MHP News

Homebuyers using SoftSecond to buy foreclosed properties

BOSTON, June 22, 2009 --- At a time when mortgage financing has been cut back sharply, the SoftSecond Loan Program is playing a critical part in the state’s economic recovery and MHP is working to enhance the program even more so it can play an even larger role in the Commonwealth’s efforts to promote responsible homeownership and stable neighborhoods.

Recent analysis of SoftSecond’s loan volume indicates that since 2002, SoftSecond has made 7,284 loans and 3,885 (53 percent) have been made in the 10 cities that have seen the most foreclosure activity - Boston, Brockton, Chelsea, Fitchburg, Lawrence, Lowell, Lynn, New Bedford, Springfield and Worcester. These figures include projected loan totals for fiscal year 2009, which ends June 30.

In addition, approximately a third of the homes purchased with SoftSecond in the last year are either foreclosed properties or so-called “short sales”, which are properties that might otherwise remain vacant or abandoned.
 
Almost 13,000 loans to first-time homebuyers

SoftSecond combines fixed-rate financing from a bank with a one-time state subsidy that keeps homebuyer monthly payments low. Created in 1990 to give minority and lower-income first-time homebuyers better access to mortgage financing, the program has made over 13,000 loans and has leveraged over $2 billion in private bank financing. The SoftSecond calculator illustrates how the program works.
  
Approximately $5,000 in state funds leverages $185,000 in private mortgage financing and the program anticipates needing $7.5 million to keep up with the demand for SoftSecond loans in FY2010.  The program will be funded in FY2010 through a combination of state capital funds and the federal Neighborhood Stabilization Program.  An amendment authorizing capital funding for the Soft Second program was approved by the state legislature as part of the FY2010 state budget. 

“The Soft Second program is critical to the recovery of the housing market in Massachusetts, and by helping new home buyers to acquire foreclosed properties it has a major impact stabilizing neighborhoods and keeping properties occupied,” said Clark Ziegler, MHP’s executive director.

New feature: Rehab grants in areas hard-hit by foreclosure

MHP and the state Department of Housing and Community Development (DHCD) have been working on an enhanced version of SoftSecond that can be used by qualified homebuyers to purchase foreclosed condominiums, single-family, two-family and three-family homes in neighborhoods hardest-hit by foreclosure. 

This new version waives SoftSecond’s first-time homebuyer requirement and raises the household income limit to under 120 percent of area median in designated census tracts in 39 communities that are eligible for federal Neighborhood Stabilization Program (NSP) funding.

In addition, designated neighborhoods in 16 of the 39 communities are also eligible for NSP rehabilitation grants when the homebuyer purchases a foreclosed property with a SoftSecond loan.  Grant awards will range from up to $20,000 for single-family homes and up to $40,000 for two- and three-family homes in neighborhoods that are eligible for NSP rehabilitation grants.

The 17 communities eligible for enhanced SoftSecond and NSP rehabilitation grants are: Boston, Brockton, Chelsea, Chicopee, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, New Bedford, Revere, Springfield and Worcester.

The 23 communities with NSP-eligible census tracts that can use enhanced SoftSecond are: Attleborough, Barnstable, Billerica, Dracut, Everett, Falmouth, Framingham, Marlborough, Marshfield, Methuen, Milford, Peabody, Plymouth, Quincy, Randolph, Salem, Saugus, Somerville, Stoughton, Taunton, Wareham, Weymouth and Yarmouth.

MHP has posted materials on its web site that explains the SoftSecond enhancement and how it can be used to buy foreclosed properties and how it can be combined with a rehab grant. For more information, click here.

Can also be coupled with employer contribution

MHP has also enhanced SoftSecond by making it possible for a first-time homebuyer to couple a SoftSecond loan with matching funds from an employer, which the state will also match, thereby reducing a homebuyer's monthly payment even more and helping the homeowner afford more home. This program is called MassWorks. 

For more information about how SoftSecond can help you purchase a home or increase homeownership in your community, email MHP.