opportunity,” said Jim Jumpe, Senior Vice President and Chief Marketing Officer.
AMGC Community is a novel high-LTV insurance solution that makes it possible for lenders to qualify many of these borrowers for a home purchase with only modest down payments. AMGC Community addresses two categories of borrowers:
1. AMGC Community Heroes
These borrowers include teachers, firefighters, police officers, emergency medical technicians and paramedics. Although these jobs are essential parts of any community, the salaries for these positions haven’t kept pace with home price growth in many areas.
“With home prices at new peaks in many markets, it’s not realistic for a teacher or an emergency medical technician to be able to save up the necessary amount from their paychecks for a traditional down payment amount,” Jumpe said.
2. AMGC Community Experts
These borrowers include certified public accountants (CPAs), chartered financial analysts (CFAs), PhDs, architects, certified mortgage bankers and designated actuaries. These degreed professionals often have good salaries but they are coping with student debt payments that might otherwise have gone to a down payment.
According to Jim Jumpe, “These are homebuyers with good credit profiles, stable positions and salaries that are well able to support a monthly payment. AMGC Community solves the down payment problem because many of these borrowers are good risks.”
For AMGC Community Heroes, the program accepts down payments as low as 1%, with gifts and grants accepted. For AMGC Community Experts, zero down payments are eligible.
“Our analysis shows that, with the issue of the down payment eliminated, these buyers are excellent candidates for homeownership,” Jumpe said.
The AMGC Community program is available through Arch Mortgage Guaranty Company, which is specifically designed to support portfolio lending through flexible underwriting requirements and available Day One rescission relief.
As a result, loans insured through AMGC are high-LTV originations that the lender will retain in portfolio. To do so, the lender needs strong financial promises, which AMGC is able to provide because of its financial strength – recognized in AMGC’s high Moody’s and S&P ratings –and its extensive risk management expertise.
The program was developed following extensive analysis by Arch MI’s risk management teams, with AMGC underwriting guidelines that recognize the borrowers’ good credit and income.
The AMGC Community Program is priced appropriately for risk through RateStar, which means that lenders who originate loans through the program will receive the most competitive rates.
“At Arch MI, we’re committed to introducing innovation to the industry and helping lenders expand their origination opportunities,” Jumpe said. “By making high-LTV options like AMGC Community available, Arch MI supports a broader strategy that creates more origination opportunities for mortgage lenders through the use of risk-based pricing.”