Banco Popular’s ‘Rent to Own’ Program Helping to Move Foreclosed Homes
While he would love to buy a house, Filiberto Ruiz pays $850 a month to rent a three-bedroom house in Villa Carolina, complete with a yard for his wife and three children, but his other household expenses make saving money an uphill battle.
“It is hard to save money for the downpayment for a house because while I am doing it, a lot of times with family, you get unexpected expenses and have to use what little I have saved,” he said.
That is why Popular Mortgage has begun a new advertising campaign for social media titled “Mi Casa” (My Home) to make consumers aware that despite the tough economic times, the bank has different products to help them buy a home.
Silvio López, first vice president & manager of Popular Mortgage, said that although the 10-year recession has hit the real-estate market hard, it is a buyer’s market as mortgage rates are at historic lows and there are a high number of empty properties available at reduced prices. “We want to reach the consumer,” he said.
One of the products that the financial institution has available is also helping to cut down the inventory of foreclosed homes in Puerto Rico. According to the Financial Institutions Commissioner’s Office, some 5,110 residential properties worth $490 million were foreclosed last year. Of those, the lion’s share—2,061 units—were foreclosed by the island’s largest bank, Banco Popular.
In an effort to move its large inventory of foreclosed homes, the financial institution created a new division called deShow.com, which manages a “Rent to Own” program for individuals like Ruiz. Through the “Rent to Own” program, a person leases a home for 24 months and a portion of the rent is set aside for the downpayment to buy the property, López said.
Popular Mortgage is advertising its home mortgage products using an online series comprised of eight episodes that can be viewed in social media and on the webpage “seriemicasa.com.” The bank invested $700,000 in the online series.
Every two episodes, the first two of which were aired last week, feature the story of Ana Isabel, a single mother who lives with her parents but is forced to move out of their home after they bought a new residence near the beach. Ana Isabel moves in with her different siblings with whom she goes through different comedic situations before deciding to buy her home with Popular Mortgage.
While the young mother in the online series has an excellent credit history and is a lawyer, López said the bank has products for different socioeconomic levels and they also educate people who do not qualify for help to buy a home.
Although home sales in Puerto Rico have dropped from about $12 million per year over a decade ago, the island still sells about 1,000 housing units a month. “This is the ideal time to buy,” López said.
Recently, the American Bankers Association (ABA), the voice of the $17 trillion banking industry in the U.S., submitted to the U.S. Treasury Department its suggestions for changes to mortgage lending rules that include raising the 43% debt-to-income (DTI) standard for Qualified Mortgages, a category of loans that have certain stable features that make it more likely for a person to afford it. The ABA said repealing the 43% DTI standard would allow banks to get a fuller picture of a person’s credit and take into account residual income when determining if the person qualifies for a loan.
López agreed, saying that the DTI standard makes it more difficult for banks to qualify applicants.