A popular settlement loan program that has helped put more than 1,200 buyers into Baltimore City homes over the past two years has run out of cash, but may be reactivated shortly with $500,000 or more in "gap financing," according to a city spokesman.
The city's $5.3 million Settlement Expense Loan Program (SELP) -- which lent homebuyers up to $5,000 for closing costs -- is depleted and had not been scheduled to receive any money in the new fiscal year, which began yesterday.
The program had been launched with general obligation bonds issued by Baltimore, but the city did not have room for more funding in the new fiscal year's capital budget, said Zack Germroth, a city housing department spokesman.
The program was not scheduled to receive any funds until the year that begins July 1, 1996, when it is tentatively set to receive $1.4 million in bond funds.
But that may change.
"We're real, real comfortable at this point to say that the city plans to come up with gap financing for at least half a million dollars to carry the program forward until the bonds kick in again" a year from now, Mr. Germroth said last week.
"While it may have looked not so sure maybe a week ago . . . it will be highly unlikely that we don't have that funding. We've come up with all sorts of possibilities, and one or two will probably pop through in a day or two."
Mr. Germroth said the program was more popular than anticipated.
Councilwoman Lois A. Garey said the lapse in the program "makes me sick." Ms. Garey, a 1st District Democrat who sponsored a Council resolution urging funding of the program, noted that Baltimore County started a similar program this year.
"I'm a little bit shocked that it's not in the budget," said Joe McGraw, government affairs director for the Greater Baltimore Board of Realtors. "It's mind-boggling to me."
"The average Realtor would have some serious concerns" about the program's lack of funding, he said.
Mayor Kurt L. Schmoke's re-election campaign has cited SELP as one of the administration's most successful programs. Some of his campaign literature cites SELP specifically. The last loans issued under the city's SELP were made in May, according to city housing officials.
Two years ago, Mr. Schmoke lauded the program, saying, "Everyone who has participated in SELP has had a remarkable experience."
The program was established in March 1993 to help middle-income families in Baltimore pay settlement expenses, lending families up to $5,000 for closing costs. The average annual income of families participating in the program was $37,902. The average sale price of the home purchased was $68,065.
The program was for homes selling for between $60,000 and $151,750, and participants were required to live in the homes. There were no income limits for eligibility, but participants had to be without enough money to pay for settlement expenses.
Loans had a maximum term of 10 years and an interest rate of 9 percent. Typically, the loans were secured as second mortgages.
The program was considered efficient by participants because applications for the SELP loan were processed at the same time as the first mortgage. Lenders were responsible for servicing both loans.
Lenders participating in the city program included First National Bank of Maryland, Loyola Federal Savings Bank, Maryland National Bank, Municipal Employees Credit Union of Baltimore Inc. and Signet Bank. NationsBank became involved after it acquired Maryland National.
Settlement expenses that were eligible to be covered by the loan included title examination and insurance fees, deed preparation fees, payments and escrows for property taxes and hazard insurance, appraisal fees, transfer and recordation taxes and fees, loan points and origination fees, mortgage insurance fees, and credit report and notary costs.
In Baltimore, these costs can easily reach 8 percent to 9 percent of the purchase price of a house, and city officials felt that the large amount of cash required at settlement was becoming a significant barrier to middle-income buyers.
To date, there have been only two foreclosures associated with SELP loans, according to Thomas H. Jaudon, chief of the city's Home Ownership Institute Development Division.
Last January, Baltimore County launched its own SELP program, but it is targeted to four areas and it is administered through four community organizations. The homes must be in Dundalk, Essex/Middle River, Randallstown/Woodlawn or Lansdowne/Baltimore Highlands.
The county program has income guidelines: A family of three, for example, can make no more than $35,550 a year. Also, buyers are required to make a minimum cash contribution equal to 5 percent of their annual income, and the homes cannot be valued at more than $125,000.
The county SELP loans range from $1,000 to $5,000, but if FHA mortgage insurance is used, they don't have to be repaid until the house is sold again. SELP participants in the county are required to attend homebuyer workshops and counseling sessions before the loan is made.
According to Larry Goetz, a county housing planner, about 50 SELP loans have been made, and 10 more "are in the pipeline." The county's goal is to make 65 loans in each of the four areas this year, for projected lending of $1,164,000, he said.
"People are ecstatic" about the program, Mr. Goetz said.
For more information on the county SELP program or homebuyer education and counseling, the following agencies can be
* Dundalk: Eastern Baltimore Area Chamber of Commerce, 631-9090.
* Essex/Middle River: Essex-Middle River Chamber of Commerce, c/o Community Building Group, 659-0832 (CBG) or 686-2233 (Chamber).
* Randallstown/Woodlawn: Liberty Randallstown Coalition, 521-5551..
* Lansdowne/Baltimore Highlands: Associated Catholic Charities, 737-8374.
The state also has an up-to-$5,000 SELP program administered by the Community Development Administration of the Maryland Department of Housing and Community Development. The state program has a household income limit of $31,350 regardless of family size.
Borrowers who are interested can call (410) 514-7501 or (800) 638-7781.