Parents' CDs Help Secure East River Loans

NEW YORK -- East River Savings Bank is offering "100% financing" for homebuyers whose parents place 10% of the purchase price in an East River certificate of deposit.

The product, aimed at first-time homebuyers, is similar to one launched last year by the rival Dime Savings Bank of New York. The Dime plan, however, requires 20% of the purchase price to be put in a CD.

East River Savings, a New Rochelle, N.Y.-based unit of River Bank America, plans to hold the loans in its portfolio and has arranged for a mortgage insurer to provide default protection, said senior vice president Nicholas Rizzetta.

First-time buyers have been making up an increasingly large portion of all homebuyers in the Northeast, as is typical in weak markets. But many first-time buyers still have trouble scraping together down payments.

The 100% financing plan is promoted as a way for parents to help without the complications of extending a loan to their children and collecting on it. If the children default, East River seizes the parents' CD funds.

Mr. Rizzetta said that the 100% financing option is offered on all of East River's loans.

Interest rates are the same with or without the option, but borrowers must shoulder an annual mortgage insurance premium of 0.38%.

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