BRIAN KOSS
Expects success in state

In an effort to reach out to the men and women that serve the country, California-based Countrywide Home Loans has introduced a new mortgage product tailored especially for enlisted military personnel.

The U.S. Military Optimum Loan program allows qualifying enlisted men and women to buy homes with little down and to use nontraditional income sources.

Brian Koss, senior vice president at Countrywide in Waltham, said the company recently came off a successful campaign to provide care packages to U.S. service personnel on active duty. The company matched employee contributions and donated $204,000, enough to fund packages along with notes from employees to 8,000 armed forces personnel.

“Our military personnel risk their lives on a daily basis keeping our country safe,” Koss said. “It is Countrywide’s responsibility, as well as that of all mortgage lenders, to do its part to see that their families are safe and that there are home loans readily available for them that are attainable and fit their personal financial circumstances.”

After the campaign ended, Koss said the company continued to consider the needs of those in the military. By taking the main components of the company’s existing Optimum Loan program, a specialized product was designed.

The Optimum Loan program gives borrowers different options to deal with financial hurdles, such as not having enough cash for a down payment or lack of traditional credit history. The loan allows borrowers to use cash gifts from family or cash held outside a traditional savings institution to help with the down payment. Borrowers can use other sources of income, like gifts from other family members or earnings from employment that may be hard to verify, in order to qualify. Borrowers can also use alternative payment records like rent or utility bills to help establish a favorable credit history.

The new military personnel loan program also has flexible guidelines, such as a minimum downpayment of $500 or 1 percent of the sale price. In addition to base pay, the program allows for inclusion of different types of military pay as income sources, such as flight or hazard pay, quarters’ allowances and proficiency pay. Borrowers can also use income from a boarder for those families who rent out a room during a family member’s deployment. Countrywide said it will accept supplemental undocumented income from borrowers who have taken second jobs, but where pay is not easily verified. The company is also allowing a family member or close friend to co-sign for the primary borrower who is establishing homeownership during deployment. National Guard members also are eligible.

Koss said he expects the product to be successful in Massachusetts, where there are still several military facilities, including Barnes Air National Guard Base in Westover, Otis Air National Guard Base in Barnstable County, Hanscom Air Force Base in Bedford and Westover Joint Air Reserve Base in Chicopee.

According the U.S. Department of Defense Web site, the department relies on the private sector for its housing and pays housing allowances to its military personnel. The department provides “on-base” privatized housing or military construction housing only when the private sector cannot provide adequate affordable housing. Between 66 percent and 70 percent of service members live in housing in the private sector.

‘Refreshing Look’

Koss said borrowers in other areas of the Bay State could also benefit from the program. The old mill towns, like Lowell, Lawrence and New Bedford have many first-time home buyers who are in the military, Koss said.

The South Coast area of Massachusetts has some of the most affordable housing in the state, he added.

The new loan will not replace the Veteran’s Administration guaranteed loan program and Countrywide will still originate VA mortgage loans that require zero down payment. VA guaranteed loans are made by private lenders and, to get a loan, borrowers apply directly to the lender. If the loan is approved, the VA guarantees the loan when it is closed. The guaranty protects the lender against loss if the borrower or a later owner fails to repay the loan and the guaranty allows underwriting at low rates.

Koss said VA loans tended to be used in areas where there were military bases. But with the Countrywide product, he expects military personnel near bases and beyond will respond.

“Now we think it will be used by everyone” [in the military] Koss said.

The difference between the two types of loans is the loan size, Koss explained. The VA loan guarantee tends to have a lower limit.

According to the Web site valoans.com, the maximum eligibility for each veteran is $89,912 and the maximum loan amount with no down payment is $359,650.

Koss said military personnel in New England are more likely to be priced out of the VA loan because of steep housing prices.

“Price is the major piece,” Koss said. “[The VA loan] is fairly restrictive.”

The VA loan is intended for veterans, whereas the Countrywide loan is meant for active members of the military.

“It’s for the deployment [and] redeployment period,” Koss said.

Another benefit of working with Countrywide, said Koss, is the likelihood that the loan will not be sold while a borrower is deployed overseas. Countrywide is currently the largest servicer of loans in the country.

Per the Service Members Civil Relief Act of 2003, Countrywide also offers a series of options to help enlisted military personnel and their families who have Countrywide mortgages and are experiencing financial duress. Some options include forbearing payments or recasting loans for families of military personnel who lose their lives while on active duty and providing post-closing counseling for military personnel who cannot make mortgage payments on time.

John Battaglia, president-elect of the Massachusetts Mortgage Bankers Association and president of Boston-based Cambridge Mortgage Group, praised Countrywide’s efforts to fulfill a need in the marketplace.

“Countrywide should be applauded,” Battaglia said. “They are using some imagination Â… and coming up with a program that meets the needs of the military.”

Battaglia said it appears the mortgage company has done its research to create the niche product.

Other than the VA loan program, Battaglia said he hasn’t seen any other products that deal specifically with the military.

In the late 1980s, Battaglia said he recalls lenders working with Fannie Mae and Freddie Mac to address the need of lending for multifamily homes. By allowing borrowers to use rental income, Battaglia said it stimulated the sales of multifamily homes.

“When there is a need, it takes someone to recognize it,” he said. “”It’s refreshing to see a lender look at some different needs out there.”

Battaglia said he is unsure of how large or successful Countrywide’s program will be because it is a niche product serving only a certain number of people. But if the product does prove to be successful, Battaglia said other companies will copy the Countrywide’s idea.

James Dougherty, executive director of the Massachusetts Mortgage Association, called the product interesting. He said he was also unaware of any similar product on the market. Like Battaglia, he commended Countrywide’s efforts.

“You can’t be critical of someone who is reaching out to the armed forces,” Dougherty said.

Jennifer Jope may be reached at jjope@thewarrengroup.com.