A pilot program aimed at the nation's estimated 6.8 million non-owners with "thin" credit files is being tested in the nation's capital, where an alliance of public and private entities have pledged $200 million to get the initiative started.

Under the R-Home program, credit-worthy consumers who are often unable to qualify for financing under traditional underwriting guidelines or are steered toward high-price loans will be qualified using an innovative automated program powered by Anthem, First American Corp.'s alternative credit-evaluation model.

Often, originators don't bother with borrowers who have little or no credit history because they takes too much effort. And originators who do work with these applicants sometimes push them into higher priced subprime loans where they can make enough money to compensate them for their time and effort.

But with R-Home's streamlined and automated way of using rent payments, utility payments, child care and even tithing to evaluate and verify creditworthiness, borrowers can gain conditional approval "within minutes" and final clearance "within 48 hours," according to Landon Taylor, president of First American Title's Strategic Market Division.

"It makes underwriting possible at the point of sale," Mr. Taylor said.

Such proof of credit has been acceptable by Fannie Mae and Freddie Mac for sometime. But they are little used by lenders.

Under the D.C. pilot, CitiMortgage will buy loans generated by nonprofit and private-sector participants and sell them on the secondary market, but retain the servicing rights.

Borrowers will be counseled before the purchase, and counseling will be made available afterwards if they have trouble making payments.

If problems persist longer than 60 days, the Neighborhood Housing Services of America says it will repurchase the loans and work "personally and patiently" with borrowers to get them back on track.

"We see this as a model of how all borrowers should be supported, not just low-income borrowers," NHSA President Mary Lee Widener said at a press conference earlier this month to kick off the program.

The partners hope to replicate the program nationally, perhaps in as soon as 18 months if the D.C. test achieves passing grades. But it will be rolled out regionally on a market-by-market basis because government involvement is necessary to make it work, Taylor said.

Here in Washington, where the program could serve up to 2,000 wanna-be home owners, the D.C. government is on board. "We take affordable housing very seriously," said Deputy Mayor Neil Albert. And counseling will be provided by two local giants, HomeFree-USA and Manna Mortgage, the city's only non-profit mortgage company.

"This is a new day," said Marcia Griffin, president of Home-Free USA, a counseling group which bills itself as a "financial empowerment organization."

"People are coming to us in droves because they don't want to be ripped off," Griffin said. "Now they don't have to worry."

Another partner in the group is State Farm, which is providing $100 million in seed money. Two mortgage insurers. MGIC and PMI, also are on board.

Under the program, borrowers who pass muster will get 30-year, fixed-rate mortgages at the prevailing rate. But Widener, a longtime advocate for low and moderate-income families, said it's "very likely" that secondary financing will be necessary. Hence, the need for local government as a partner.

In Ventura County, Calif., where the innovative underwriting technology was refined, up to "seven layers" of financing was necessary, Widener said. "So there absolutely has to be local government involvement."

Even with secondary financing, though, the partners believe R-Home will test out as "the solution for borrowers who aren't bad credit risks" but don't have a thick enough credit file to win approval the traditional way.

"R-Home is a lending program that focuses on long-term success of the borrower," Widener said. "It's a lending model that embraces the principles that are being advocated by consumer groups and policymakers."

Published: October 10, 2007

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.