sailsmen
10-27-2011, 06:29 AM
New Orleans ready to start 'soft-second mortgages' program
Published: Wednesday, October 26, 2011, 9:00 PM Updated: Wednesday, October 26, 2011, 9:17 PM
By David Hammer, The Times-Picayune The Times-Picayune
After numerous delays, the city is expected Thursday to launch a long-promised $52 million subsidy to help first-time homebuyers acquire affordable homes.
Times-Picayune archiveThe city is expected today to launch a long-promised $52 million subsidy to help first-time homebuyers acquire affordable homes.
The program will make so-called "soft-second mortgages" of as much as $65,000 available to families of modest means who qualify for first mortgages and have not owned a home for at least three years. The lower a family's income, the larger the forgivable loan they can get to help pay for a restored house. The most that can be forgiven is $65,000.
A second component of the subsidy program, which will pay as much as $65,000 per home to developers to defray their construction costs, will be ready soon, mayoral spokesman Ryan Berni said. Developers who take the grants will be required to sell the homes at reasonable prices to people of limited means.
Soft-second mortgages are used to bridge the gap between what families of modest means can afford and the rising costs of rehabilitating blighted or storm-damaged properties. Initially, they get a no-interest loan, but if they stay in the house for 10 years and stay current on their first-mortgage payments, the second-mortgage loan becomes a gift.
The new soft-second mortgage program was conceived in 2007, and in 2008 the state agreed to move $75 million out of a failed rental property rehabilitation program and make it available to parishes for forgivable loans for homebuyers of modest means.
New Orleans went ahead with a smaller $27 million soft-second program in 2008-09, and it was credited with helping 400 families get instant equity in homes rebuilt after Katrina. But despite that success and promises of more from then-Mayor Ray Nagin, the successor program never got off the ground. It stalled repeatedly because of problems with the administration of federal grant dollars and Nagin's decision to shift some of the money elsewhere.
After taking over in May 2010, Mayor Mitch Landrieu decided the program should be run from City Hall, rather than by the Finance Authority of New Orleans, causing yet another delay. Leading up to the sixth anniversary of Hurricane Katrina, the Jeremiah Group, the organization that first called for the rental aid money to be redirected to soft seconds, pushed again for action. Landrieu's new director of housing policy and community development, Brian Lawlor, promised to launch the program in its entirety by mid-October.
Half the money will be targeted to homebuyers, and that portion of the program is ready, Berni said. Meanwhile, Lawlor and his team are preparing to put out a request for proposals for the construction-aid portion of the program. The city plans to give priority to developers who are willing to restore several properties and focus their work on blighted houses or the thousands of Road Home buyout lots in the city now owned by the Louisiana Land Trust.
Lawlor said the program is not limited to blighted or Land Trust properties, but he hopes the cheaper costs of those lots will make them attractive to developers.
Berni said the subsidy fits into Landrieu's place-based development strategy because the subsidies will be targeted to homes and development projects in 11 specific zones. The city is expected to release the specifics of those zones at a news conference today.
Lawlor's team has been meeting with real-estate agents, homebuyer counselors and the lenders who will administer the loans to make sure that everything is ready to "go live" today.
Published: Wednesday, October 26, 2011, 9:00 PM Updated: Wednesday, October 26, 2011, 9:17 PM
By David Hammer, The Times-Picayune The Times-Picayune
After numerous delays, the city is expected Thursday to launch a long-promised $52 million subsidy to help first-time homebuyers acquire affordable homes.
Times-Picayune archiveThe city is expected today to launch a long-promised $52 million subsidy to help first-time homebuyers acquire affordable homes.
The program will make so-called "soft-second mortgages" of as much as $65,000 available to families of modest means who qualify for first mortgages and have not owned a home for at least three years. The lower a family's income, the larger the forgivable loan they can get to help pay for a restored house. The most that can be forgiven is $65,000.
A second component of the subsidy program, which will pay as much as $65,000 per home to developers to defray their construction costs, will be ready soon, mayoral spokesman Ryan Berni said. Developers who take the grants will be required to sell the homes at reasonable prices to people of limited means.
Soft-second mortgages are used to bridge the gap between what families of modest means can afford and the rising costs of rehabilitating blighted or storm-damaged properties. Initially, they get a no-interest loan, but if they stay in the house for 10 years and stay current on their first-mortgage payments, the second-mortgage loan becomes a gift.
The new soft-second mortgage program was conceived in 2007, and in 2008 the state agreed to move $75 million out of a failed rental property rehabilitation program and make it available to parishes for forgivable loans for homebuyers of modest means.
New Orleans went ahead with a smaller $27 million soft-second program in 2008-09, and it was credited with helping 400 families get instant equity in homes rebuilt after Katrina. But despite that success and promises of more from then-Mayor Ray Nagin, the successor program never got off the ground. It stalled repeatedly because of problems with the administration of federal grant dollars and Nagin's decision to shift some of the money elsewhere.
After taking over in May 2010, Mayor Mitch Landrieu decided the program should be run from City Hall, rather than by the Finance Authority of New Orleans, causing yet another delay. Leading up to the sixth anniversary of Hurricane Katrina, the Jeremiah Group, the organization that first called for the rental aid money to be redirected to soft seconds, pushed again for action. Landrieu's new director of housing policy and community development, Brian Lawlor, promised to launch the program in its entirety by mid-October.
Half the money will be targeted to homebuyers, and that portion of the program is ready, Berni said. Meanwhile, Lawlor and his team are preparing to put out a request for proposals for the construction-aid portion of the program. The city plans to give priority to developers who are willing to restore several properties and focus their work on blighted houses or the thousands of Road Home buyout lots in the city now owned by the Louisiana Land Trust.
Lawlor said the program is not limited to blighted or Land Trust properties, but he hopes the cheaper costs of those lots will make them attractive to developers.
Berni said the subsidy fits into Landrieu's place-based development strategy because the subsidies will be targeted to homes and development projects in 11 specific zones. The city is expected to release the specifics of those zones at a news conference today.
Lawlor's team has been meeting with real-estate agents, homebuyer counselors and the lenders who will administer the loans to make sure that everything is ready to "go live" today.