In today’s economic climate, especially with what has happened over the past year with mortgage lenders, special programs from housing authorities have become more important than ever. Two such agencies are the Massachusetts Housing Authority (www.MassHousing.com) and the Connecticut Housing Finance Authority (www.CHFA.org). These two organizations have one goal: making home ownership possible. It is not just a matter of making it affordable, it is also a matter of making it realistic. 

 

 

Rose Holbrook, marketing and customer service coordinator with CHFA, says, “When most people think they are ready to buy a house, the first step is to go looking. The first step for everyone should be learning about buying a house. At CHFA, we start with homebuyer education. Fourteen counseling agencies across our state offer an eight-hour homebuyer education class. Our counselors help prospective homebuyers understand what homeownership is all about.”

MassHousing also offers homebuyer counseling programs with the same goal, helping buyers understand the process, finding what is most affordable and right for buyers and their families.

With education under your belt, you are ready to go forward with finding a home, acquiring a mortgage, and moving toward making that home yours. What if, on the other hand, you do not have money for a down payment or closing costs? CHFA has programs to assist you there as well. According to Holbrook, “CHFA is committed to providing homeownership opportunities for Connecticut residents. We offer an assistance program that can help with the down payment and closing costs. Homeownership is about families having something that is theirs, something special. We want to do everything possible to make that happen.”

 

How do CHFA and MassHousing accomplish the goal of making homeownership more affordable, more possible? They offer programs financed with mortgage revenue bonds. Bond investment money funds the mortgages for homebuyers. The real benefit is that the interest rates are lower than conventional financing and sometimes includes no points.

 

What are points? In some cases, points can be used to pay the interest in advance rather than over the course of the loan. One point is equal to 1% of the loan amount. For a $100,000 loan, then, one point would be $1,000. You as a homebuyer can elect to have a lower interest rate by paying the interest in the very beginning. For example, MassHousing is quoting a rate of 6.125% and no points, or 5.875% and two points. On a $100,000 loan, two points would be $2,000. Is it worth it? Yes and no. The question is, “Can you afford it?”

 

With CHFA, there is a one-point origination fee for the purpose of paying the bank or mortgage company for its services. There are certain requirements in qualifying for a bond mortgage program, and Connecticut residents should contact CHFA to determine which program is right for them.

 

How else do bond programs and agencies like CHFA help first-time homebuyers? By helping the communities they live in with special options available to municipal and state police officers, active members of the military, teachers, the disabled, and people who are coming out of public housing. Such programs help both the homebuyers and Connecticut neighborhoods. As an example, Holbrook says, “With teachers and police officers, we encourage them to live in the communities they serve. It reduces commuting and, with police officers, it creates a presence.” As well, certain urban areas of Connecticut are being revitalized through these programs. Holbrook says, “We want our state to be the best it can be. We recognize that urban renewal is a critical part of that, so, by offering programs for people who are willing to work at improving a property that has been neglected, we are making those areas better, safer, and more attractive. When people move into our urban areas and rehabilitate a property, they help stabilize the neighborhood and create pride in ownership.”

 

 

Loan origination

 

CHFA and MassHousing don’t loan the money directly. Both work with lenders, banks, and mortgage companies that originate loans on their behalf. A look at the CHFA Web site, under Homebuyer Programs and then Participating Lenders, shows a long list of banks and mortgage companies who originate CHFA loans.

 

 How hard is it to qualify? There are three critical elements–employment history, credit history, and income. Lenders need to know that you can afford your home. They need to know that you have a stable job and a good credit history–that you pay your bills. What about those people to whom “life happens,” catastrophic illness, loss of job, loss of income, or bankruptcy? Do these things make someone a poor risk for a mortgage? Not necessarily. Nobody plans to have an accident, fall ill, get laid off, or be in debt to the point that they are forced into bankruptcy. Most housing authority agencies look to FHA guidelines in making determinations. They want to see two years of good credit, job and income history. Credit is examined on a case-by-case basis, and the lender determines if you meet the criteria for a specific loan program. If there are issues with credit, a borrower may be directed to speak with a counseling agency to guide the borrower to rectifying a credit issue. The process can sometimes be short or may take time, so that the borrower can reestablish good credit.

 

We can’t cover the topic of affordability without also covering what is happening today, the worst foreclosure crisis in history. What happens when a home that was affordable in the beginning now isn’t? What about those people who purchased a home in the last two or three years with an adjustable rate mortgage, and the interest rate has increased, making the payments too high? Subprime mortgage lending targets people with poor credit histories or other high risk factors but it requires that those people pay very high interest rates. We have seen the results. In one word, foreclosures. Do CHFA and MassHousing work to help these people as well? Absolutely they do. Holbrook says, “Traditionally our mortgage programs have had very low foreclosure rates. We have loss mitigation programs in place to help those who have become delinquent because of extenuating circumstances such as unemployment, underemployment, illness, or other circumstances beyond their control.

 

“A new $50,000,000 refinancing program to address the subprime mortgage crisis in Connecticut was recently unveiled by Connecticut’s governor, M. Jodi Rell. There are about 71,000 active subprime mortgages in the state. About 8% of these loans are seriously delinquent, and about 21,000 are adjustable rate mortgages that are scheduled to reset to higher rates in the near future. The CT FAMLIES Program, administered by CHFA, assists first-time homeowners with a subprime mortgage who cannot make their mortgage payment as a result of a recent reset. Eligible borrowers will be able to refinance their subprime adjustable rate mortgage into a thirty-year fixed rate loan at 0.25% above the CHFA Homebuyer Program rate.” The CT FAMLIES Program began December 10, 2007.”

 

In terms of prevention or mediation, MassHousing, especially, offers assistance. . Home Saver is a counseling and loan program that helps borrowers who were victimized by unfair lending practices. It is a proactive step that homeowners take before their mortgage becomes unaffordable and before foreclosure becomes a real possibility. To qualify for Home Saver, homeowners must demonstrate that (a) they were victimized by unfair or deceptive lending practices; (b) are employed with verifiable income and can afford the home; and (c) meet minimum income, credit history, and loan limit guidelines.

 

 

Taking advantage

 

The programs outlined here sound attractive, but how often do people actually take advantage of what CHFA and MassHousing have to offer? Holbrook says, “In 2006, we set a goal of helping 3,500 families become homeowners. We went over that by close to 15%. Last year CHFA helped 4,010 families buy their first home. Of that number, close to 1,500 families took advantage of our down payment assistance program. One very positive element is that the term ‘first-time homebuyer’ doesn’t always mean that. People who have not owned a home in the previous three years may also qualify for our programs. The Connecticut Housing Finance Authority has a thirty-eight-year history, and we have helped more than 115,000 Connecticut families become homeowners. We are very proud of the work we do and what we have accomplished. We are even more proud of what those families we helped have accomplished–the dream of homeownership.”

 

The goals of these agencies are to help people buy homes, help the communities within their states, and help revitalize neighborhoods that have experienced decline. The key word in that sentence is “help.” With their efforts, Massachusetts and Connecticut are becoming even better places to live and to own a home. MassHousing’s Home Ownership program can be reached at 888-843-6432 or through its Web site, www.MassHousing.com. The Connecticut Housing Finance Authority can be reached at 860-571-3502 (English), 860-571-4343 (Spanish), or through its Web site, www.CHFA.org.