FOR IMMEDIATE RELEASE
PATRICK ADMINISTRATION UNVEILS NEW $250 MILLION MORTGAGE LOAN PROGRAM TO HELP HOMEOWNERS STRUGGLING WITH SUBPRIME LOANS
MassHousing, Fannie Mae and Patrick Administration team up to fight foreclosure crisis
BOSTON -- July 11, 2007 -- Governor Deval Patrick, Secretary of Housing and Economic Development Dan O'Connell, Undersecretary of Housing Tina Brooks and MassHousing Executive Director Tom Gleason today announced that Massachusetts is ready to rollout the most comprehensive, publicly assisted loan program in the nation to help address the ongoing home foreclosure crisis.
The program, which will not rely on taxpayer money, will provide foreclosure prevention counseling and fixed-interest rate refinancing loans to help hundreds of struggling Massachusetts homeowners get out from underneath increasingly unaffordable subprime loans.
"For many Massachusetts homeowners, the subprime crisis has turned the American dream of homeownership into a nightmare," said Patrick. "Too many of our residents were put into loans they couldn't afford. This innovative mortgage loan program will give some of our most vulnerable citizens a fighting chance to keep their homes."
The Governor announced that MassHousing, a quasi-public agency that serves as the state's affordable housing bank, will partner with Fannie Mae to provide $250 million for the new loan program, which will also include extensive counseling for homeowners.
The program is geared toward homeowners with modest incomes who were put into loans that were unaffordable and unsustainable, and where abusive practices may have been used by the lender. Household incomes may not exceed 135% of the area median in the Boston area and 125% of the area median income for the rest of the state.
"This is the next step in the Administration's ongoing and comprehensive approach to addressing the foreclosure issue," said Secretary O'Connell. "This program will allow us to offer vital relief to families and neighborhoods all across the Commonwealth at a time when it is most needed."
Homeowners who are struggling with a loan that has suddenly become unaffordable will be encouraged to call a toll-free foreclosure prevention hotline, 1-888-995-HOPE. They will be connected with staff from NeighborWorks, a national nonprofit partially funded by Congress that is dedicated to sustainable homeownership.
After providing the NeighborWorks staff with initial information, homeowners will be directed to one of a dozen or so Massachusetts non-profits, where they will receive more in-depth counseling about how they can work with their lender to remain in their home despite falling behind on their mortgage payments.
If the borrower is qualified, they may be able to obtain up to a 40-year, fixed-interest rate loan for up to 105% of the value of the home, as determined by an appraisal. Interest rates are expected to be approximately 7 7/8 % at the outset. Borrowers can be behind on their mortgage payments by up to 60 days and still be eligible, as long as the delinquency was caused by their interest rate resetting to a higher level, and not by the homeowner's actions, such as assuming more debt. The program is open to owners of condominiums, single family homes, as well as two-, three- or four-family homes.
Acknowledging that homeowners saddled with unaffordable loans are likely to have damaged credit, borrowers with credit scores as low as 560 will be eligible, although credit scores must be slightly higher for the owners of multifamily homes.
The program will be financed with approximately $190 million from Fannie Mae and $60 million from MassHousing. MassHousing will sell bonds to raise the capital for its portion of the program. "There will be some risks with a program of this nature, but they are risks we are willing to take in these difficult times in order to help the people we were created to serve," said Gleason.
"Over the last several months, MassHousing and Fannie Mae have been negotiating the minute details of this program," said O'Connell. "Each agency showed strong leadership during a difficult time in the industry and I commend them for stepping into the fray on behalf of our neediest citizens and staying true to their affordable housing missions."
"Governor Patrick has once again taken action to coordinate and harness the resources of the state's housing agencies to make Massachusetts a national leader in developing this innovative, flexible and accessible mortgage product," said Brooks.