CUs nationwide commit nearly $1 billion for homebuyers

WASHINGTON (11/1/05)--With the goal of helping lower-income homebuyers afford their first home, the Credit Union National Association (CUNA) yesterday unveiled a billion-dollar mortgage lending initiative for the nation's credit unions.

The initiative--called the Home Loan Payment Relief (HLPR, pronounced "helper") program--makes below-market-rate mortgage loans available to borrowers with household incomes at or below the median in their markets.

Participating credit unions are voluntarily bearing the cost so that the loans can be offered at a more affordable rate. It will benefit qualifying borrowers in several ways:

  • Through lower monthly payments;
  • By qualifying for a larger mortgage; or
  • By lowering the income level needed for a given mortgage.

So far, 61 credit unions that together serve more than 10 million members have committed nearly $1 billion in mortgages to the HLPR program, a number that will rise over time as more credit unions learn of the program and participate, said CUNA President/CEO Dan Mica during yesterday's national press conference.

Click for slide showDuring a press conference Monday in Washington, D.C., CUNA President/CEO Dan Mica projects the new Home Loan Payment Relief (HLPR) program will reach $2 billion in commitments in two years. Seated (from left) are Bert Hash, president/CEO of Municipal Employees CU or Baltimore, Md.; Rudy Hanley, president/CEO of Orange County Teachers FCU, Santa Ana, Calif.; and CUNA Board Chairman Juri Valdov, president/CEO of Northwest FCU, Herndon, Va. (Photo provided by CUNA)

Mica said he expects total commitments will reach $2 billion later this year and $10 billion over five years as the program gains more attention and is fine-tuned based on experience.

"As credit unions, we take our commitment to serve people of modest means to heart. The HLPR mortgage is the newest manifestation of our commitment," said Rudy Hanley, CEO of Orange County Teachers Federal Credit Union, Santa Ana, Calif., who spearheaded the development group under the auspices of CUNA.

He said the HLPR mortgage was vetted with the appropriate regulatory and secondary-market agencies so that participating credit unions can begin offering it immediately. "We believe it has tremendous potential for growth," he added.

"Owning your own home is part of the American dream, and for too many low- and moderate-income families, it's becoming increasingly hard to reach," added Daniel A. Mica, CUNA President and CEO. "Real estate prices have surged all over the country, and mortgage rates are headed upward as well. The gap between the incomes of average families and the affordability of a first home is widening every day. Credit unions believe the HLPR mortgage is an innovative solution that will narrow the gap."

Median home prices in the nation's capital region, for example, have risen over 26% in the past year alone, according to the National Association of Realtors. The median home price in the area is $482,000 but the median income in the District of Columbia, according to the U.S. Census, is only $54,193.

In nearby Baltimore, home prices are rapidly climbing as well. The NAR figures show a 17% increase from the same time last year. The median income is $38,706. The median price of a home has risen over $100,000--from $154,000 in 2002 to $264,000--in 2005.

Municipal Employees CU of Baltimore (MECU) will be participating in the HLPR program and reaching out to lower-income families there.

Bert J. Hash Jr., president/CEO of Municipal Employees CU of Baltimore said his credit union's participation in the HLPR Program provides another tool to help members of modest means achieve their financial dream of owning their own homes.

"This program not only will help our members, but will strengthen our communities by increasing the opportunities for homeownership," he said.

Among the basics announced at yesterday's press event:

  • The HLPR loan is a three-year adjustable-rate mortgage that will be offered to qualifying borrowers at one percent below the national average for these loans. Based on current market rates, the HLPR mortgage will be offered at about 4.5%;

  • Credit unions are voluntarily bearing the cost so that the loans can be offered at this more affordable rate as part of their commitment to serving people of modest means;

  • The required down payment will be no more than 3%, and gifts or grants are permitted. After three years, the rate will adjust annually to market rates, with rate adjustments capped at 1% a year and 5% over the life of the loan;

  • The loan is available to borrowers whose household income is either at or below the area median income; additional eligibility for those in "high cost"-designated areas; and

  • Participating credit unions are encouraged to reduce closing costs, private mortgage insurance costs and other related fees or costs.

Use the resource link below for details and a complete list of participating credit unions.

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