Huntingburg Council: Mortgage assistance program could help older home market

Sourced from Dubois County Free Press

Huntingburg is the first city in the state to offer a new mortgage assistance program facilitated through Freddie Mac, the Federal Home Loan Mortgage Corporation.

Designed for homes $100,000 and less in value, the new program helps borrowers with their down payments and other closing costs associated with purchasing a home. In effect, the program is designed to support the purchase of older homes or less expensive homes that come available as residents move into newer or larger homes like those being built in Hunters Crossing.

The Indiana Multi-City Partnership will allow homebuyers to qualify for special assistance to cover the downpayment and closing costs for mortgages if the buyer fits certain criteria.

Trish Whitcomb of George K. Baum and Company, one of three companies authorized to administer the program and partnership, was on hand to explain the program and answer questions from the council as they considered the partnership. Whitcomb, who is also the late governor Ed Whitcomb’s daughter, is based in the company’s Indianapolis office.

To qualify, prospective homeowners need to have an income between 120 to 140 percent of the county’s median income and an average credit score of about 640. The median income for 2015, the most recent data, was $53,513, so the borrower’s income can be no more than about $74,000.

“So you can see, this is geared toward people who have jobs and people who pay their bills,” Whitcomb said.

Additionally, the borrower doesn’t have to be a first-time homeowner like some assistance programs. However, they cannot own more than one home to qualify for the program.

Whitcomb told the council the program is designed to ensure liquidity in the market for a certain level of consumers. With the limited income threshold required in the program, this will help borrowers seeking to purchase older starter homes.

A second part of the program allows the homeowner to receive up to $35,000 to help update some cosmetic features of the home. The money will be used to update things like carpeting, lighting fixtures and appliances. But it can’t be used to replace plumbing and electrical or other major renovations that don’t add value to the home.

The amount given is based on the impact the work will have on the home’s value. According to Whitcomb, the goal is not to have the borrower be upside down on the home’s value and the mortgage. In addition, Whitcomb advised the council to identify certain contractors to complete the work to ensure it is done to a certain level of quality and the contractors are accountable. The city could identify the contractors as the only option for completing the work under the FHA 203K mortgage.

Whitcomb also pointed out an advantage to the program was it did not add a second mortgage for the borrower. Additionally, it brings money back to the city.

Once completed, the lender is reimbursed for the closing costs or down payment assistance by selling the mortgages at the cash window through Freddie Mac. “And then there is extra cash provided as an incentive to lenders to make loans for what the market considers a small amount of the mortgage,” she said.

Through the incentives offered by Freddie Mac, the City of Huntingburg will receive $50 per $1,000 financed at the time of closing. The council briefly discussed where that money would go but decided to hold off on that decision until a later date.

Only two local banks are qualified lenders under the program, German American Bank and Old National Bank although borrowers can choose from other qualified lenders outside the area. However, Springs Valley Bank and Freedom Bank have both expressed interest in the program but must become approved under Freddie Mac’s guidelines to take part.

Councilman Jeff Bounds felt the program was a welcome addition to the city to support home ownership. “I think anything that we can do to help people to move from a renting situation to a home ownership situation when they want to, is good for our community,” he said as he motioned to approve the resolution to partner in the program. It passed unanimously.

The city’s responsibility as a partner is to advertise the program. Whitcomb said it will take about three weeks to get the program up and running.

“There are folks living in those $75,000 to $100,000 homes that can’t move into a newer property until they have a buyer of their home,” Mayor Spinner said. “This program could have a ripple effect to move these homes faster and allow them to move into their next home.”

Spinner added the second part of the program would allow these homeowners to update these older homes in Huntingburg’s housing market after they move into them. “It allows them to update the home and make it their own,” he said.

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