Discover how you can receive down payment assistance and learn more about the THDA.
If you don't know where to start, reach out to a Leaders Mortgage Champion who will be happy to guide you through all of your homebuying options.
The Pocket Change Podcast is presented by Leaders Credit Union. Leaders is here to help you on your financial journey.
Shea:
Hey, this is Shea.
Carrie:
And this is Carrie.
Shea:
Welcome to the Pocket Change Podcast,
Carrie:
Where you'll learn better ways to spend, save and invest and take control of your financial journey.
Shea:
You know, Carrie, about 69% of Tennesseans own their home, but that leaves about 30% that still are renting or don't own a home yet. And so that's a large number.
Carrie:
I know, and there's many people that don't think that they can afford a home.
Shea:
But there are resources out there and especially agencies that can help with down payment assistance, closing costs. And so, we want our listeners to find out about that.
Carrie:
That’s right. So, we're going to talk to someone today to learn all about it.
Carrie:
We're excited to welcome our guest today, Mr. Ralph Perrey executive director of the Tennessee Housing Development Agency. Welcome to Pocket Change. Mr. Ralph.
Ralph Perrey:
Well, thanks, Carrie. I've been looking forward to it. Shea. Good to be with you both.
Shea:
Thanks for being here.
Carrie:
Let's start with your story. So, can you tell us how you got involved with the housing industry?
Ralph Perrey:
Well, I took a job at Fannie Mae. When I left the governor's office, Fannie Mae was opening regional offices, one in most states. And they were looking for someone who knew the state pretty well and could coordinate community development investment, which is what I did for a period of time. Along the way, Governor Sundquist pointed me to the THDA board of directors. So that gave me a little bit more exposure to everything. And then, down the road I was on the board. My predecessor as executive director decided to move into the private sector. And I thought, you know, this would be a pretty neat position to have. You can really, you know, I like the fact knowing that if we do our work right, things we talk about around the table in the morning can get done. And a lot of those things lead to a better housing income for somebody in our state. So, I was anxious to take that challenge on. And fortunately, my former colleagues on the board agreed. And it's been a good ride.
Shea:
So about what, 13 years you’ve been with THDA?
Ralph Perrey:
This is my 13th year. I'm the longest serving executive director. I run up the score on that every single day.
Shea:
There you go.
Ralph Perrey:
No one else hit eight years. So, I take that as a good sign.
Shea:
Yeah. Well, we appreciate your leadership in the THDA. And talking about home ownership, what are some common misconceptions that you encounter about home ownership?
Ralph Perrey:
Well, you know, there are a lot. There are a lot of folks who still think, well, 1, I’ve got to make a lot of money, and I've got to have perfect credit, and I need to put 20% or more down to have a shot at anything. So, a lot of what we try to do is work through our partners to go “well, not necessarily.” You know, in much of West Tennessee, for example, you can be making about $100,000 and still qualify for a THDA mortgage. A bit higher in Madison County and some others. But, you know, our typical customer has a household income of closer to $80,000. They have a credit score in the around the 690 range, and they need some down payment assistance from us in order to buy a house that's worth about $280-$300,000. So, you know, that’s new information to a lot of people. And that makes them realize that homeownership might be a little closer than they had imagined. That's, you know, that's the big part of our outreach is just letting people know, “Don't take yourself out of the game on assumptions.” There is flexibility, and there's down payment assistance that can help you do that.
Shea:
Especially for those folks who've maybe, you know, who've experienced the housing crisis, you know, ten or so years ago or less. And, you know, they may be fearful of that. So, I know those are some other misconceptions. There was some trouble, but there are still opportunities out there.
Ralph Perrey:
You know, our friends in Memphis, I mean, that was really one of the epicenters of dodgy lending and subprime and predatory attorney practices relative to bankruptcy and foreclosure. So, you have a lot of people who, I mean, their credit income, they could qualify for a mortgage right now, but they saw Uncle John lose his house. They saw mama get talked into some bad deals. They don't want anything to do with that. So, the other part of this is working with our partners to go, “Well, that stuff's all been wrung out of the system.” You're dealing with reputable lenders, particularly if you're looking for THDA products, a product that's an honest value for you. And we're going to help you with counseling. We're going to help you with the down payment. And we're the loan servicer on the back end. So, if you get jammed up, you have the opportunity to talk to a real live person in Tennessee, not a call center in who knows where.
Shea:
That's good. That's good to know.
Carrie:
So why do you feel homeownership is important?
Ralph Perrey:
Well, it's not that renters are bad people, but when you own a home, you are more invested not just in the house but in the place. You're more likely to vote. You're more likely to care that the schools are good. The streets are clean, the park is well-maintained. You're more likely to be involved in the civic life of your community. So, I mean, that's how you build good communities and good neighborhoods. And just the certainty of knowing, “I bought this home. I'm going to be here a while. My kids are going to go to the same school.” And just the security of knowing, “I know where I'm resting my head at night and where I'm keeping my stuff.” The stability that brings is important to families. And over time, it is still a prime way to build generational wealth for your family.
Carrie:
That's true.
Shea:
Yeah. And with those, you know, good reasons for homeownership, there's still challenges. And so, what type of things are you seeing in the current market? I know we hear about rates. We hear about inventory. What would you say?
Ralph Perrey:
All of the above. You know, after the housing crash 15 years ago, we went the better part of those years, not building anywhere near as much housing as you need. And at the same time, household formation is increased. State like Tennessee, we gain more people than all but 5 or 6 others. We learned this in school. High demand, low supply pushes up the cost of a house, pushes up the rents that that people will give. So, we have to build more. And this will take time. The other challenge that our folks face, well, there's the financial challenge. I'll give you an example. Our typical sized mortgage this year is 60% bigger than our typical mortgage in 2019. And interest rates are double. So, what that means is this year's typical THDA customer has a payment of about $1,000 a month more than our typical customer five years ago, and that extra thousand a month knocks people out of the market. Then it's a question of inventory. I mean, nobody's building starter homes. Used to be that was 40% or 50% of what was built last year. It was 7% of what you built and a lot of starter homes don't get back into the inventory. I may want to move up, but I have a 3% mortgage and the next one's going to cost me close to 7%, so the kids can double up in that bedroom for a while longer. Yeah, you're not seeing the churn in the market. So, the combination of not much to buy at entry level price points, the fact that that's going to be more expensive, the financing costs are higher. That's going to be a drag, frankly, on our end of the business for some time.
Carrie:
All that makes perfect sense to what I'm seeing myself. So, for those that are unfamiliar, what is THDA and how does it serve families across Tennessee?
Ralph Perrey:
Well, here's the short answer. We’re your state housing finance agency. We were created, and still our principal business is, financing mortgages for largely that first time homebuyer and that moderate middle income range. We have almost $4 billion worth of those loans in our portfolio. And it's the earnings from that portfolio that pay for everything we do. The state of Tennessee doesn't actually give us any money. So, that not only covers our cost, but it lets us support other affordable housing activity like down payment assistance, like homeownership counseling, like the grants that we provide to nonprofits or special pilot programs that we launch from time to time around the state. And in addition to that, over time, the state has given us responsibility for 12 federal housing programs. So, this is a broader range of program responsibility than any of the nation's other state housing finance agencies do. I tell our folks it is a lot of work, but I take it as a vote of confidence that they think an agency with 300 people can do all of that. And largely we do. And what it means is that if it involves housing, we're probably involved, or we're working closely with the people who are. And I like to tell our folks to remind them, really, that when we do our work right every day in this state, somebody is a little better housed and, you know, it's work you can feel good about, I think.
Shea:
It sounds like Tennessee's leading the way.
Ralph Perrey:
I like to think so.
Shea:
So, you mentioned some assistance for buyers that y'all offer. So, tell us a little bit more about that.
Ralph Perrey:
We offer downpayment and closing cost assistance in two ways: essentially a forgivable grant of $6,000. No interest, no payments will recoup that down the road when you refi or sell the house. Alternately, if you need more and you have a debt ratio that will support it, we will provide up to $15,000 of downpayment and closing cost assistance, and that'll be a soft second. You'll have an additional payment. It might be an extra 30 or $40 a month. But it's the same rate of interest as your first. This is helpful in higher cost areas, especially where people need a little more to get in, or we find a lot of folks, they have their down payment. Closing costs? What’s that? And is it really going to be $8-10,000? Yes, it is. And we can help you cover that.
Shea:
That's great. Yeah.
Carrie:
So, would you mind sharing if you have any stories that illustrate the impact of THDA’s work on real families? Surely you have some.
Ralph Perrey:
Well, actually, it was one of your originators, might even have been Tammy Ladd, who I should plug because she was our originator of the year last year for THDA. But she told us the story of working with a single mom. One child of her own, wasn't getting child support or anything like that. And her brother's family, if I recall, had some difficulty. So, she ended up taking three of their children in. So, she was obviously looking for a larger home for all those kids and, in part working with you all and a THDA mortgage, they found a home in a price range she could afford. And she is a homeowner and has provided a good home for those four children in her care as well. You know, I mean, these are the kind of stories we see and we hear from our lenders. We have a product that really does offer an honest value. And, you know, we have a great network of lenders and, you know, Leaders, you all been leaders, truly, for us in West Tennessee. But, you know, you get the opportunity to tell people, “Oh, we can work with you.” You don't need perfect credit. We can help you with the down payment. We want you to get counseling. Cause that's going to make it less scary to get into. And you're going to learn a little bit about managing your money and handling your credit. And then when you're in the home THDA is your servicer through volunteer mortgage loan servicing. You have a problem, you have a question, you talk to a live person in Tennessee. That has made an enormous difference. And we think from start to the process to the end, it's a pretty good package, especially for that first time home buyer.
Shea:
And it sounds like a more holistic approach. And you mentioned, you know, some of the counseling, financial counseling, those homebuyer classes. So, you know, what are those and what's all involved in that for the buyer?
Ralph Perrey:
We have scores of partners who offer that. And almost all of them are HUD certified. There was actually an academic paper; someone at Vanderbilt did the research years ago, as we were just starting this. So, they had a comparison group of borrowers who didn't have it and those who did, and they found that the ones who went through real homebuyer education were like 50% less likely to make the kinds of mistakes that get you jammed up, you know, and missed payments and get to default. So, we believe very strongly in it. And, you know, folks are going, “I don't want to take another class.” You know, nobody wants to do that. But once they get in it, they often go, “Oh, I'm glad I did that because I didn't know this.” It gets you a better prepared borrower. And then as I say, we have a good product. We have down payment assistance, and then we're the service so we can stay in touch, we can offer advice, we can troubleshoot, get people through the, you know, the inevitable hard times a lot of people run into.
Shea:
You mentioned those are hosted at the UT extension offices, sometimes? And other partners like that?
Ralph Perrey:
Yeah, a lot of the UT extension offices do it. A lot of the NeighborWorks nonprofit affiliates. You know, up east, a lot of the Fahe members do it. It's a pretty wide-ranging network. And we try to support them, because they're doing us the favor, we think, and they're adding a valuable service to people who aspire to homeownership because there again, that's often the eye opener. They take this class and they go, you know, “I thought I was like five years away from homeownership. You know, if I do this right, maybe next year.”
Carrie:
Right. That's great. So, how does to work with lenders like Leaders, or us, to make homeownership possible for those who may think they're not qualified?
Ralph Perrey:
Well, you know, everything we do is through our lenders I remind people, you know, we're not the lenders. We're sort of the back-office folks. So, part of this is we do some advertising on our own. When you go to our website, our consumer website, which is simply greatchoicetn.com, one of the things you will see there is a list of the lenders we work with. We always say, you know, work with the lender that you already have that relationship with. They work with us. The list of counseling agencies is provided there as well. But part of that, is also working with groups like realtors and nonprofits so that when someone comes in and they're interested, you know, if they fit the profile and go, well, hey, you can qualify for a loan and get some help, go talk to your lender about this. So, that's part of it. And of course, I mean, you and your team at Leaders, I mean, you know this stuff. So, often times, a borrower will come in and they're not sure what they're looking for. But you're in a position to go, “Well, actually, we have something for you.” Yeah, we have this product. We like to think of the products as market expanding opportunities, you know, giving you the ability to say yes to somebody who might be on the bubble otherwise. And the down payment assistance often helps there. But you know, my view is, how's that nice lady in Humboldt supposed to know we can help her if we're not making the effort proactively in the community to let her know that this is something that's out there?
Carrie:
It sounds like you have everything on your website. Can you say that again for us?
Ralph Perrey:
Yeah. Greatchoicetn.com. That's our consumer site and that's specific to homeowners. So, it'll describe the loan products, how the down payment system works, where you get signed up for counseling, the whole list of lenders and you know, there's probably some helpful Q&A.
Carrie:
One stop shop. You've got it all there.
Ralph Perrey:
We like to think so.
Shea:
Well, the fact that you all spend time in the different regions of Tennessee and supporting the lenders and offering, you know, information and being sure our lenders know what the product is and how to how to get our members into those products is helpful.
Ralph Perrey:
You know, I remind our folks nobody has to work with us. You know, it's not required. So, number one, it's on us to make the effort. When I became executive director, you know, I like to look at numbers. And I was finding that like two thirds of our business was within an hour’s drive in Nashville. And I'm going, “Well, you know, we're not the Nashville Housing Development Agency. Let's get people in East Tennessee. Let's get people in West Tennessee. Let's hit the road.” We had, you know, maybe a hundred lenders at the time. We've got over 150, 160 now. But half of them were giving us like three loans a year. I mean, well, you know why is that? What do we do when we see them? “Well, we don't see them.” Okay, this is the next thing we change. So, you know, we have a really good customer account team. You all work with them. Their job is to get around and to listen, to learn. You hire a new originator, we got a welcome kit for you. We'll coach you up on the things that we're doing. We've got that help line for originators. You know, you got a question, you can talk to one of our underwriters. We can do that online. We can do that the old-fashioned way with a phone conversation. But it's important to us that we offer not just that honest value for the borrower, but a worthwhile business relationship for our lender partners. That means compensation that makes sense for the work you're doing on our behalf. And secondly, we give you a first-class back office execution. So, when you send us that file, you know, you know you're going to get it back within two business days.
Shea:
Yeah. Well, you know, we're about creating a great member experience for our members. And it sounds like y'all are doing the same. And so, it's, you know, beneficial for us to work together because we want to give our members a great value for their home loan.
Ralph Perrey:
And we want to help you do that.
Shea:
Yeah. And you are. And so we appreciate that. And hopefully this podcast can help even more people learn more about THDA, their offerings, and check us out for their homeowning needs.
Ralph Perrey:
Well, I hope they will. You know, our general website is thda.org with information on all the programs and resources that we have. We also run a terrific state housing conference. I think it's February 22nd or 23rd next year. We encourage, we got about 700 people. And it's a really great way to network, exchange ideas and information.
Carrie:
That's great.
Shea:
And so, we know, you mentioned Tammy Ladd, the THDA originator of the year, and we've had, I believe Pam German, our underwriter, won an award last year.
Ralph Perrey:
Yeah, for loan submission. We like to catch people doing well. You know, I think we've all, at some point probably worked for somebody, you know, who only notices your work when you screw up. We like to catch people doing well. So, you know, our top originator, the person who sends us the most clean submissions on the first try, you know, we have an award for that. We recognize them, and, you all kind of cleaned up.
Shea:
And Pam had 100%, right?
Ralph Perrey:
I think that's right. You can't get much better than that.
Carrie:
Shout out to Pam.
Ralph Perrey:
But we are, we're very pleased, you know, selfishly, by pointing out that someone else is getting it 100%, we kind of hope to encourage others to pick up their game a little better.
Shea:
Sure. Yeah, we're glad to have them on our team because they've done great.
Ralph Perrey:
Indeed.
Carrie:
So, as we wrap up, we always like to ask, since this is a financial podcast, what is the best piece of financial advice you've ever been given?
Ralph Perrey:
Boy, you know, it's probably don't get over your head with debt. But, I just personally, the best thing that ever happened to me, I had the good judgment to marry a woman who worked at a bank, because there, at that point in my life, there was literally no end of the trouble I might have caused myself not knowing all of this stuff.
Shea:
But somebody to have the money under control in the relationship.
Ralph Perrey:
Yeah, so it helped a great deal. It helped a great deal.
Shea:
Well, my wife married me and I work at a financial institution, so that's her best advice, too.
Ralph Perrey:
I'm going to stay out of that for you, there, Shea.
Shea:
And since this is, we call it the Pocket Change Podcast, if you had any extra pocket change, what would you spend it on?
Ralph Perrey:
Depends how much pocket change we're talking about. If it’s a relatively modest amount, I will treat myself to an extra beer when I go to the ballpark.
Shea:
There you go.
Ralph Perrey:
If it's a larger amount, I'll put it in that 529 account I've set up for my granddaughter.
Shea:
Even better.
Carrie:
That's great. Well, thank you for being with us today and sharing all the things about THDA and what you guys offer. It's been a real treat to learn all of this.
Ralph Perrey:
Well, thank you, Carrie. Thank you, Shea. I've enjoyed it. We'll do this again sometime if you like.
Carrie:
Sounds good. I might join you with that ball game and beer sometime.
Ralph Perrey:
You should.