home loans help buyers
while they boost neighborhoods
Cristen Copley didn't know a special home-buying
program would ante up a few thousand dollars for her St. Louis dream
house. But she's glad it did: It keeps the milk from spoiling.
Mae and Freddie
Mac work with government agencies, lenders and community activist
groups to offer specialized loan programs around the country. The
initiatives come in all shapes and sizes, but have one underlying
aim -- to revitalize communities, replenish neighborhoods and otherwise
give dilapidated buildings a new lease on life.
Buying a house
-- and a refrigerator
"We already had the contract on the house and were getting ready
to close. Then our real estate agent happened to find out about
the program," says Copley, a 27-year-old registered nurse at Washington
University School of Medicine in St. Louis. "Because there was so
much that needed to be done to the house, we were scraping every
last penny that we had, and this way we actually were able to buy
In the mortgage world, thousands of home buyers
never have to stop and think about the world around them. They can
pay 10 percent, or even 20 percent, down and buy a brand-new home
for their 2.6 kids, never worrying about anything save for the delinquent
homeowner down the street who painted the mailbox a gaudy color.
To some consumers, however, finding a place
to settle down involves much more. Some want to buy homes, but can't
because they don't have enough money for a down payment or have
too many financial scars in their past. Others crave the sense of
personal satisfaction that comes from helping out the communities
around them. Regardless of the reasons, these home hunters don't
fit into the conventional mortgage mold.
loans for special buyers
Because of the efforts of a remarkable collection of groups, however,
they don't have to. Supported by Fannie Mae and Freddie Mac -- the
two agencies that purchase loans from lenders, bundle them together
and sell them off to Wall Street investors -- these interested parties
make millions of dollars worth of mortgages available so unconventional
buyers can realize their dreams like everybody else. And because
the programs target everyone from firefighters in Los Angeles to
people with troubled credit in New Orleans, the local lender may
very well offer at least one of them.
"The standard mortgage lending process doesn't
always ... satisfy the needs of different markets, different borrowers
and different neighborhoods," says Mike Coffey, vice president for
expanding markets at Freddie Mac. "We know that (conventional loans)
don't necessarily work in all cases across the entire spectrum of
borrower circumstances and there are situations or circumstances
where you have to do something and take more direct intervention."
The two agencies approach targeted lending in
different ways, and no two loan programs are the same.
Fannie Mae got the ball rolling a few years
back by unveiling a "Trillion
Dollar Commitment": its pledge to provide that amount of housing
money to underserved borrowers, be they minorities, low- to moderate-income
mortgage hunters or immigrants. Since 1994, the agency has designed
more lenient loan programs and encouraged the use of computerized
loan processing systems to reduce the risk of these mortgages. It
also has established so-called Partnership Offices in many cities
that hammer out loan agreements with local groups.
"We're working very, very closely with our partners
in the community -- developers, counselers -- and we're working
with lenders and Realtors doing training," says Clifton Berry, director
of the agency's St. Louis location. "If you live in an area where
there is a Fannie Mae partnership office, you know about that office,
you know about that office's investment plan, you know specifically
the number of investments you committed to and the number of families
we're committed to help."
target specific groups
Two of those commitments unveiled in Berry's region during the past
couple years help illustrate where the consumer fits into the grand
scheme of things. The first, offered to Copley and her husband,
targeted employees of Washington University and Barnes-Jewish Hospital.
It allowed the couple to buy a property in the Skinker-DeBaliviere
neighborhood, about three miles from WU's medical school. They received
$4,000 from the university, a grant equal to about 3 percent of
their home's $125,000 purchase price.
More recently, Fannie Mae announced an alliance
with the Unity Health group of hospitals and related health-care
subsidiaries. The program aims to encourage Unity employees to buy
homes in the neighborhood surrounding the company's Alexian Brothers
Hospital. Eligible borrowers will receive up to $5,000 in purchasing
assistance in the form of a forgivable loan. The employee won't
have to make payments on principal or interest and won't have to
pay the loan back at all if he stays in his home and continues to
work for the company for five years.
"The hospital is located in a neighborhood with
changing demographics. We have a neighborhood which had been predominately
elderly, with an older, stable population that is really starting
to transition," says Glenn Appelbaum, Alexian's senior vice president.
"As the largest employer here in the neighborhood, we were viewed
as the logical company to take a leadership initiative."
An employee can choose between four lenders,
which will offer loans under terms spelled out by Fannie Mae. The
loans, which the agency will buy after closing, feature fixed-rate
payment schedules much like traditional 30-year mortgages, but have
looser qualification guidelines for debt-to-income ratios, credit
scores and the like.
"We're right down the street from the hospital
so it would make sense that we're involved with this project," says
Edwin Schmid, vice president of the local Union
Planters Corp. branch. "It's kind of a win-win-win thing
for everyone involved. We hope, and the goal is, to try and stabilize
and improve the neighborhood, and at the same time offer financing
to people who may not think they qualify."
The hospital launched its program March 1 and
is just now beginning to advertise it to employees. Appelbaum hopes
to get about 20 to 25 people into homes during each of the next
three years through the initiative.
"What you see when you leave are some boarded-up
properties, some properties in somewhat of disrepair and vacancies,"
he says. "But you see properties in pretty shabby condition -- older
brick properties -- that with some care and some dollars put into
them could be quite nice facilities."
smorgasboard of programs available
So what options are available for borrowers who don't happen to
change IV bags in southeastern St. Louis? Plenty, given the wealth
of programs available today through both of the agencies.
Freddie Mac's Los Angeles program, for example,
allows civil service workers such as firefighters and police officers
the chance to buy houses without a down payment. Another pilot program
lets people with bad credit purchase homes after 18 months in a
Credit Counseling Service debt management plan. Others have
targeted minority borrowers, with the assistance of the National
Association for the Advancement of Colored People and general
home buyers in southern California, Kansas City, Kan. and Orange
Fannie Mae runs an information line (1-800-7FANNIE)
that people can call to find out about programs in their area, while
Freddie Mac suggests consumers contact their state housing authority
or agency. Churches, other community organizations and local lenders
may have information as well.
The bottom line, at least from Copley's perspective,
is that help's out there for the taking -- if you know where to
"We are thrilled," she says almost a year and
a half after settling. "At the time that we moved in we didn't even
realize what a gem we have, and we just feel so fortunate that we
bought into such a wonderful neighborhood."