In a move to expand its inner-city lending, PNC Mortgage is launching an alliance with Freddie Mac and Baltimore officials and setting up shop in the city to lend an anticipated $20 million in mortgages this year -- mostly to low- and moderate-income borrowers.
PNC will offer loans geared toward making homeownership in the city more affordable, said Larry Costello, spokesman for PNC, the mortgage banking unit of PNC Bank Corp.
"PNC is extremely committed to Baltimore and helping more residents in all communities become homeowners," Mr. Costello said. "Baltimore represents a huge opportunity."
As part of a public-private coalition to be unveiled tomorrow at PNC's first city branch, on South Charles Street, city officials and housing groups will collaborate to help borrowers qualify for loans.
Freddie Mac (the Federal Home Loan Mortgage Corp., which purchases loans on the secondary mortgage market) has agreed not only to buy loans originated by PNC but also to ease restrictions on qualifying standards.
"We'd really like to identify and prepare as many qualified borrowers for homeownership as possible," said Mike Coffey, vice president of expanding markets for Freddie Mac.
"The more [loans] we can produce through these partnerships, the more mortgages we can purchase," he said. "The only limitation is the number of potential candidates that we're dealing with in Baltimore."
Through its "Affordable Gold" program, Freddie Mac requires down payments of just 3 percent from borrowers, allowing an additional 2 percent to come from gifts, grants or unsecured loans. The program also allows borrowers to spend a greater percentage of their income on housing then with conventional loans. Financing to assist with down payments or closing costs could come from others in the coalition.
Such programs can mean the difference between renting and owning for hundreds of city residents, bank officials said. PNC hopes to reach people such as Allan Davis, 51, who bought a three-bedroom rowhouse in late November in the city neighborhood where he and his family had rented a similar house.
He had looked to buy only in the city, where he and his wife can walk to stores and where he can take public transportation to his job at Chesapeake Paperboard Co.
"It's much better for you to have something for yourself," Mr. Davis said. "When you're getting up in age and you have your kids, it's nice for you to have your own home."
The coalition is the latest in a series of housing initiatives in Baltimore. Fannie Mae -- the Federal National Mortgage Association -- has opened a Baltimore Partnership Office to boost home loans and direct housing investment in the city with a $750 million program of mortgage purchases and other spending over five years.
Also, the Neighborhood Assistance Corp. of America and NationsBank Corp. have said they will offer $500 million in loans over five years to low- and moderate-income people in the Baltimore area and six other cities.
City officials, members of the real estate industry and housing-advocacy groups have been working with PNC for about a year, advising the lender on loan products that would best serve city residents, said Guy F. Stafford, PNC's sales vice president in Baltimore.
An advisory committee included members such as city housing officials, the Baltimore Urban League, the Baltimore Housing Roundtable, Neighborhood Housing Services of Baltimore Inc., St. Pius V Housing Committee, Baldwin Development, Bacon & Co., Otis Warren Real Estate Services, Harbor Title Guarantee Co. and Spencer Vaughn & Associates.
"The idea is to create a self-sustaining coalition, bringing all of the organizations to the table and having them play a particular ++ role," said Freddie Mac's Mr. Coffey. "Once we create the process, it can sustain itself as long as necessary."
City and housing leaders will find potential borrowers and prepare them for homeownership by linking them with counselors or financial assistance programs.
City officials view the effort as a way to boost homeownership in the city. Now, about 44 percent of city residents own homes. Nationwide, nearly two-thirds of households are homeowners.
"We'd like to be at 50 percent in the city, and we've got a ways to go," said Thomas H. Jaudon, chief of the city's Home Ownership Institute.
Their first home
Obstacles to homeownership typically include saving enough cash for down payments and closing costs, Mr. Jaudon said.
Relationships formed through the coalition already have begun to help new homeowners.
Anthony Smith and Verna Hickinson, parents of a 4-year-old son, bought their first home at the end of December on West Caton Avenue, after moving from New York City to be closer to Mr. Smith's family.
The couple got a mortgage from PNC and had enough cash for closing costs, thanks to a $1,000 loan from Neighborhood Housing Services.
"We thought that in the long run we would be able to own something, rather than rent," said Ms. Hickinson, a 36-year-old home health aide and nursing assistant.
"We had considered [rent] money going down a big bottomless pit, money you'd never see again."
PNC expects to make use of products such as its Triple Play loans, which require only 3 percent down payments -- lower than conventional financing -- to allow more flexible qualifying ratios and offer prequalification at no cost to borrowers.