New Mortgage Program Helps Cambodia’s Poor Find Better Homes

If you’ve applied for a mortgage recently, you know how hard it can be. The bank demands all kinds of obscure documents and wants proof of almost every asset you own. But an innovative mortgage program halfway around the world will evaluate your application without any extra documentation — and if you’re approved, it will give you a 15-year fixed-rate mortgage. There’s just one catch: The mortgages are only for low-income people in Cambodia. The program is a throwback to the days when bankers got to know their customers — and trusted them. … Keng and her husband both work. She makes and then sells rice soup at a street stall, while her husband sells clothes at another stall. But they don’t meet one of the crucial requirements for getting a mortgage: They don’t receive salary slips or other financial documents, so they don’t have what bankers call “verifiable income.” … Late last year, Keng heard about an unusual bank called First Finance, which was designed specifically to give mortgages to low-income people like her. She and her family could already imagine the new home they wanted to buy: a two-story house with indoor plumbing. It would cost about $20,000. … The First Finance mortgage program in Cambodia was the brainchild of Talmage Payne … Microfinance, he says, was not the solution. People needed much bigger, long-term loans to buy homes. Payne also says he realized something else that contradicts traditional banking assumptions: Low-income families make great mortgage customers. Just about everybody in a typical Cambodian family works. The wife might run a market stall, while the husband does day labor. “Grandma sells peanuts, the kids work,” Payne says. As a result, many of the families are financially resilient. If one person has to stop working, the others can chip in. “You’re giving somebody something that they never thought they could have. So no matter what the hardship is, what’s the one bill they’re not going to miss? They’re not going to miss the mortgage,” Payne says. …

http://www.wbur.org/npr/176121367/new-mortgage-program-helps-cambodias-poor-find-better-homes