JAMES BLAKE
‘Very appealing’

Despite rumors of a real estate bubble, home prices in the Bay State continue to inch upward, pushing homeownership out of the grasp of many low- to middle-income workers across the state. But a statewide program run by credit unions is aiming to keep homeownership in reach for low-income, first-time homebuyers.

The Massachusetts Credit Union League and participating member credit unions are sponsoring an initiative to provide $100 million in below-market-rate mortgage loans. The league announced the initiative, which is part of the Credit Union Community Hope Initiative, last week. It is part of the national Home Loan Payment Relief program that, to date, has committed to providing more than $1 billion in mortgage loans to qualifying individuals and families nationwide.

Among those behind the idea was James Blake, president of HarborOne Credit Union in Brockton and first vice chairman of the Massachusetts Credit Union League. Blake said he got the idea for the program after his credit union started receiving inquiries about special mortgage programs. Home prices were rising yearly, and many people in the area were having trouble buying a home. Most existing programs provided extended debt ratios or SoftSecond loans (a Massachusetts Housing Partnership program that helps low-income borrowers with down payments), but there were very few that offered actual discounts, he noted. Blake therefore decided to help.

“Credit unions have historically been there for working-class people,” Blake said.

So he sat down with some other like-minded individuals and, along with credit union presidents from other states, decided to take the program national.

The 13 participating credit unions in Massachusetts will offer qualifying buyers a three-year, adjustable-rate mortgage at 1 percentage point below the market rate for such loans. The rate will be fixed for the first three years. After that, it will adjust annually if the rate environment changes. Adjustments are capped at 1 percent per year and 5 percent over the life of the loan. A market-priced adjustable-rate mortgage can adjust up to 2 percent per year with a lifetime cap of 6 percent over the initial rate.

“When it came down to it, the best thing we could do was cut the price and eat the difference ourselves,” Blake said.

The down payments for the loans will be no more than 3 percent, and gifts and grants are permitted. The maximum ratio of monthly obligations to income will be 42 percent, which will allow for those with lower income levels to qualify for a given loan size.

For example, at today’s rates one would need a household income of $40,000 per year to qualify for a $130,000 mortgage loan. Through the initiative, that required household income would drop to $32,000. Similarly, a $240,000 mortgage would require just a $56,500 yearly household income through the plan, as opposed to a $70,000 household income at standard rates.

The median home price in the metro Boston area in 2005 was $430,000, an increase of more than 5 percent from 2004, according to the National Association of Realtors. But the median income in the Boston area is only $57,800.

“Owning a home is truly the American dream,” said Daniel F. Egan Jr., president of the Massachusetts Credit Union League, in a prepared statement. “Buying a home, however, is always difficult, especially for those of modest means. This program will enable many Massachusetts residents to take the major step into homeownership that they didn’t think possible at this time.”

‘Entirely Consistent’
The national campaign kicked off on Nov. 1 of last year, according to Robert Kimmett, senior vice president of the Massachusetts Credit Union League. Some credit unions, like HarborOne, have been involved from the start. But since the announcement of the statewide campaign, the league has been fielding calls from more credit unions interested in the initiative. The campaign was kicked off last week at the State House.

“This loan program is entirely consistent with the way that credit unions operate,” said U.S. Rep. Michael Capuano, D-Mass., in a prepared statement. “It reflects their commitment to helping ordinary working people who are trying to build better lives for their families.”

HarborOne so far has provided $4 million worth of loans, Blake said. The average age of the new homebuyers is 32, but 57 percent are under 30. They work in professions such nursing, teaching and factory work, and the average income is $54,000.

Blake said he expects to get more requests for mortgages as the program gains publicity.

“I think we’ll see this ramp up pretty quick,” he said. “This kind of discounted program is very appealing to people.”

To be eligible, borrowers’ household incomes must be at or below the area median income, which varies in different cities and towns. Some exceptions will be made for certain “high-cost” areas designated by Freddie Mac and Fannie Mae based on data from the U.S. Department of Housing and Urban Development. Applicants must be purchasing an owner-occupied principal residence. Credit unions, at their discretion, may extend the loans to those who aren’t first-time buyers, subject to the income limitation.

“This program makes homebuying truly affordable for consumers,” said Gene Foley, president of Harvard University Employees Credit Union, in a prepared statement. “However, unlike interest-only mortgage loan products, the HLPR loan not only helps people purchase a home, it frees them from worrying about whether or not they will be able to afford it over the long run.”

National Credit Union Administration Vice Chairman Rodney Hood praised the credit unions of Massachusetts for “committing their money and partnering with the HLPR initiative, which is an innovative and compassionate way for credit unions to join together in helping their members achieve the American dream of homeownership.”

Aside from HarborOne, other credit unions participating in the program are Central One Federal Credit Union in Shrewsbury, Crescent Credit Union in Brockton, Digital Federal Credit Union in Marlborough, GFA Federal Credit Union in Gardner, Hanscom Federal Credit Union at Hanscom Air Force Base, Harvard University Employees Credit Union in Cambridge, Members Plus Credit Union in Somerville, Metropolitan Credit Union in Chelsea, NationsHeritage Federal Credit Union in Attleboro, RTN Federal Credit Union in Waltham, UMassFive College Federal Credit Union in Hadley and Worcester Credit Union in Worcester.