Massachusetts Credit Unions to Provide $100 Million in Mortgage Relief to Low- and Moderate-Income Borrowers.

BOSTON -- Buying a home just got more affordable for those who need it most.

Low-income, first-time home buyers now have access to $100 million in below-market-rate mortgage loans from local credit unions. It is part of the "Credit Union Community Hope Initiative" that was announced today at a State House news conference.

The initiative is sponsored by the Massachusetts Credit Union League and its participating member credit unions. It is part of the national Home Loan Payment Relief (HLPR) program that, to date, has committed to providing more than $1 billion in mortgage loans to qualifying individuals and families nationwide.

Participating credit unions are voluntarily bearing the cost so that the loans can be offered at this more affordable rate as part of their commitment to serving people of modest means.

"Owning a home is truly the American dream," said Daniel F. Egan Jr., president, Massachusetts Credit Union League. "Buying a home, however, is always difficult, especially for those of modest means. This program will enable many Massachusetts residents to take the major step into home ownership that they didn't think possible at this time."

How it works

Participating credit unions throughout Massachusetts will offer qualifying buyers a three-year, adjustable-rate mortgage at one percentage point below the market rate for such loans. The rate will be fixed for the first three years. After that, it will adjust annually if the rate environment changes. Adjustments are capped at 1 percent per year and 5 percent over the life of the loan (a market priced Adjustable Rate Mortgage can adjust up to 2 percent per year with a lifetime cap of 6 percent over the initial rate).

Required down payments for the loans will be no more than 3 percent, and gifts and grants will be permitted. The maximum ratio of monthly obligations to income will be 42 percent, which will allow for lower income levels to qualify for a given loan size.

For example, at today's rates one would need a household income of $40,000 per year to qualify for a $130,000 mortgage loan. Through this initiative, that required household income would drop to $32,000. Similarly, a $240,000 mortgage would require just a $56,500 yearly household income through the plan as opposed to a $70,000 household income at standard rates.

The median home price in the metro Boston area in 2005 was $430,000, an increase of more than 5 percent from 2004, according to the National Association of Realtors. Still, the median income in the Boston area is only $57,800.

"Credit unions have a long-standing reputation for serving people of modest means," said James Blake, president of HarborOne Credit Union and first vice chairman of the Massachusetts Credit Union League. "There is an increasing gap between the average family income and the cost of area real estate, and we're confident that this initiative will help to narrow that gap."

Eligibility

To be eligible, borrowers' household incomes must be at or below the area median income, which varies by cities/towns. Exceptions will be made for certain "high-cost" areas designated by Freddie Mac and Fannie Mae based on HUD data.

Applicants must be purchasing an owner-occupied, principal residence. Credit unions, at their discretion, may extend the loans to non-first-time buyers, subject to the income limitation.

Gene Foley, president of Harvard University Employees Credit Union, stated, "This program makes home buying truly affordable for consumers. However, unlike interest-only mortgage loan products, the HLPR loan not only helps people purchase a home, it frees them from worrying about whether or not they will be able to afford it over the long run."

For more information on this program, contact your local credit union or the Massachusetts Credit Union League at 800-842-1242 (www.maleague.org).

About Massachusetts Credit Union League

The Massachusetts Credit Union League, Inc. is a trade association representing more than 240 credit unions in Massachusetts. Credit unions are consumer-owned financial cooperatives which offer a variety of financial services to their members. The League's offices are located at 845 Donald Lynch Boulevard in Marlborough, MA. The website may be viewed at www.maleague.org.