WASHINGTON-Credit unions are looking to give a boost to low-income home ownership through the new CUNA Home Loan Payment Relief (HLPR-"helper") Mortgage program. Representatives from CUNA and a handful of credit unions were on hand to announce nearly $1 billion in commitments to the program during a press event at the National Press Club last week. Actually, in about two month's time, the program has garnered more than $770 million in commitments from 61 credit unions, according to CUNA. The trade association expects commitments to hit $2 billion later this year. The two largest pledges include $125 million from $25 billion Navy Federal Credit Union and $100 million from $5.6 billion BECU. "We think this is a phenomenal product at a time when Americans need it." CUNA President and CEO Dan Mica said. "We think it will reach as many as 10 million and we think that number will grow dramatically." The program goal is to reach $10 billion within five years. He pointed out that this will be quite a feat for an industry of about $660 billion in assets. Orange County Teachers Federal Credit Union President and CEO Rudy Hanley explained that the program offers a three-year ARM capped at 1% annual increases beyond the first three years. The initial interest rate on the mortgages is 1% below the market price of a like-product. The loan cannot increase more than 5% above the initial rate. "Except for some real extreme circumstances, the rate would never be higher than what the fixed rate would be," Hanley said. On Halloween, the day of the press conference, the rate would have been 4-5/8% and never rise above 9-5/8%. OCTFCU, with $5.6 billion in assets, has pledged $60 million toward the program and is offering processing assistance to credit unions that do not offer mortgages in the Santa Ana, Calif.-area that are interested in the program. HLPR has been reviewed by the appropriate regulators and secondary market agencies for compliance. It is really fortuitous that the HLPR program-two years in the making-was coming to fruition the same week as the House Ways and Means Committee will be holding a hearing on the credit union tax exemption. "If we were taxed, we could not be able to provide the services that we provide to the members," Municipal Employees Credit Union of Baltimore President and CEO Bert J. Hash, Jr. stated. MECU ($758 million) has committed $7.7 million to HLPR mortgages. Hanley agreed, "This kind of program, from where I sit, would not be possible if we were taxed.We're clearly living the credit union philosophy or mission of serving people of modest means." Hanley added that these types of programs do impact credit unions' bottom lines and recommends credit unions try out the program with between .5-.75% of their assets. Hanley said OCTFCU plans to hold on to the mortgages until they are more comparable to market pricing and then possibly sell them on the secondary market. CUNA is also looking into ways for interested credit unions with low demand to participate in loans with credit unions overwhelmed by demand. Mica explained that the program encourages credit unions not to make up the costs with hidden fees as well. The low 3% maximum downpayment requirement is also a low-income-friendly feature of the HLPR program and there are no restrictions on where those funds would come from. For the program, low-income is defined as at or below the area median income with additional eligibility for those in `high-cost' designated areas. The maximum allowable debt-to-income ratio is 42%. In addition, participating credit unions are encouraged to reduce closing costs, private mortgages insurance costs, and/or other related fees. Through the HLPR program, homeownership will be more affordable and allow borrowers to qualify for larger mortgages than they otherwise would (See chart). "While we don't have any control over the rising cost of housing, we can find new and innovative ways to help more individuals qualify for a home," Security Service Federal Credit Union President and CEO David Reynolds, who's $3.9 billion credit union has committed $25 million, stated. "Part of our job as a credit union is to make products and services available to individuals at every income level. Participating in the HLPR program is just another great way we can help individuals, who might otherwise be locked out of the real estate market, own their own home." Though the program targets first-time buyers, others are eligible subject to income limitation. -

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