ATLANTA — For many first-time homebuyers of moderate income their “dream home” is more often a pipe dream.

That was until CDC Federal Credit Union and the Georgia Department of Community Affairs joined to make first-time homebuyers’ dreams come true by offering the Georgia Dream Homeownership Program, which has targeted borrowers with moderate incomes and modest assets throughout the state. Benefits include the availability of a 100%, 30-year fixed-rate purchase money mortgage at a below market rate, no prepayment penalty and an assumable loan feature that allows the member to pass along the terms to a new buyer at the time of sale.

The demographic targeted by the program, low- to moderate-income, is designated as 80% of the HUD median income. The federal and state governments subsidize the program, which also includes a 0% second mortgage. The mortgage options included in the Dream program are also available to Protectors, Educators, Nurses (PEN), buyers interested in energy-efficient homes, and family members or individuals who are disabled (CHOICE). These first-time buyers may also qualify for a low-interest rate and a zero-interest mortgage.

“It is difficult but every credit union that has an active mortgage department, or in our case a CUSO, should be doing this,” said John Murphy, vice president of mortgage services at CDC. “But we’re the only one. I’m pushing correspondence, trying to offer it to the other credit unions. We’ll do the work and you take the credit. That type of thing. You have to do something. I mean two-thirds of the credit unions aren’t doing anything.”

Since CDC FCU began its partnership with DCA in 2005, over $4 million in mortgages have been written for young couples, single mothers, recent graduates, perennial renters and working immigrant families. Murphy said that $4 million is a small volume, but expects to double that figure in 2007 since the program is being melded with a Federal Home Loan Bank program. FHLB has given the credit union $400,000 of grant money so it can leverage homebuyers’ resources at a five-to-one clip. If a first-time homebuyer comes in with only $1,000, they can walk away with $5,000. The average FICO score on a typical CDC mortgage loan is about 740. With the Dream program it’s been 680 and average income with the program has been only 73% of the HUD median income. Murphy described it as “a shot in the arm to the underserved market.” “Credit unions should be running this up the flagpole saying, ‘This is the target market. This is a program that focuses on what is attracting the most attention on Capitol Hill.’ They’re saying to show them that credit unions serve the underserved because all of the stats say that bankers are doing a better job. It’s driving me nuts because this is something that credit unions need to do. We need to dig our feet into the sand to be able to say that we’re not only targeting, but successfully helping this underserved market,” Murphy added.

Murphy said that it’s very difficult to take a risk and try a new program when you have grown up in an industry like credit unions where it “tends to be more risk-adverse.” A lot of people think anytime the government is involved with a program it’s a nightmare and the Dream program has yet to induce any cold sweats in Murphy.

“It’s frustrating when the industry has a 2% market share with the same programs that they’ve had for 10 years. Do something different. Maybe even something new,” Murphy reasoned. “We are in the process of building a small correspondent network of small and medium-sized credit unions that are really in the gun sights. They’re either going to have to consolidate or go out of business. We’ll offer them fee income and we’ll do all of the work for them.”

The big story for the Dream program in 2007 is the expansion to additional smaller markets, where credit unions simply need the support of others, like CDC, that know their ways around mortgages, Murphy said. –ccauser@cutimes.com