The name of the program is meant to evoke a sense of government and financial institutions working for the people. The Home Ownership Compact, announced by Gov. Deval Patrick last week, is a notable step toward enabling homeownership in the Commonwealth of Massachusetts after the Great Recession.
The state program has a goal of providing 10,000 mortgage loans to first-time homebuyers over the next five years. The compact includes a commitment among lenders to originate a specific number of mortgage loans to first-time home buyers with household incomes below the area median income through the MassHousing and the Massachusetts Housing Partnership programs. With a shortage of homes around the Bay State and home prices rising fast outside the realm of affordability in many instances, this can only be a good thing.
Banks such as Citizens Bank, Sovereign Bank, Eastern Bank, Rockland Bank and Trust, Enterprise Banks and Blue Hills Bank are already on board with the program.
Massachusetts, like the rest of the country, has been through a rough period of time the past few years, but there are bright signs on the horizon. Foreclosure activity across the commonwealth continues to drop, according to data from The Warren Group, publisher of Banker & Tradesman. The number of foreclosure petitions statewide dropped almost 79 percent year-over-year to 370 from 1,750 in April 2012.
But even with the positive signs, there are some trends that should spark some concern. An important economic indicator is wage growth and wages haven’t really grown during the past few years. The most recent data suggest real wage growth in the U.S. isn’t really moving anywhere. According to the U.S. Bureau of Labor Statistics, from March to April 2013, earnings increased .5 percent, which is an increase but not a substantial one.
In a way, we may be fighting yesterday’s post-war. After World War II, returning war vets got mortgage help through the GI Bill, without which many wouldn’t have had a prayer of buying a house in a real estate market that was heated up by their very return. Technically and financially, this was a big splurge on the part of the federal government. But it paid off big-time. The U.S. job market, then unthreatened by global competition, wanted the vets and was willing to give them generous benefits such as health insurance and defined-benefit pensions. Job, house, all good. All boats rose with the tide, over a generation and then some.
Not so today. Our hollowed-out middle class will be lucky if it can retire at all, or even hold decent jobs. So a quick fix won’t necessarily solve an economic disparity problem we’ve had for the last 40 years. That all being said, along with the announcement of the compact, the Massachusetts Division of Banks also announced that it awarded $1.3 million in grants to 11 regional foreclosure prevention centers and 10 individual/first-time homeownership centers across the commonwealth.
It’s all a proactive effort to allow people to achieve their dreams of homeownership while keeping homeowners who might otherwise be foreclosed upon in their homes. And as long as it’s managed responsibly, we see this as an important attempt to bring more consumers into the marketplace.
