A state mortgage program aimed primarily at first-time buyers is lowering its interest rate and setting aside $100 million to lure people relocating as part of the military's base realignment and closure initiative.

Officials want to help those buyers and aid the region's still-struggling housing market at the same time.

Thousands of federal workers and contractors are moving to take jobs at Aberdeen Proving Ground, Fort Meade or one of several other installations in Maryland as part of the base changes, known as BRAC. Officials say the mortgage program would give them a reason to buy rather than rent — or commute, as those now based in Northern Virginia could do.

"We're hoping this will accelerate their decision to move to Maryland, … providing a little bit of boost to a lagging real estate market," said Lt. Gov. Anthony G. Brown, who plans to officially announce the changes Thursday at a home for sale in Laurel.

The program's mortgage rate is dropping to 4.5 percent Thursday, from 4.75 percent. That's available to eligible buyers purchasing a home anywhere in the state, but $100 million of the program's $257 million will be set aside for buyers purchasing in Baltimore City and the counties of Anne Arundel, Baltimore, Carroll, Cecil, Frederick, Harford, Howard, Montgomery and Prince George's.

Those are the state's designated "BRAC counties," meaning they are within commuting distance of installations that are growing through the national base realignment and closure effort.

The state estimates that the money could allow for about 1,600 loans, with roughly 625 of those set aside for its BRAC program. Borrowers must either be first-time buyers or be purchasing a home in lower-income areas, and they must also meet income and home-price requirements.

Raymond A. Skinner, the state's secretary of housing and community development, said he was hopeful the lower interest rate would "reinvigorate" the Maryland Mortgage Program. Participation dropped from nearly 1,700 loans in fiscal year 2009 to about 700 in the fiscal year that ended June 30, which he attributed to mortgage rates that were a quarter- to a half-point above average for the market.

The state, which sells bonds to finance the mortgages and repays them with money from borrowers, usually offers below-market rates. But it couldn't afford to do so last fiscal year, as nationwide averages were pushed downward in part by federal purchases of mortgage-backed securities.

Skinner said the state is now able to lower its rate because of a one-time federal initiative that allowed the mortgage program to sell bonds to the Treasury Department by way of mortgage financiers Fannie Mae and Freddie Mac.

"Mortgage rates in the marketplace are at an all-time low," Skinner said. "In order for us to be competitive and get people to use our program, we have to have a similar rate."

The average rate for mortgages nationwide last week was 4.68 percent, lower than the state's rate at the time but higher than its new rate.

However, Wednesday's rate for a loan insured by the Federal Housing Administration, a popular choice for first-time buyers, was an even lower 4.375 percent, noted Jerry Rader, president of Corridor Mortgage Group in Marriottsville. He doubts Maryland's program will get an influx of new buyers.

"It won't hurt them to lower their rates, but I don't see it significantly increasing the number of loans they do, just by pulling themselves even with the market," said Rader, whose firm has seen interest in the state's loans drop.

What would help, he said, is if market averages rise significantly while the state's loans are locked in at 4.5 percent.

Steve Meszaros, president of the Maryland Association of Realtors, is more optimistic about the effect of the changes. He thinks the housing market will benefit, not only from the lower rates but because the state program helps out borrowers with incentives such as down payment assistance.

jamie.smith.hopkins@baltsun.com

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Maryland's mortgages

State officials are hoping to reinvigorate interest in the state-run Maryland Mortgage Program, which has seen a declining number of borrowers in recent years.

Fiscal year 2008

2,875 loans worth $585 million

Fiscal year 2009

1,664 loans worth $310 million

Fiscal year 2010

706 loans worth $108 million

Source: Maryland Department of Housing and Community Development

Applying for the program

Go to http://www.mmprogram.com

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