Wells Fargo is offering eligible homebuyers in Baltimore a $15,000 down-payment assistance loan that is fully forgivable if the purchaser lives in the home for five years — part of a legal settlement over alleged discriminatory lending practices by the bank.
“2013 promises to be the best year ever to buy a home in Baltimore city,” said Mayor Stephanie Rawlings-Blake at a new conference Monday morning in City Hall to announce the initiative.
The new $4.5 million program, a large enough pot of money to help individuals purchase 300 homes, adds to an already robust set of incentives to buy a home in Baltimore. If the Wells Fargo funds are combined with the other city homebuying inducements — including the Vacants to Value booster program and the Live Near Your Work incentive — a potential homebuyer could have tens of thousands of dollars to put toward buying a home.
The first $1 million — enough for 67 homes — became available Jan. 2. The remaining funds will be distributed to qualified buyers at a two-day event that will take place in early April.
All of the funds will be distributed on a first-come, first-served basis, according to Neighborhood Housing Services of Baltimore Inc., which is collaborating with Wells Fargo to administer the program.
Called CityLIFT, the program was established as part of a $175 million settlement last year between the U.S. Department of Justice and Wells Fargo. CityLIFT funds also are being made available in several other cities that were hard hit by the foreclosure crisis, including Washington, Chicago, Philadelphia and Oakland, Calif.
The government accused the bank of discriminating against African-American and Latino borrowers between 2004 and 2009. Black and Latino borrowers were more likely than whites to receive a subprime mortgage — a higher-cost loan intended for borrowers with poor credit — from the bank during that period even if they should have qualified for better loan terms, the Justice Department said.
Baltimore, a leader in the discrimination case against Wells Fargo, was allocated $7.5 million of the settlement funds. The $3 million that is not going toward down-payment assistance through CityLIFT is being divided between the payment of litigation expenses and a to-be-determined foreclosure-related program, according to City Solicitor George Nilson.
The city requested proposals for the use of the remaining settlement funds from a handful of legal services and housing organizations, Nilson said. He expects a decision about how that money is going to be used by early February, he said.
“We’re looking for uses where modest amounts of money could be the most help,” he said of the surplus settlement dollars.
In Baltimore, borrowers are eligible for a CityLIFT loan if their household income is 120 percent or less of the area median income. That is about $72,000 for an individual and $103,000 for a family of four. Household income is calculated using all income earned by people 18 and older living in the home after purchase.
Purchasers must use a loan from a lender that has been invited to participate in the program. Wells Fargo, First Mariner Bank, First Home Mortgage and Prospect Mortgage are among the participating lenders.
An applicant for the loan is not required to be a first-time homebuyer, but if the applicant currently owns a home, it must be sold before the closing on the new house. In fact, to qualify, the applicant cannot own any additional properties, including investment properties, according to Neighborhood Housing Services.
The new home must be used as an owner-occupied primary residence and must be within Baltimore’s city limits. In addition to single-family detached homes, condos, townhouses and buildings with one to three rental units (in addition to the owner’s primary residence) are eligible for the Wells Fargo loan.
“It is required you participate in an eight-hour housing counseling program” administered by a counseling agency approved by the U.S. Department of Housing and Urban Development, said Dan Ellis, executive director of Neighborhood Housing Services.
In Baltimore, those agencies include Ellis’ group, St. Ambrose Housing Aid Center, the Greater Baltimore Urban League and several neighborhood-focused community development organizations.
The CityLIFT loans charge no interest. Twenty percent of the loan is forgiven each year the purchaser remains in the home, until it is fully forgiven in the fifth year. If the home is sold or not owner-occupied before the end of the five-year period, the prorated balance is due immediately.
In other cities where the program has been launched, funds were allocated only through a conference-style meeting, said Ken Strong, Baltimore’s deputy commission for green, healthy and sustainable homes. But organizing a large convention can take months, so city officials negotiated with Wells Fargo to have $1 million made available at the beginning of the year, he said.
“We’d be missing these critical three months” of home sales, Strong said, if the city waited until a convention could be organized.
Until April, only applicants who have completed a homebuyer counseling class, received a pre-approved mortgage from a CityLIFT lender and signed a sales contract are eligible to participate in the program, Ellis said.
These requirements will not be necessary to register for the two-day event in April, where potential homebuyers will be able to meet with mortgage consultants, sign up for homebuyer education programs and take part in a tour of homes for sale. Registration for the April event, scheduled for the 5th and 6th, will open in March and be coordinated by Neighborhood Housing Services.
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