1. The North Carolina Institute of Minority
Economic Development
NCIMED 1
April 27, 2010 Economic Impact of Housing on the Underserved

2. The Institute
Who We Are
About the Institute
The North Carolina Institute of Minority Economic
Development (“The Institute”) is a statewide nonprofit
organization. The Institute works to build the asset base of
underutilized and undeveloped populations through economic
development strategies that build businesses and sustain
institutions vital to vibrant communities. Since inception in
1986, the Institute has published more than 15 studies/reports.
Over the past five years (2004-2009) its business development
clients have realized more than $225 million in contracts and
Andrea L. Harris, President
financial transactions.
NCIMED 2

3. Critical Observation
• Underserved Homeownership Shift
• GSE’s and FHA Pricing and Fees
• Unemployment and Foreclosures
• Demographic Landscape Transformation
• Commercial Property Impact
• Projected Forecast
NCIMED 3

4. NCIMED 4

5. Impact Of GSE Delivery Fees - $250,000 Home, 95% Loan
Borrower Borrower Loss of
Total LLPA Note Rate Payment Affordable Loss of Affordability
FICO Score % -a) Total LLPA $ Impact Impact Home Impact Affordability %
>= 740 0.25% $594 0.06% $9 $248,820 $1,180 0.5%
720 - 739 0.25% $594 0.06% $9 $248,820 $1,180 0.5%
700 - 719 0.75% $1,781 0.19% $28 $246,570 $3,430 1.4%
680 - 699 1 1.00% 2 $2,375 3 0.25% 4 $37 5 $245,454 6 $4,546 7 1.8%
660 - 679 2.00% $4,750 0.50% $75 $241,058 $8,942 3.6%
640 - 659 2.50% $5,938 0.63% $93 $238,898 $11,102 4.4%
620 - 639 3.00% $7,125 0.75% $112 $236,765 $13,235 5.3%
Assumptions:
Base Note Rate: 5.25%
Home Price $250,000
Loan-To-Value % 95%
Loan Amount $237,500
HDTI Ratio 31%
Example 95% LTV Loan to a FICO 680 borrower:
1 GSE delivery fees sum to 100 basis points, or $2,375 on the $237,500 loan amount
2 Lender must charge as points to borrower (additional cash at closing) or "premium price" into note rate
3 Estimated amount of note rate increase required to generate 100 basis points of additional loan price is 25 basis points
4 Monthly payment increase created by the additional note rate is $112
5 Borrower who could have afforded a $250,000 home now limited to $245,454 due to LLPA fees.
6 Loss of affordability due to LLPA fees.
7 Loss of affordability due to LLPA fees, expressed as a percent of $250,000 original home price
*Fannie Mae– Adverse Market Delivery Charge, LLPA by Credit Score/LTV
*Freddie Mac– Post-Settlement Delivery Fees, Market Condition, Indicator Score/LTV
NCIMED 5

6. Conventional Loan LLPA Fee Impact
$5,000
$4,500
$4,000
Additional Upfront Cost
$3,500
Series1
85% LTV
$3,000 Series2
95% LTV
$2,500 Series3
90% LTV
$2,000 Series4 MCM
97% LTV
Series5 Flex
97% LTV
$1,500
$1,000
$500
$0
620 - 639 640 - 659 660 - 679 680 - 699 700 - 719 720 - 739 740+
Source: NCIMED
FICO Scores
NCIMED 6

7. Down Payment
FHA Max
Financing
3.5%
Impact of the New FHA Changes New FHA
Max
Financing
Coverage 100% 3.5%
UFMIP 1.75% 100%
Monthly MI Premium 0.55% 2.25%
Sales Price
Base Note Rate
150000
5.25%
150000
5.25% UFMIP Increased 0.55%
150000
5.25%
2.25%
Yield Spread Premium over FHA 0.00% 0.00%
Premium Pricing of Closing Costs
Delivery Fees
4.0 0.00% 1.75% 0.00%
0.00%
Jumbo Premium
97% MCM Premium 0.00%
Adverse Mkt Premium 0.25% 0.00%
< 740 Premium
Total Delivery Fees
Note Rate Impact of Delivery Fees 4.0
Total Note Rate 5.25%
5.25%
Term 360 360
360
Closing Costs
Loan Origination* 1.00% 1,500 1,500
Loan Discount Points 0.00% - -
Buyer's Attorney* 450 450 450
Title* 0.75% 1,125 1,125
Appraisal* 275 350 350
Survey* 150 150 150
P&C Insurance 0.50% 875 875
Taxes 2.00% 500 500
Recording* 20 20 20
Tax Service* 75 75 75
Credit Report* 50 50 50
Seller Contribution
Credit From Note Rate Premium 0% - -
Total Closing Costs 5,095 5,095
*Non-Recurring (financable) Cost 3,720 3,720
Max Base LTV (for Premium rating purposes) 96.50% 96.50%
Minimum Down Payment 5,250
$2,533.00 Increased 5,250
Non-financed Closing Costs
Total Cash to Close
5,095
10,345 $3,257 5,095
10,345
144,750
Base Loan 144,750
UFMIP 2,533 3,257
Financable Closing Costs
Total Loan Amount 147,283 148,007
Total LTV% 98.2% 98.7%
Monthly Payment
817
P&I 813
66
Monthly MI 66
313
P&C and Taxes 2.5% 313
1,196
Total Monthly Payment 1,192
Months to amortize to 100% LTV
Max Seller Decreased 10,345
Total Cash to Close 10,345
Minimum Borrower's Cash Investment 3.5%
5250
Contribution $4,500 3.5%
5250
3%
Max Seller Contribution 6%
9,000 $9,000.00 4,500
5,845
Cash Net of Allowable Seller Contribution 5,250
Borrower Income Needed 1,130
Payment for Ratio Purposes: 1,126
Income Ratio 31% 3,644.51
Gross Monthly Income
Annual Income to Qualify
3,631.62
43,579.47
Cash to Decreased
43,734.17
closes
Cash To Close Tie Out
Minimum Down Payment
10,345
5,250
($3,905)
$595 10,345
5,250
5,095
Seller Contribution 5,095 595
Closing Funds from Borrower (3,905)
NCIMED 7

8. African American or Black 23.8%
NCIMED 8

9. NCIMED 9

10. Deficits: Cause and Effect
• Causes
– Under current policies, deficits will likely exceed $1 trillion in
2010 and 2011 and remain near that figure thereafter
– Bush-era tax cuts; War in Iraq and Afghanistan are the dominate
driver of the deficits; TARP, Fannie, Freddie and Stimulus
represents a minimum deficit increase
• Effects
– Greater Budget Cuts and Reduction will matriculate from the
federal level to state and local government impacting all sectors
– Unemployment and foreclosure projected increase in 2010, 2012
and 2013 will reduce tax revenue resulting in additional stress on
the economy
NCIMED 10

11. Unemployment and Foreclosures
High unemployment
High foreclosure
Source: NCIMED Source: CBPP analysis based on Congressional Budget Office estimate
NCIMED 11

12. NCIMED 12

13. Reset Forecast
NCIMED 13

14. Community Impact
NCIMED 14

15. Community Impact
NCIMED 15

16. NCIMED 16

17. NCIMED 17

18. Projected African-American and
Latino Foreclosures
Foreclosures between 2009 and 2012:
African-Americans-1,115,189
Latinos-1,480,285
NCIMED 18

19. Minority
Wealth
Limited Access
Reduced to
Buying Power Predatory Lending Capital / Credit
Home Foreclosure
Negative-Impact
Personal Community
Minority Future
Wealth Wealth
Business Credit / Wealth
Deteriorating Minority Economics
NCIMED 19
19

20. NCIMED 20

21. Minority
Business
Limited Access
Reduced to
Limited Access to Capital
Buying Power Limited Access to Credit Capital / Credit
Impact of Minority Foreclosure
Negative-Impact
Reduction of Community
Personal Reinvesting Loss of Minority
and and Business
Loss of Future
Business Wealth Jobs Creation and Services Credit / Wealth
Deteriorating Minority Economics
NCIMED 21
21

22. Strategic Focus
• Evaluation
– All aspect of the business
– All business methodology are aligned with the
core function and market segment
• Preparation
– Update and organize all reporting systems
and files
– Update, adjust or amend short-term and long-
term strategies to reflect current economy
condition and worse case projected forecast.
NCIMED 22

23. Strategic Solution
• 400 Billion Dollar infusion into Small
Businesses
• Develop Regional MSA Lending Pools
• Balance affordable Risk with Capital
• Remove Toll-Gates to access Liquidity
NCIMED 23

24. Building Economically Vibrant and Socially
Responsible Communities through
Research and Information, Education and
Training, and Business Development
Victor A. Galloway
Director of Special Research & Policy Projects
vgalloway@ncimed.com
NC Institute of Minority Economic Development
114 West Parrish Street
Durham, NC 27701
919-956-8889
www.ncimed.com
NCIMED 24