Among those on hand at the State House last week for the announcement of the Massachusetts Mortgage Bankers Association’s new efforts to help low- and moderate-income first-time homebuyers were: (from left) Fred Johnson, Plymouth Savings Bank; Linda Bates, Shermond Mortgage Group; Saber Solim, Plymouth Savings Bank; Kevin Cuff, executive director of MMBA; Cynthia Merkle of Eastern Bank, chairwoman of MMBA; Cheryl Croxton, managing director of Fannie Mae’s New England regional office; and Jack Wilson, senior deputy directory of Fannie Mae’s Boston Partnership office.

The Massachusetts State House was the scene of attacks against predatory and abusive mortgage lenders last Wednesday, when the Massachusetts Mortgage Bankers Association, in collaboration with Fannie Mae products, announced new mortgage solutions aimed at low- to moderate-income first-time homebuyers who have been the target of high interest rates and corrupt financing agreements from mortgage lenders.

The MMBA, in collaboration with their member partners – Boston Federal Savings Bank, Countrywide Home Mortgage, Plymouth Savings Bank and SIB Mortgage – introduced Massachusetts Mortgage Solutions, made up of two Fannie Mae products aimed at providing homebuyers accessibility to mortgage loans and originations.

The Fannie Mae products, “MyCommunityMortgage” and “Expanded Approval,” are not new to the Fannie Mae product line, but can provide alternative financing options to first-time homebuyers with blemished credit reports or low financial backing.

MyCommunityMortgage is a suite of flexible, low-down-payment mortgage options for low- and moderate-income borrowers; Expanded Approval allows lenders to offer previously underserved borrowers a mortgage rate – including the costs of any mortgage insurance premiums – that is up to 2 percentage points lower than non-traditional alternatives.

Based on current mortgage rates, the difference can save borrowers up to $60,000 over the term of a 30-year mortgage, a mortgage option that combines the benefit of lower-cost financing with an incentive for improved creditworthiness for borrowers with past credit challenges.

“These products are not new products, but they have continued to evolve. [Fannie Mae] has continued to push the envelope with the suite of products and we have become more aggressive,” said Jack Wilson, senior deputy director of Fannie Mae’s Massachusetts Partnership office. “These are all special unique lending opportunities for our customers. [Products] are targeted to credit blemished borrowers, first-time homebuyers who may be in the low- to moderate-income range and view credit and down payment [prices] as the two more difficult pieces of first-time homebuying.”

However, the initiative comes on the heels of much anticipated debate in the state Legislature surrounding Community Reinvestment Act procedures extending to the mortgage industry – an issue that members of the mortgage industry have been battling against since May.

‘Responsible Lending’

Based on Home Mortgage Disclosure Act data compiled over the past three years, one industry professional said the MMBA’s new product offering is nothing short of a benefit to consumers who have felt the pressures of predatory lending, and who just happen to be in low-income and minority areas, where CRA requirements are usually essential.

“It’s a win-win situation for consumers. Based on HMDA data, this was not a CRA issue – this was a predatory lending issue,” said Cynthia Merkle, senior vice president and chief quality officer for the Mortgage Banking and Community Reinvestment Division at Eastern Bank and current chairwoman of the MMBA. “Now we can offer nontraditional ways of lending by looking at total debt and offering flexible credit options … to consumers throughout the state.”

Merkle said nonprofit organizations, including the Association of Community Organizations for Reform Now, Citizens Housing and Planning Association and the Massachusetts Affordable Housing Alliance, provided insight for the MMBA on what was taking place in low- and moderate-income communities that those organizations served.

MMBA Executive Director Kevin Cuff said the MMBA has been working on the initiative for the past 18 months in hopes of offering those types of products to consumers.

“We have been participating with a special task force to review lending data and HMDA data as it regards to the increase of predatory and abusive lending that has popped up throughout the country,” said Cuff. “Based upon the review [of data] and working with the Committee of Banks and Banking, the MMBA recognized there was more we could do by way of offering alternative financing to low-to-moderate income people or those with blemished credit history.”

The MMBA and their lender partners will provide financing to borrowers who have had past credit problems or who have been consigned to alternative financing when they could qualify for lower rates, enabling the borrower to secure a mortgage rate that may be considerably lower than other mortgage options available.

“Some homebuyers are spending more than they should have to on mortgages, simply because they have had past credit problems. This program not only provides an alternative to this practice, but it also makes it more difficult for less scrupulous lenders to take advantage of homebuyers,” said Cuff.

The MMBA anticipates the participating lenders will provide more than $100 million in financing low- to moderate-income loans. Fannie Mae will purchase all of the eligible loans under the initiative.

In the interim, Fannie Mae will perform training and educational classes to lenders in an effort to increase the knowledge of the products offered.

“[Fannie Mae] will conduct training with loan officers and lenders and continue to update them with the feature of these products,” said Wilson. “It’s a way for us to promote responsible lending and it’s another part of an initiative we have been part of for the past few years.”

Cuff said the MMBA and their lender partners are committed to providing the opportunity for homeownership and the investment in communities throughout the commonwealth.

Melanie Nayer may be reached at mnayer@thewarrengroup.com.