PNC Mortgage has unveiled a new mortgage program to attract middle-class homeowners back into Philadelphia.

The unit of PNC Bank Corp. will require only 3% down payment of borrowers, who would also receive a $1,000 city grant and be eligible for unsecured loans at discounted rates to help meet closing costs and any prepayments.

Freddie Mac has committed to buy all of the loans in the project.

"We have had great population loss and problems with flight with the middle class," said John Dodds, director of the Philadelphia Unemployment Project, a not-for-profit community organization. "That leaves you with the poor, which does not give you the tax base you need to maintain a major city."

The program is open to households with incomes of $42,300 to $63,500, and is not limited to first-time homebuyers.

Philadelphia's Office of Housing and Community Development, a federally funded government agency, has pledged $200,000 from a private city fund, to provide $1,000 grants to 200 one-person or two-person households.

"We are trying to encourage middle-income buyers to move into or stay in Philadelphia so that we have a mix of income in neighborhoods," said Emily Romin, spokeswoman for the Office of Housing and Community Development.

"We want to rejuvenate the neighborhoods and schools, and this should have a ripple effect in doing that."

"This is the first time the city is working with the middle class," Ms. Romin said. "But no federal funds will be used for the grants."

The Pew Charitable Trusts, which had $4.7 billion of assets last year, has pledged to match the city's $200,000 grant.

Jim Calista, a sales vice president for PNC Mortgage, said grant and loan funds have been allotted only for the 1999 calendar year.

"If you think of the home-buying sequence, Philadelphia has traditionally provided low-income products," Mr. Calista said. "It makes sense to take the low-income buyers that you assisted in the first place and provide them with an opportunity to move up."

Noting that the homeownership rate has started to edge up in the past few years, Mr. Calista said the program gives the city a chance to "chart its own course rather than let the chips fall where they may."

"There are a lot of very high-priced and very low-priced homes sold in Philadelphia, so there is not really much of a chance for median buyers," he said.

"This is really aimed at the working-class person that has the ability to make housing payments but does not have the cash for the entry requirement of a down payment. This has traditionally been one of the biggest barriers for middle-income borrowers."

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