SEATTLE - Credit Union of the Pacific is gearing up to be a player in the city's low- and moderate-income housing market.

The $90 million-asset institution's weapon: a 1% down payment mortgage program for first-time homebuyers.

"There are several affluent areas in Seattle and I think because of that the low- to moderate-income buyer has been overlooked," said Daniel C. Cote, chief executive of Mortgage Services of the Pacific, the credit union's year-old mortgage subsidiary.

"It definitely is an area to specialize in."

Credit Union of the Pacific started offering the program - a variation of Fannie Mae's 97% Community Home Buyers Loan - closed its first loan last week.

The credit union expects the program to take off. So far, 75 requests for loans have been made, Mr. Cote said.

"It's reasonable to say we should be doing 20 a month, or about $2 million," Mr. Cote said.

Under the program the credit union will loan the buyer up to 2% of the required minimum down payment.

So while the purchase of a $125,000 home typically would require $11,400 in cash to cover the payment and closing costs, under the program the buyer would have to put up $3,800. Escrow fees are waived for both buyer and seller.

Qualified buyers must meet standard underwriting guidelines without exceeding median family income levels established by the Department of Housing and Urban Development. For example, in the Seattle area, HUD has established $50,600 as the median family income.

The mortgages are then sold to the secondary market, but the credit union retains the servicing.

Because the program is offered through the credit union's subsidiary, the institution can originate loans with the general public, not just its 21,000 members.

"It's a way to reach a broader market," said Laurie Stewart, chief executive and president of the credit union. "Being in the secondary market is expensive - it takes professionals and needs underwriting - things we might not otherwise keep in the credit union. Taking loans from nonmembers lets us crack the overhead nut and ultimately lowers costs for our members."

Mortgage Services of the Pacific is a partnership between the credit union and Orca Inc., the credit union's service organization. Revenue that goes to the credit union isn't taxed, but revenue to Orca is.

Beyond finding a niche, Credit Union of the Pacific views itself as fulfilling a mission.

"Seventy percent of the credit union's membership is blue-collar, so this conforms with our membership base," Mr. Cote said.

Mr. Cote himself is unashamedly idealistic about trying to put people in homes. In his office hangs a black-and-white tapestry depicting a scene from "It's a Wonderful Life." He also has a copy of the script, four copies of the movie, and uses scenes from the movie in presentations with realtors.

"I get to be George Bailey," he said.

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