Posted on September 30, 2011
WASHINGTON, D.C., Sept. 30, 2011 --- Homebuyer education, risk retention by private lenders and a loan review system that includes a “second look” by the program’s public administrator are three reasons why the Commonwealth’s SoftSecond Loan Program has been so successful in making loans to low and moderate first-time homebuyers, according to Judy Jacobson of the Massachusetts Housing Partnership.
Speaking at a panel discussion entitled “Risk, Access & the Future of Homeownership,” Jacobson cited these three reasons as keys to how SoftSecond has made over 15,000 loans to lower-income first-time homebuyers while maintaining delinquency and foreclosure rates that are lower than rates for prime mortgages in Massachusetts.
Jacobson, MHP’s Deputy Director and General Counsel, also said that as of June 30 of this year, the delinquency rate for SoftSecond was 5.39 percent as compared to 5.48 percent for prime mortgages in Massachusetts. Jacobson added that SoftSecond’s performance was also better than the Federal Housing Administration delinquency rate of 10.13 percent.
Jacobson added that the spread on the foreclosure rate is even bigger: .94 percent for SoftSecond as of June 30 compared to 2.02 percent for prime mortgages in Massachusetts. To read a complete version of Jacobon’s remarks, click here.
SoftSecond was created in 1990 to address concerns that minority and lower-income homebuyers in Boston did not have equal access to mortgage financing. MHP, community groups and banking leaders came together to address the problem and determined that one of the biggest obstacles to long-term successful homeownership was a mortgage structure that only considered payments in the first year without considering the borrower's ability to make payments over the life of the mortgage.
By combining fixed-rate financing from a bank with a small one-time state subsidy, SoftSecond monthly mortgage payments start lower and gradually increase over the first 10 years of the loan. Introduced as an innovative pilot program in Boston, it was eventually taken statewide. Today, the program is offered by over 40 banks and has leveraged over $2.5 billion in private mortgage financing. It is administered by MHP.
The panel discussion was held at the Center for American Progress and co-sponsored by the University of North Carolina’s Center for Community Capital and the Brookings Institute. Key speakers included Sen. Kay Hagan (D-NC), Sarah and Rosen Wartell, Executive Vice President of the Center for American Progress Action Fund.
In addition to Jacobson, the panel featured Vijay K. Lala, Senior Vice President for Home Loans Product Administration at Bank of America and Roberto G. Quercia, Director of UNC’s Center for Community Capital and co-author of Regaining the Dream, a new book that studied how 46,000 lower-income families received home loans and kept their homes during the worst housing crisis in U.S. history.
“Our findings clearly show that low-moderate income families can become successful homeowners when they are given quality mortgage products,” said Quercia. To read a complete version of Quercia’s remarks, click here.