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HOMESTART PROGRAM PAIRS ILLINOIS TREASURER, FANNIE MAE FOR MORTGAGES WITH LOW DOWN PAYMENT

 HOMESTART PROGRAM PAIRS ILLINOIS TREASURER,
 FANNIE MAE FOR MORTGAGES WITH LOW DOWN PAYMENT
 SPRINGFIELD, Ill., May 12 /PRNewswire/ -- The new HomeStart program will help Illinois' working families obtain mortgage loans with a low down payment and more flexible lending terms. Details of the program were announced today by Illinois Treasurer Patrick Quinn and Jim Johnson, chairman and chief executive officer of the Federal National Mortgage Association (Fannie Mae) (NYSE: FNM). Targeting families who otherwise may not be able to own their own homes, the two offices developed this innovative program in partnership with financial institutions across the state.
 "In today's economy, we need creative solutions to difficult problems," Quinn said. "HomeStart is just such a solution, pooling the resources of public and private sectors to help our families realize the American dream of home ownership."
 Quinn pointed out HomeStart removes three common obstacles to home buyers.
 First, the program reduces the amount of cash needed for a down payment and closing costs. With today's lower interest rates, many families will find their mortgage payments lower than rent, but are blocked from buying a home because of the typical down payment: of up to 20 percent. HomeStart requires a maximum down payment of 5 percent and allows 2 percent to come from a gift or unsecured loan from relatives, employers and non-profit agencies.
 Second, the program allows buyers to qualify for a mortgage by devoting more of their income to housing than is typically allowed on conventional mortgages. The program targets buyers who earn up to 115 percent of the median income in their county. Funds may be used to buy property occupied by the borrower.
 Third, the program includes buyer seminars co-sponsored by local financial institutions. These sessions will help prospective buyers calculate the full cost of buying a home and plan a family budget accordingly. They will learn to shop for a mortgage, comparing various lender fees and points as well as the advantages and disadvantages of different mortgage vehicles.
 Johnson said: "Fannie Mae is pleased to work with Treasurer Quinn, private lenders and the people of Illinois to provide more affordable housing for low- and-moderate-income households. Treasurer Quinn's HomeStart Mortgage Program -- a partnership between the public, private and non-profit sectors -- will help make home ownership a reality for more Illinois families."
 To provide seed money for HomeStart, Quinn is depositing up to $100 million in participating financial institutions. These state deposits will earn interest for the taxpayers and are not at risk. The financial institutions, in turn, will make the mortgage loans. Fannie Mae, the nation's largest investor in home mortgages, has agreed to purchase all loans originated under this program, applying its more flexible lending criteria and freeing up local funds for issuing new mortgages.
 Fannie Mae's participation in HomeStart is part of the company's initiative to invest $10 billion in moderate-income and special needs housing by 1993. Johnson announced that initiative in March 1991. Fannie Mae is a congressionally chartered, shareholder-owned company.
 In rural areas of the state, HomeStart is backed by the Farmer's Home Administration, with guidelines that may be even more flexible, including down payments as low as zero in some cases.
 Other partners in HomeStart include:
 -- The General Electric Mortgage Insurance Corporation (GEMICO),
 a unit of GE Capital Mortgage Corporation, which is providing
 the private mortgage insurance necessary for buyers who put
 less than a 20 percent down payment.
 -- Seven lead lenders which are using their statewide networks of
 financial institutions and mortgage brokers to make HomeStart
 loans available. The seven are: LaSalle Talman (16
 branches); Sears Mortgage Bankers (50 Coldwell Banker
 affiliates and six approved correspondent lenders); Household
 Bank (Chicago area locations); First of America Bank/Champion
 Federal (91 branches and affiliates); First Federal of
 Rockford (30 locations in their network); Greenwich Capital
 Financial Services (available through 106 institutions and
 mortgage brokers statewide); and BFI, Bank for Financial
 Institutions (the lead bank for rural lending).
 In addition, many local financial institutions that are not part of the lead lender network are also participating, making HomeStart mortgages available at hundreds of institutions statewide.
 -0- 5/12/92
 /NOTE: For further information, including a list of participating lenders, buyers can call Fannie Mae's public information office at 800-7-FANNIE or contact the Illinois Treasurer's office, State of Illinois Center, Suite 15-600, 100 West Randolph, Chicago, Ill. 60601./
 /CONTACT: Marj Halperin of the Office of Illinois State Treasurer Patrick Quinn, 312-814-3571/ CO: Office of the Illinois State Treasurer ST: Illinois IN: SU:


TW -- DC040 -- 9306 05/12/92 16:24 EDT
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Date:May 12, 1992
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