PDC's New Loans Help First-Time Buyers
The Portland Development Commission launched a new program in February aimed at helping first-time homebuyers get into a new home. The program is in response to an escalating housing market and feedback from prospective buyers that high mortgage payments are often a deterrent to homeownership.
PDC'sNeighborhood Housing Program now offers JumpStart, a tool to help first-time homebuyers increase their buying power by temporarily lowering the payment on a first mortgage. JumpStart is a second mortgage loan used with a PDC purchase and renovation loan to enable a buyer to move ahead with a home purchase and renovation rather than delay because payments are just a little beyond reach.
JumpStart allows a borrower to increase his or her buying power and lower monthly payments during the first five years of the loan. For example, someone who might only be able to afford a home selling for $179,000, could, with JumpStart, qualify for as much as $227,000. That's because for the first year of the loan PDC uses a qualifying interest rate that is 2 percent lower than its regular rate.
That gives the borrower a lower initial mortgage payment. Over the next four years, the interest rate is gradually adjusted, and the mortgage payment increases accordingly. At the beginning of the fifth year, the JumpStart assistance ends and the buyer begins making the full payment required based on the regular interest rate.
To accomplish this adjustment, PDC lends the borrower up to $10,000 in a second mortgage loan behind the PDC first mortgage purchase and renovation loan. The JumpStart loan is used to pay for the adjusted interest rate over the first four years of the mortgage.
PDC places the proceeds from the JumpStart loan in a secured account. Each month, money is withdrawn from this account and added to the buyer's temporarily reduced mortgage payment to make the full payment on the loan.
JumpStart is intended for borrowers who want to purchase and renovate a home and can demonstrate the potential to handle increased monthly payments. Borrowers must meet an income requirement, and purchases are restricted to the Lents Town Center and Interstate Corridor Urban Renewal Areas. JumpStart is ideal for a borrower who can qualify for a larger mortgage amount. The borrower will have a lower monthly payment and can direct the extra cash towards needed improvements to the property.
For more information on JumpStart, visit www.pdc. us/jumpstart. To learn more about any of the purchase and renovation loans offered by PDC, call 503-823-3400 to speak to a loan specialist or contact staff at nhp@pdc.us for an application packet.
Foreclosure Can Be Avoided With Prompt Communication
MINNEAPOLIS—Nearly half (49 percent) of U.S. homeowners say that home foreclosures are becoming an increasingly widespread problem, according to a nationwide poll conducted recently by the Homeownership Preservation Foundation, a nonprofit organization dedicated to preserving homeownership and preventing foreclosure.
According to foreclosure statistics, nearly 2.9 million foreclosures have been initiated in the last five years alone. In addition, according to the survey, 53 percent of homeowners would not place their first call for help to their mortgage company if they were facing difficulty in making their mortgage payment.
The nationwide survey also revealed the following:
• 73 percent of homeowners say they (the homeowner) bear the most responsibility if they are facing foreclosure. Only 6 percent would place the blame with mortgage lenders or servicers.
• 33 percent identified "mistrust," 30 percent listed "pride" (embarrassment) and 20 percent listed "frustration" as feelings that would discourage them from calling their mortgage servicer or another third-party to seek help with their mortgage.
• 38 percent of homeowners said they would be "scared," and 35 percent said they would feel "depressed" if they were in the position of losing their home to foreclosure.
• Only 52 percent of homeowners would trust their mortgage company to find a solution to avoid foreclosure on their home.
Unexpected events can quickly and drastically change financial circumstances. Loss of a job, cut in work hours, an injury, military service, death in the family, divorce or a natural disaster such as Hurricane Katrina — any or all have the potential to turn your household's finances upside down.
According to several studies, 60 to 70 percent of Americans live paycheck to paycheck. Because many households lack an emergency savings account, they can quickly become delinquent on their mortgage when faced with a financial crisis. In some states, foreclosure proceedings can begin after a borrower has missed as few as three mortgage payments.
The foundation recommends taking the following steps to avoid foreclosure if you're falling behind on your payments.
1. Contact your mortgage company immediately. The sooner you contact your mortgage company when you are going to miss a mortgage payment, the greater the chance that together, you and your mortgage company will be able to work out a solution.
Contrary to popular myth, mortgage companies do not want to take over your house. Foreclosure is very expensive for mortgage companies, so they would rather assist you than see you lose your home.
Depending on your situation and the status of your loan, there may be different options available to you through your mortgage company. Be honest about your situation, so the lenders can help you find the right solution. They may be able to refinance the debt, arrange a repayment plan or modify the loan by adjusting the interest rate or extending the terms to make it more affordable.
You can find your mortgage company's contact information on your monthly mortgage billing statement, your payment coupon or on the company's Web site. When you call, be sure to have current financial records in front of you, such as pay stubs and bills, so you will be able to review the information with your mortgage company.
However, it's important to note that in some cases, it may not make financial sense for a homeowner to continue maintaining homeownership. In those cases, your mortgage company can help you figure out how to exit your mortgage obligation and avoid the negative consequences of foreclosure from hurting your credit report.
2. Prioritize your expenses. Prioritize your bills and pay the ones that are most necessary for the well-being of you and your family, such as shelter, food and utilities. Next, consider ways to reduce unnecessary expenses. Cut all non-essentials such as dining out, cable, newspapers, health club memberships and entertainment. Be creative and cut costs wherever you can.
Additionally, contact your credit card and utility companies and alert them to your situation. Your credit card company may be able to reduce the interest rates on your cards, and utility companies often have special programs based on income and for families facing life-changing events.
Lastly, don't write checks hoping that they won't get cashed before the money is in your account. The number of days to process checks has been significantly decreased due to legislation that allows banks to process checks electronically.
Missed payments and bounced checks could result in expensive late fees and/or dings on your credit report.
3. Protect your credit score. When you are experiencing a financial challenge, remember that making late payments or skipping them can seriously affect your credit score. Protecting your credit score is important because companies refer to it when they are evaluating your ability to qualify for loans or other financial products.
A poor credit score could even affect your ability to rent an apartment or to get a particular job. Employers sometimes check credit reports to see if potential employees have filed for bankruptcy or have been convicted of fraud.
4. Beware of scams. Beware of predatory lenders, pre-approved loan offers and phony counseling agencies. Homeowners facing financial troubles are especially vulnerable because they are desperate to find a solution to their problems.
Legitimate counseling agencies will offer their programs for free or for a small administrativecharge. Check with a lawyer or your mortgage company before signing anything involving your home.
Do not sign anything you do not understand. The U.S Department of Housing and Urban Development has more information about avoiding predatory lending onitsWebsite, www.hud.gov.
5. Don't make a bad situation worse. Ignoring your situation won't make it go away. This crisis will subside over time, and by taking the appropriate steps now, you can guard against long-term negative effects. The sooner you seek help, the sooner you can get back on your feet.
Fannie Mae Aims to Close Minority Gap
WASHINGTON, D.C.—Fannie Mae, the nation's largest source of financing for home mortgages is pledging to help 6 million families — including 1.8 million minority families — become first-time homeowners over the next decade.
The pledge boosts the company's commitment to the national Minority Homeownership Initiative and will help raise the minority homeownership rate from 49 percent currently to 55 percent, with the ultimate goal of closing the gap between minority homeownership rates and non-minority homeownership rates entirely.
Fannie Mae's new commitment to first-time home buyers is part of the next stage of the company's "American Dream Commitment," a plan announced in 2000 to provide $2 trillion in private capital for 18 million minority and underserved Americans to own a home by the end of the decade.
"We and our housing partners have bold ideas and big plans to work on the toughest housing problems facing America," said Franklin D. Raines, chair and CEO of Fannie Mae. "The first phase will emphasize getting people — especially minority families — into homes of their own.
"Over the past 10 years, the $3 trillion in commitments Fannie Mae has made and met have transformed us into a completely different company, where underserved families are the core of our business," Raines added. "Now that we have the capital, the tools, and a wide range of committed housing partners, Fannie Mae is pushing to do more with bold ideas and big plans to really move the minority homeownership rate."
Under the three-phase American Dream Commitment expansion plan, Fannie Mae will pledge significant new resources through several dozen new and enhanced mortgage initiatives to achieve these goals:
• Expand access to homeownership for millions of first-time home buyers and help to raise the minority homeownership rate to 55 percent, with the ultimate goal of closing the homeownership gaps entirely;
• Make homeownership and rental housing a success for millions of families at risk of losing their homes; and
• Expand the supply of affordable housing where it is needed most.
In addition, the company is establishing a set of additional goals and objectives designed to increase opportunities for homeownership and to help lenders reach out and serve more first-time home buyers. Steps Fannie Mae outlined to achieve this goal include applying technology to lower the costs of mortgage originations and expand access to mortgage credit, building stronger partnerships with those who serve as advisers to first-time home buyers, adapting products and processes that build upon public sector assistance to potential home buyers and working to transform manufactured housing lending.
