WASHINGTON - An Arizona affordable mortgage program, "Home to Own," will place its first two families in houses this month.
Community activists believe the program will be a model for banks trying to improve their minority-lending records.
The program was announced five months ago by First Interstate Bank of Arizona and an alliance of 12 local non-profit government agencies. The Federal National Mortgage Association also is a partner.
Home to Own plans to make $10 million in mortgages available to low-income and very low-income residents, minority and single-parent households, the elderly, and the disabled within the state. The program is expected to serve 250 families, with average loans of $40,000.
"We work with people who never thought they could own a home," said William Randall, CEO of the Southwest region of the First Interstate Bank Corp.
The program targets borrowers earning 60 percent or less of the area's median income. A family of four in Phoenix earning 60 percent of the median income would have an annual income of $24,950.
Loans generated by Home to Own will be sold to Fannie Mae.
A Long-Time Dream
Yolanda Ornelas, one of the new homeowners, is a single mother with three children. She said it had been a long-time dream to own a house. "I started jumping up and down when I heard the news," she said.
Ms. Ornelas, who works as a nurse's aide, bought a house in Peoria, a suburb of Phoenix, through the program for $43,000. She had been renting at $224 a month, and will now pay $333 a month toward her new home.
She received down-payment assistance from one of the board of directors of First Interstate.
Latest Partner's Role
The program expects most new homeowners to receive help with their down payments through public and private sources.
The latest partner in the project is the Arizona Multibank Community Development Corporation, with a $500,000 investment. Their contribution is earmarked for second mortgages for low-income borrowers to use for down payments and closing costs when they purchase through the program.
Home to Own was patterned after First Interstate's own affordable housing program. The bank's program, which was begun in 1989, has generated more than $6 million in mortgages to 160 Arizona families.
Mr. Randall said the delinquency ratio in their original program was less than the bank's average delinquency ratio for mortgages.
Home to Own borrowers must make a cash investment of at least $1,000, or three percent of the sales price, whichever is lower.
The program also grew out of a grass-roots community effort to revitalize Arisona's cities that began last April at a First Interstate forum on affordable housing. Agencies at that forum included the ACORN Housing Project, the Department of Housing and Urban Development, the Urban League, and Chicanos Por la Causa.
John Salgado, vice president for community development at First Interstate Bank of Arizona N.A., said if Home to Own works well, they planned to expand through other southwestern communities and then around the country.
John E. Taylor, executive director of the National Community Reinvestment Coalition in Washington, said he expected bankers to flock to Phoenix to learn how the program works if it is successful.