NEW YORK-The exit of mortgage brokers from the business has been a "huge loss" when it comes to serving low- to moderate-income first-time homebuyers, Marietta Rodriguez, director of national homeownership programs at NeighborWorks America, told Origination News in an interview here earlier this year.

This persists despite the greater emphasis put on these borrowers in today's market and the availability of an $8,000 first-time homebuyer tax credit that some of them quality for, she said last month.

"There's still a huge need," said Ms. Rodriguez.

Several communities were left with a shortage of Federal Housing Administration origination facilities that could serve local low- to moderate-income first-time homebuyers in the wake of the subprime market's collapse. This is among the reasons why NeighborWorks this year has tested the viability of a group of nonprofits that originate mortgages.

To prevent any conflict of interest, there have been "firewalls" set up between these nonprofit originators and others nonprofit market participants that do prepurchase counseling, Ms. Rodriguez said.

Of the more than 230 nonprofits NeighborWorks works with, about 90% are engaged in "homeownership" efforts. The origination project started with about 20 groups participating, and Ms. Rodriguez at the time of that interview expected another 15 to test the concept. She said she subsequently expected about 20% fallout during testing.

For nonprofits, "the risks are high," Ms. Rodriguez said, noting that taking on this kind of role creates changes that can challenge these organizations and their boards. The biggest challenges have been individual issues related to sizing up the market they serve and building the infrastructure and capital to match it.

"Given how volatile the market is, they're having a hard time right-sizing that," she said. Ms. Rodriguez said participants in the project are finding a hurdle lies in getting enough volume to sustain where they would like to be. "They still need to build the car before they can drive it," she said.

At press time last month it appeared interest rates and maybe home prices had stabilized, and Ms. Rodriguez said this - in combination with the first-time homebuyer tax credit - might be helpful to those who would like to get a better handle on the purchase market. While how that market might shape up going forward remained somewhat uncertain at press time, these conditions have started to potentially prime pipelines for more origination, she said.

"I do think the tax credit has proved to be an incentive to homebuyers who were on the fence," said Ms. Rodriguez.

Also somewhat helpful has been the fact that the tax credit can be monetized. She said a handful of NeighborWorks groups have been allowing borrowers to monetize the tax credit in the form of loans that can paid back when borrowers file amended tax returns in order to cover mortgage costs they might not otherwise have been able to cover.

But generally the ability to reach first-time, low- to moderate-income borrowers remains largely limited by the fact that liquidity for anyone who is not a "squeaky clean, A-plus borrower with a perfect work history, downpayment" is still scarce.

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