Affordable financing will be a challenge in the near and the distant future. The very slow recovery from the overall economic crisis has initiated a new era of affordable housing incentives.
The infamous subprime mortgage loans that allegedly collapsed the economy were driven by greed for bigger homes based on an artificial boost of one’s buying power.
Since the buyers were in abundance the attitude was: get more square feet for the buck now and think of how much one can afford in five years. Now buyers are scarce and empty houses too many. Buyer incentives are as scarce because they have to be risk averse or simply realistic.
Fannie Mae is offering an incentive to borrowers who applied for Fannie’s Owned HomePath Property loan after April 11 and will close the deal on or before June 30, 2011.
The offer excludes investors. Qualifying borrowers who plan to use the property as their primary residence may receive up to 3.5% in closing cost assistance on all properties listed on Fannie’s HomePath.com website, which provides detailed information about the surrounding community and nearby schools in addition to photographs and other physical data about the property. In addition to mortgage financing it allows for renovation mortgage financing with a 3% downpayment.
Fannie’s executive vice president of credit portfolio management, Terry Edwards, described the incentive as a tool designed to help reduce the inventory of vacant homes as much as a way to attract new buyers while interest rates remain low.
Smaller-size banks are similarly trying to provide incentives and be cautious at the same time.
NASA Federal Credit Union of Upper Marlboro, Md., with over $1 billion in assets, is currently offering two high loan-to-value mortgages “for a limited time.” The bank’s president and CEO, Doug Allman, says the reason behind the offer is demand for “additional flexibility and affordability,” which is not readily available through other lenders.
NASA’s 100% loan-to-value financing with no private mortgage insurance requirement is applicable towards new home purchases of up to $650,000.
For new home purchase loans between $650,000 and $850,000, NASA also offers 95% loan-to-value mortgages with 5% down and 90% loan-to-value mortgage refinancing with 5% down on current homeowners.
A 95% loan-to-value refinancing loan is offered to current homeowners at up to $650,000. It allows for a cash-out option and does not require private mortgage insurance.
“Changing times call for innovative and flexible mortgage products,” Allman said.
That is: if done right and for a limited period of time, or if they include an attractive motivation.
The Umpqua Bank of Portland offers incentives driven by efficient and renewable energy consumption awareness. The bank expanded its GreenStreet product offering that was initially launched in 2008 in Oregon to other locations in the state and also in California, Nevada and Washington.
According to executive vice president of community banking for Umpqua Bank, Rick Calero, the program aligns the bank’s goal to invest in community development and provide affordable financing for energy-saving housing improvements and solar power to local residents.
“Energy efficient homes protect natural resources and encourage the kind of innovation that spurs economic growth and recovery.”
It is a win-win option. All three GreenStreet customer loan products do not charge origination fees or prepayment penalties.
The bank offers GreenStreet Home Equity loans and lines of credit for energy efficiency improvements starting from $5,000 to $100,000. Home Equity loans have loan terms of up to 15 years while the lines of credit can have terms of up to 25 years.
