NeighborWorks® America

Information About Innovation:

Title:

Affordable Plus Mortgage Program

Contest Category:

Innovative partnerships to sustain homeownership - 2008

Summary:

The Affordable Housing Corporation of Lake County (AHC) developed the Affordable Plus Mortgage (APM) to empower low-income households to attain and maintain successful homeownership in expensive Lake County Illinois. Through the creation of a public-private consortium, AHC implemented this unique and effective program that significantly increases purchasing power, provides pre-purchase education and counseling, and offers the built-in safety net of a foreclosure prevention/intervention system.

Description:

The APM has three integrated components: mortgage financing, pre-purchase education and counseling, and foreclosure prevention and intervention. It shares the responsibility, risk and benefits of sustainable homeownership across an integrated network of public and private sector partners, and responsible homebuyers.

Recognizing that traditional government funding sources were no longer adequate to address the affordability gap in high-cost Lake County, AHC created a public-private consortium to provide first and subordinate mortgage financing along with discounts on other services. All buyers receive $50,000 in subordinate financing toward the purchase of their home. Of this, $35,000 is provided in the form of a 30-year fixed rate loan as is originated at 4% interest. While these dollars are funded by a pool of private lenders, AHC acts as the loan originator and servicer for this loan. An additional $15,000 is provided through the local County and/or State, and is an interest-free deferred loan. A portion of these funds ($3,000) is a grant that is forgiven if the buyer stays in the home for five years. In all cases, this combined $50,000 eliminates mortgage insurance and significantly reduces interest charges. On a $200,000 purchase price, the monthly payment is lowered by nearly $300, thus providing for an affordability boost of around $40,000. Downpayment and out-of-pocket costs for the buyers are less than $2,500. The first mortgage is originated by an approved AHC lender; these lenders agree to adhere to AHC’s underwriting standards, to reduce fees and to offer the lowest interest rate possible. AHC also has partnerships with title companies, home inspectors and other industry professionals to provide additional discounts to our clients.

All buyers are required to attend AHC’s homebuyer education class and pre-purchase counseling. The education class provides the ABC’s on budgeting and credit, mortgage financing, shopping for a home and the settlement process, and life as a homeowner. Counseling provides one-on-one assistance and gives clients an affordability and credit analysis, a personalized homeownership action plan, and ongoing assistance resolving any barriers that will prevent buyers from qualifying for a mortgage. The counselor assists the buyer in navigating through every aspect of the home buying process, providing advocacy and guidance where needed.

The APM provides a built-in foreclosure prevention and intervention system. AHC’s underwriting standards and pre-purchase education and counseling help insure the buyer is as protected from foreclosure as possible. In addition, as AHC is the second mortgage originator and servicer (for the $35,000 as described above), we are able to maintain a relationship with the household. At closing, borrowers sign a document that obligates them to attend counseling upon a 30-day delinquency of this mortgage. This allows AHC’s experienced counseling staff to intervene early, connect the homeowners with any number of community services as needed, and help the borrower get back on track. After closing, AHC also keeps in touch with APM buyers quarterly mail with helpful educational items and resources.

These three components form a program that allows buyers to overcome all of the major barriers to successful homeownership: lack of downpayment, inability to afford monthly payments, lack of information and unrealistic expectations, poor credit or debt, consumer advocacy, and help in the event of financial crisis.

Projected Annual Operating Cost:

The APM has two budgets: one for program operations, and another for mortgage financing that directly supports the buyers.

Our Homeownership Programs budget for the current fiscal year is $213,675, of which 76% of the costs are staffing-related. This cost center includes education, counseling and mortgage program administration for all AHC clients, including those that do not ultimately purchase using the APM. While it is impossible to offer an exact figure, we estimate that about 50% of costs are APM-related.

AHC also generates commitments from our public-private consortium every year to provide financing directly for the buyers. $1,750,000 is required from private lenders for the $35,000 mortgage, and another $750,000 from government sources for the $15,000 in loans and grants. We also secure commitments from first mortgage lenders totaling approximately $7,500,000.

Specific Outcomes or Results in Calender Year 2008:

AHC anticipates that 50 households will purchase a home with the APM in 2008, all of which will receive comprehensive pre- and post- purchase services. We estimate than an additional 150 households will utilize AHC’s education and counseling programs; some of these will eventually purchase using the APM, while others will, for a variety of reasons, follow a different route.

Web Site (optional):

http://www.ahclc.org

Information About Organization:

Name:

Affordable Housing Corporation of Lake County

Address 1:

3701 W. Grand Avenue

City, State, Zip:

Gurnee, IL 60031

501c3 Non-Profit:

yes

Contact Name:

Lisa Tapper

Contact E-Mail:

ltapper@ahclc.org

Contact Phone:

847/263-7478

Keywords:

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