TARP Money Used to Create a 3.5% Mortgage

Citizens South Bank, Gastonia, N.C., will use all of its $20.5 million in federal Troubled Assets Relief Program money to create a 30-year residential loan program with a starting interest rate of 3.5% in an effort to stimulate the local housing market. The loan program has a maximum rate of 5.5% and waives closing costs. The program will bring together builders and developers, who are Citizens South customers and have extra housing stock or residential lots ready for sale, with consumers who are looking for the best possible mortgage rate. Participating builders and developers will agree to pay the closing costs on the mortgages as a form of assistance to qualified homebuyers. "Recent consumer surveys show that lower interest rates provide people with the assistance they need to purchase a home," Kim S. Price, president and chief executive of Citizens South Bank, said. "We believe this program is the best use of our CPP funds because it promotes home ownership and generates work for builders, developers, construction workers and real estate agents." The start rate of 3.5% is set for the first 24 months; then the loan adjusts to the 5.5% rate. Applicants will be qualified at the 5.5% rate. Citizens South will hold the loans in portfolio.