Md. mortgage program thriving

The Baltimore Sun

Here's a mortgage program that's not in trouble.

Nearly 4,000 homebuyers turned to the state for their home loans last fiscal year, a record for Maryland's 28-year-old loan program at a time of increasing disarray in the mortgage industry.

The state made about $767 million in low-interest loans to buyers, almost all of them purchasing their first home, in the 12 months that ended June 30. That's three-and-a-half times the amount it lent the previous fiscal year - and far above the $269 million record set in the 1995 fiscal year.

Stephen D. Silver, the state Department of Housing and Community Development's chief financial officer, credits timing for the big jump in demand.

The state expanded its "More House 4 Less" offerings a few years ago from a single product to several - 30-, 35- and 40-year mortgages including interest-only loans - but word filtered out slowly.

Meanwhile, first-time homebuyers found their private mortgage options shrinking this year as foreclosures rose and lenders, stung, backed away from borrowers with shaky credit or little money to put down.

"I'm sure we are picking up some people that were being steered toward subprime," said Silver, referring to loans aimed at borrowers with credit problems.

Thus far, the state has fewer delinquent loans than do lenders with mortgages in Maryland insured by the Federal Housing Administration, the state housing and community development agency said.

The state's loans have below-average interest rates - about 6 percent last fiscal year while the market rate was closer to 6.5 percent. Borrowers are also eligible for assistance with down payment and closing costs.

The products are all fixed rate. "We wanted to make sure our borrowers were getting something with no surprises," Silver said.

The state made 3,882 loans last fiscal year, triple the number a year earlier. Though that's a fraction of all new loans, it's a hefty increase at a time of slumping home sales.

Home values, which remain high, are part of the reason homebuyers would flock to a program that offers down payment and closing-cost help. Many first-time buyers are hard pressed to put even 5 percent down. With average sales prices in Maryland at $380,000, a 5 percent down payment would equal $19,000.

Ryan W. James, senior mortgage banker with First Horizon Home Loans in Timonium, said the More House 4 Less loans - sometimes called "CDA" because they're handled by the state's Community Development Administration - have grown in popularity as the state made it easier and quicker to get one.

"CDA had a bad reputation for a long time," said James, who said he now does 10 to 15 of the loans a month and said the processing time is much faster than it once was. "What took weeks with CDA now takes days. ... That helped a lot."

The average More House 4 Less borrower got a loan equaling 99 percent of the value of the home. Nine out of 10 participants got down payment assistance, closing-cost help or both from the state.

Borrowers had to be buying either for the first time or in targeted areas, such as Baltimore City. The average borrower had a household income of about $55,000 and purchased a home priced at almost $200,000.

The state housing agency, which finances its loans with mortgage revenue bonds, said it hasn't run into trouble getting money as investors abandon other parts of the mortgage market. Silver figures that's because the bonds are rated AA and are mostly tax-exempt, and because all the mortgages the state approves have either private or government insurance.

More House 4 Less

Participation in the state's More House 4 Less mortgage program jumped in 2007:

Fiscal year 2003:

946 loans worth $93 million

Fiscal year 2004:

1,270 loans worth $137 million

Fiscal year 2005:

1,251 loans worth $147 million

Fiscal year 2006:

1,277 loans worth $209 million

Fiscal year 2007:

3,882 loans worth $767 million

[ Source: Maryland Department of Housing and Community Development]

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