Gov sets homeownership goal, unveils new ONE program

BOSTON, June 11, 2013 --- After more than 20 years and 17,000 loans, MHP's SoftSecond Loan Program is taking steps to continue its success by transforming from a two-loan structure to one mortgage, a move that will make it simpler for first-time homebuyers and the financial institutions that offer the program.

The switch to the new product, which will be called the ONE Mortgage Program, was unveiled on Monday, June 10 during Governor Deval Patrick's announcement of a new Massachusetts Homeownership Compact, which creates a shared goal between the state and its financial institutions of providing 10,000 mortgage loans over the next five years to first-time homebuyers with household incomes below the area median income.

The 10,000 mortgage loans would be made by lenders through MHP's ONE Mortgage Program and similar mortgage programs offered by MassHousing. The announcement was made on Monday, June 10 at the Boston home of Sean and Rashida Constantine, who bought their two-family home five years ago with a SoftSecond loan from Boston Private Bank.

"I'm proud to announce our shared commitment to provide 10,000 mortgage loans to first-time home buyers over the next five years," said Governor Patrick. "Working with MassHousing and MHP, lenders will create mortgage loan programs targeted to first-time home buyers with household incomes below the area median income. The chances for modest-income families to own their own home in Massachusetts just got a lot better."

Joining Governor Patrick and the Constantine family were representatives of six banks that have already signed onto the Compact - Citizens Bank, Sovereign Bank, Eastern Bank, Rockland Bank and Trust, Enterprise Bank and Blue Hills Bank. All of these banks plan to offer the ONE Mortgage Program.

The transition of SoftSecond from a two-mortgage structure to one mortgage is meant to simplify the program for borrowers while making it easier for financial institutions to underwrite and administer the loans. The one-loan structure also makes it possible for the loans to be sold on the secondary market, something that couldn't be done with SoftSecond.

"We're trying to do something that was much more reflective of the current state of bank regulation, but in a way that was as close to identical as we could make it in terms of interest rates and payments for the borrower," said Clark Ziegler, executive director of the MHP.

ONE standards, track record earn exemption from fed rules

MHP's move to the ONE Mortgage Program received a significant boost earlier this month when the Consumer Financial Protection Bureau exempted programs like MHP's ONE Mortgage from new ability to repay rules. In explaining the reasoning behind granting exemptions to certain mortgage products with outstanding loan histories, the CFPB singled out MHP by name as an example of an organization whose tightly-underwritten loans made it eligible for the exemption. This means that banks who issue ONE Mortgage loans won't have to worry about an additional legal liability from them.

"Part of what (CFPB) is saying is that the programs like ours, there's built-in discipline and quality control," said Ziegler. "This is a public mission, to help borrowers and make sure that they're successful. So to put banks through the wringer when that's already hardwired into what we do, doesn't make sense." said Zeigler.

SoftSecond was created in 1990 in the aftermath of a 1989 Federal Reserve study that found a pattern of racial bias in mortgage lending in Boston. In response, representatives from MHP, the Massachusetts Affordable Housing Alliance (MAHA), the Massachusetts Bankers Association, the City of Boston and others created SoftSecond. The two-mortgage structure and well-established pre-purchase education and post-purchase services have enabled the program to maintain low delinquency and foreclosure rates while serving lower-income borrowers and boosting owner-occupied homeownership in poorer urban neighborhoods.

"In 22 years, over 17,000 low- and moderate-income first-time homebuyers have purchased a home through this program and half of those buyers have been persons of color," said Tom Callahan, executive director of MAHA. "With an average income of just 55 percent of the area median, this program has served families no other mortgage can reach. We now call on other lenders, big and small, to participate in the Compact and ensure that homebuyers get the very best mortgage from your bank, credit union, or mortgage company."

Homeowner: Pre- and post-purchase classes key

Sean and Rashida Constantine, who hosted the Compact event in front of their home, represent the type of borrowers who have benefited from mortgage programs like SoftSecond.

"We bought our home five years ago and we love our yellow house as my five- year old son calls it," said Rashida Constantine. "Each time we climb our stairs and turn our keys we are ever so grateful for our mortgage and the support system that comes with it."

Constantine said that pre- and post-purchase classes that are part of the SoftSecond and ONE programs erased many of her family's doubts about whether they were ready for homeownership.

"When we decided to purchase our home as a young couple, I was 24 and, my mom, my husband and I were a little nervous," she said. "But once we took the plunge, the process was amazing. From the first-time homebuyer class at MAHA to my helpful loan officer to closing, to the City of Boston's down-payment assistance to the HomeSafe (post-purchase) program at MAHA, I knew I was well prepared to be a homeowner and landlord. I was ready for any challenge."

MHP's Deputy Director Judy Jacobson thanked the administration, participating lenders and community groups for pledging to continue the success of SoftSecond.

"With over $2.7 billion in mortgage financing provided by our partner lenders and a foreclosure rate less than half of that of prime mortgages in the state, we have shown that this kind of lending is possible and isn't too risky," she said. "But this isn't just about numbers. If you had any doubt about how important this is, just take one look at the Constantine family and their beautiful home. Now, as we tweak, simplify and roll out the ONE Mortgage Program, we look forward to building on our 20 years of success and helping more families like the Constantine family."

Compact kicks off Housing Week; Division of Banks awards $1.3M in grants

In announcing the Massachusetts Home Ownership Compact, Governor Patrick proclaimed June 10-16 as Commonwealth Housing Week. Throughout the week, the Department of Housing and Community Development and the Office of Consumer Affairs will be highlighting the recovery of the Massachusetts housing market and the success of the state's foreclosure prevention efforts with events across the state.

At the event, the Massachusetts Division of Banks also announced that it awarded $1.3 million in grants to 11 regional foreclosure prevention centers and 10 individual/first-time homeownership centers across the Commonwealth.

The Division of Banks funds first-time homeownership counseling programs and regional foreclosure educational centers with administrative fees associated with the licensure of mortgage loan originators.

For more information about the ONE Mortgage Program, contact MHP Homeownership Director Gina Govoni at 617-330-9944 x293 or ggovoni@mhp.net.