The $375 million sale of One Federal St. in Boston is among the high-profile deals brokered by Trammell Crow this year.
A pilot program to help municipal workers live in the communities they serve has enjoyed such “phenomenal success” that this week it will be expanded statewide.
MassHousing, formerly the Massachusetts Housing Finance Agency, initiated the program in July in partnership with Plymouth Savings Bank. Called the Zero Down/Live Where You Work loan program, it initially was available to all full-time municipal employees in 13 of the towns where the bank has a branch.
“Well, right after you [Banker & Tradesman] published the article [about the pilot program] we started getting calls, and the calls came from not only lenders – banks that wanted to know more about the program – but municipal officials, mayors and people like that saying, ‘How can I get my town involved in the program?’ We started to talk to people and the interest was just overwhelmingly positive,” said Peter Milewski, director of the Mortgage Insurance Fund for MassHousing.
As of last week, 56 banks across the commonwealth had committed $222 million to the program, now known as the Municipal Mortgage Program.
The Mortgage Insurance Fund of MassHousing provides insurance on the loans made by the banks in the program. In turn, the banks make the loans available to a targeted consumer base.
To qualify, applicants must be municipal employees and must meet household income requirements. “We used 135 percent of the HUD median incomes” to set requirements, Milewski said. That means household income limits range from $62,370 for some towns in Berkshire County to $94,770 for towns in pricier Middlesex County.
“Our initial goal was to see if we could establish a program of about $50 million and we quickly blew past that goal in the first couple of weeks,” he said. Then the goal of $100 million was reached very quickly and Milewski turned his attention to another goal for the program.
“After that, what we tried to accomplish is statewide coverage, making sure we found a community bank that would give us the ability to make the program available in every city or town in the commonwealth,” he said.
Edward J. Merritt, president of Boston-based Mt. Washington Co-Operative Bank, said the program fits in perfectly with his bank’s mission of providing affordable financing options to its customers.
“It’s extremely expensive to buy a home in this day and age. Anything we can do to make it easier for our customers to own a home, obviously, is something we’re very interested in pursuing, and in particular in South Boston. There are a number of municipal employees who, quite frankly, live in this community and might be able to participate in this,” he said.
‘Rainy Day’ Money
According to the latest statistics from the U.S. Census Bureau, the median household income for Massachusetts between 1997 and 1999 was $43,697. According to Education Week statistics, teacher salaries in Massachusetts average about $32,502.
The pilot program made loans available to municipal employees in some of the costliest towns in the state, including Duxbury, where the median price for a one-family home is $370,000, an increase of $184,500 from the 1995 price of $185,500, according to statistics complied by Warren Information Services, a sister company of Banker & Tradesman.
“The pilot program was a huge success. The credit quality of the borrowers was exceptional,” said Milewski. “The other thing we found out was 100 percent financing wasn’t just for people who had no down payment. One hundred percent financing was very attractive to people who probably struggled for years to accumulate it and didn’t want to give up the security of having it in the bank.”
A number of people had 5 percent and even 10 percent down payments saved but wanted to save the money out of fear of being “cash poor” after the purchase of a house should something go wrong, he said.
“I think this gave people a lot more confidence to buy a home knowing that not only could they afford it but they had the security of being able to keep their savings in the bank for that proverbial rainy day that always comes when you have a home,” said Milewski.
“It’s a great program for municipal employees in our community,” said Merritt. Today with low interest rates, a lot of people are going to be looking into mortgage programs. Considering that many people are looking to buy a first home and combine that with the escalation of real estate values, “Just to come up with a down payment to get into a home can be a very overwhelming challenge for a young family or a young couple. The fact that we’re coming up with a program that says we’ll lend, all you have to do is put 3 percent down on a home if you’re a municipal employee, that’s a terrific program,” said Merritt.
Mt. Washington has committed $3 million to the program and has assets of $225 million.
Milewski said part of what makes the program so attractive is the fact that, although it’s a government-sponsored program, it doesn’t require any subsidies. “It doesn’t require any giveaways. We use the financial security of the insurance we provide to the Mortgage Insurance Fund,” he said.
“The borrowers benefit because now their capacity to own a home has increased by tens of thousands of dollars because they’re qualified on the basis of their income rather than the down payment they’re able to accumulate,” said Milewski.
“When we first did the program it just sounded like a good thing to do. After Sept. 11, we’ve become much more acutely aware of the critical value, especially, that police and firemen and school teachers provide to the communities they work in. I think we feel that much better today than we even did a month ago before the tragedy in New York and Washington [D.C.]. We now really do understand how important municipal employees are to our communities,” he said.
The official launch date for the program is this Friday; however, some banks didn’t want to wait that long, said Milewski. Already 12 loans have been approved. Although no ceremony for the launch had been fixed by press time, Milewski said MassHousing wants to honor the West Springfield area because 10 banks in the area cumulatively contributed close to $50 million to the program as a group.
