- The Washington Times - Friday, February 1, 2002

A lot of "unique" financing programs have crossed my desk, and most of them were simply warmed-over,

repackaged programs that have been on the market for quite a while. Not since the introduction of 100 percent financing have I gotten as excited about a mortgage product as about one I saw this week from the Federal Home Mortgage Corp. (Freddie Mac).

The "Home Sweet Home Virginia" is a new type of program that promises to become a nationwide product for Freddie Mac as partners line up with the proper support and funding.

Basically, it's a lease-to-purchase program that helps low-income to moderate-income buyers or purchasers with credit problems get into a house by first renting it and then converting the lease into a purchase after a three-year period.

Now, this isn't a new way of financing a house owners have been offering lease-to-purchase offerings for years. But this is the first time a national money source Freddie Mac has lined up with other national partners to create such a program buyers can use for either a new home or existing house purchase.

Freddie Mac launched a similar $90-million program in California in September. Freddie Mac spokesman Brad German says the program works well with housing agencies that have bond-issuing authority. The original funds for this type of programs come from the issuance of bonds.

The housing agency then works to get the at-risk buyer into the target property. Once the buyer fulfills the three-year lease, the deed and mortgage is then transferred to the purchaser and Freddie Mac buys the loan on the secondary market, thus replenishing the funds for future purchasers.

The new program is "designed to help families with blemished credit, a lack of traditional credit, or a lack of funds for a down payment to move into a new or existing home," according to Freddie Mac. All potential borrowers must participate in a borrower-counseling program provided by HOPE International Inc.

The program is available only in communities where local housing agencies can issue bonds to raise funds. The Virginia program will start in high-priced Fairfax County, where new single-family houses sell for more than $525,000 and new town houses tip the pricing chart at $300,000-plus. This is to target buyers who are caught in escalating-price areas where generally only higher-income purchasers can afford to buy.

Interestingly, the initiative is coming from all over the state but is targeted at a few jurisdictions. The Harrisonburg Redevelopment and Housing Authority, based in western Virginia, is the group issuing the bonds, but it's helping buyers across the Old Dominion. HOPE International, a nonprofit housing agency in suburban Washington, handles the mortgage applications while First Financial Equity and other lenders will provide the mortgages.

Neither the California nor Virginia program requires a down payment; however, the purchaser must pay a commitment fee equal to 1 percent of the home's purchase price. Once the purchaser assumes the mortgage, other costs associated with the purchase and loan assumption must also come from the buyer.

Freddie Mac has a good program here, and I hope housing agencies across the country will get on board. Housing agencies interested in forming a lease-purchase program should call Freddie Mac at 703/903-2437.

(Virginia buyers can call 703/267-5673 for application information. California residents can get more information on the East Bay-Delta Lease-Purchase Homeownership Program by going to www.eastbaydeltahousing.com, or by calling 510/796-9257.)

M. Anthony Carr has written about real estate for more than 12 years. Reach him by e-mail ([email protected]).


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