The Massachusetts Department of State Treasurer recently paired with Sovereign Bank, one of the commonwealth’s largest financial institutions, to expand the eligibility guidelines for a new program that will provide low-cost home loans to Massachusetts educators. The Massachusetts Educators Loan Program was first made available in June but was recently broadened to include all certified area educators – public and private grade school teachers, school administrators and state college and university educators being among them.
Through the program, Sovereign will provide up to $100 million in mortgages supplied by the Treasury, which will support the lending through a “linked deposit” method that includes leveraging state funds to provide further benefits. In return, the bank will provide the Treasury with market-rate returns.
The program was a response to a recommendation from State Treasurer Timothy P. Cahill’s Job Growth Task Force, a group formed in mid-February in response to Procter & Gamble’s pending acquisition of The Gillette Co., and the resulting negative impact on jobs in the area. The task force, which includes representatives from the region’s four largest banks, was charged with looking at ways to leverage existing Treasury resources to further job growth in Massachusetts. The Massachusetts Educators Loan Program created with Sovereign was one answer to the proposed problem of job retention and development.
The program was initiated in an attempt to provide constancy to Bay State communities by ensuring that their teachers can afford to live in or near the towns and cities where they work.
“Sovereign Bank recognizes that we need to keep our teachers in this state and that we have an opportunity to provide some assistance. Our new home loan program will not only make more teachers homeowners, we will also create more stable communities,” said Joseph P. Campanelli, president and chief executive officer of Sovereign Bank New England, in a statement released to the press.
“Qualified teachers and school administrators are one of our greatest assets in Massachusetts. Unfortunately, buying a home in Massachusetts can be difficult to manage on a teacher’s salary,” said Cahill in a prepared statement. “This new lending program will help us retain talented educators by providing them with the resources needed to make living and owning a home in Massachusetts more affordable.”
‘A Great Program’
With home prices in Massachusetts at record highs, many professionals who provide invaluable services but have lower salaries cannot afford to purchase homes or condominiums. Instead, they are forced into the rental market, which in some cases means monthly bills almost equal to mortgage payments after placing the necessary down payment.
The program reduces the standard 10 percent to 20 percent deposits that some banks require on home loans and will allow educators who wish to purchase their primary residence or refinance an existing mortgage to acquire fixed-rate home mortgage and home equity loans for a down payment as low as 5 percent.
Additionally, there are no application costs or rate-lock fees for applicants, who also benefit from discounted closing costs.
The state Department of Education reports that the average salary of a Massachusetts teacher in fiscal year 2003 was $51,800. Comparatively, the state’s median home sale price in 2004 was $340,000, an increase of 11.5 percent over 2003, according to the Massachusetts Association of Realtors.
“Teachers are key people in every town and we need to find a way to help people stay in the community they serve and to be able to purchase here,” said Maggie Tomkiewicz, president of MAR and broker-owner of M. Macdonald Real Estate in South Dartmouth. “Their pay scales will rise once they’re in a position, but we need to ensure that they can stay long enough to make that happen. And if they’re coming in buying a starter home, it could be very difficult.”
Campanelli said he believes the program will help to combat “one of the most critical problems in Massachusetts Â… the lack of affordable housing.”
Tomkiewicz noted that home prices differ from community to community and with each individual based on whether they have previously owned a home in another state that they’d sold. With housing prices as they are, she added, it would be easier if they were coming from a pricey market like California, as opposed to a less expensive market like Mississippi.
“Teachers fall into a certain income bracket. If they don’t have the funds, if they can’t afford to live in the community they’re working in, then what can they do?” asked Tomkiewicz.
If they are intent upon pursuing homeownership, then the answer is that they must move to a community that they can afford, which in many cases can be miles and miles away.
“Without assistance and with prices as they are, teachers would have to push farther and farther and farther away from the city hub, or wherever they’re working. That becomes an issue. [MAR] has been focusing on that every year. We make barriers to housing a focal point in meetings so the hypothetical does not happen” Tomkiewicz said.
Supporters believe the Massachusetts Educators Loan Program may not only work to keep educators in the state and around their area of employment, but also could help to bring in more teachers and administrators.
“At a time when we are trying to attract and retain the best teachers in Massachusetts public schools, this is a great program that promises to lower the hurdles that make homeownership unattainable for so many deserving educators,” said Kathleen Kelly, president of the Massachusetts Federation of Teachers, in a prepared statement. “Helping teachers, librarians and all of our certified educators achieve homeownership is a critical step toward attracting and retaining the best educators for Massachusetts schools.”
The Massachusetts Educators Loan Program is one step in a six-part, $1 billion plan released in May of this year by the Job Growth Task Force to positively impact the state’s job market. Other portions include: a $75 million loan program offered through TD Banknorth to help a new segment of small businesses – those with capital needs of less than $500,000 – over the next three years; a $50 million Treasury program to buy local housing bonds to encourage cities and towns to increase the availability of housing; and a $200 million loan program offered through Sovereign to benefit small businesses, first announced in February.
Ashley Wilkins may be reached at awilkins@thewarrengroup.com.
