“More House 4 Less” A Maryland Homeownership Tool

1. “More House 4 Less”A Maryland Homeownership Tool An affordable/workforce homeownership initiative of the Maryland Department of Housing and Community Development’s (DHCD) Maryland Mortgage Program Stephen D. Silver, Chief Financial Officer ABA Forum on Affordable Housing and Community Development Workshop C – Homeownership Tools May 26, 2006

2. Contents • Introduction to Maryland DHCD • Homeownership Landscape in Maryland • Maryland Mortgage Program (MMP) • Maryland Homeownership Challenge • More House 4 Less (MH4L) Meets the Challenge • Who MH4L Can Serve • MH4L Results • Ongoing Homeownership Opportunities

3. Introduction to Maryland DHCD

4. DHCD Mission The Department of Housing and Community Development is dedicated to improving the quality of life in Maryland by working with its partners to revitalize communities and expand homeownership and affordable housing opportunities

5. DHCD in Maryland • DHCD is a cabinet-level state agency, authorized to issue tax-exempt revenue bonds and administer federal low income housing tax credits (LIHTC) in support of its housing and community development mission • Victor L. Hoskins was appointed in 2003 by Governor Robert L. Ehrlich, Jr. to be Secretary of DHCD • DHCD enjoys the strong support of both the Governor and the state legislature – capital budget for housing and revitalization for FY 2007 is $69.5 million

6. Overview of CDA as a Revenue Bond Issuer • The Community Development Administration (CDA) is the agency within DHCD that is authorized to issue tax-exempt Mortgage Revenue Bonds (MRB) • CDA manages both single family and multifamily housing revenue bond programs • Investors purchase CDA bonds at lower interest rates because the interest income is tax free • CDA uses bond proceeds to fund loans at lower interest rates to eligible homebuyers under DHCD’s Maryland Mortgage Program (MMP) – the State’s single family homeownership program

7. Overview of MMP Loan Origination • CDA is NOT a direct lender • CDA partners with well-known banks who become participating lenders • Participating lenders originate CDA-eligible loans in addition to their own loan activity • CDA eligibility requirements are dictated by federal tax-exempt rules that include: • house price limits, • household income limits, and • first-time home buyer requirements • CDA pays lenders up to a 2% fee

8. Homeownership Landscape in Maryland

9. Homeownership Landscapein Maryland • 2005 Homeownership Rate = 71.2% • Up from 67.4% in 2000 • Ranking improved from 29th to 25th • 2000 Minority Homeownership Rate = 52.1% • Up from 45.2% in 1990 • Ranking improved from 31st to 14th • Grew 2.4 times faster than national average

10. Maryland Mortgage Program (MMP)

11. Maryland Homeownership Challenge • Incomes not keeping pace with rising home prices – low income and workforce households feeling squeeze • Median home prices up 102% from 2000 to 2005 • Median household incomes up only 12% over same period

12. More House 4 Less (MH4L) Meets the Challenge • DHCD needed to create and promote a new homeownership initiative to better serve workforce/affordable housing needs in response to this challenging housing market • More House 4 Less (MH4L) was launched by Lt. Gov. Michael S. Steele in 2003 to re-invigorate the Maryland Mortgage Program (MMP) and meet the challenge

13. MH4L Meets the Challenge • The MH4L mortgage initiative expanded housing affordability by offering: • Below market, fixed interest rates with various point options • New mortgage products (interest-only and longer-term mortgages) • Enhanced closing cost assistance • MH4L streamlined and improved processes, eliminating unnecessary policies to ensure all eligible Marylanders could use MH4L • MH4L expanded marketing and outreach

14. MH4L Meets the Challenge Maintained Affordability with Various Interest Rate/Point Options • Recent offerings of affordable interest rate/point combinations available for the 30-year and 35-year (5-year I/O) mortgages • Availability of below market rates are maintained by: • Issuance of tax-exempt bonds (including the use of variable-rate bonds) • Managing bond issuance process to ensure mortgage funds are always available • Efficiently managing the entire mortgage origination and servicing process

15. MH4L Meets the Challenge New Mortgage Products • Increased flexibility for borrowers by expanding from 1 product to 15 • Raised loan-to-value ratios to 100% and more by partnering with private mortgage insurers • Increased borrower purchasing power by over 15% by adding new mortgage products: • 40-year amortizing mortgage • 35-year interest-only mortgage

16. MH4L Meets the Challenge New Mortgage Products • Enhanced affordability without sacrificing predictability to allow a more affordable home purchase • Longer Amortizing Mortgages – 40-year: • Fixed rate for life of mortgage • Predictable payments that do not change • Interest-only Mortgages – 35-year (first 5 years interest only): • Fixed rate for life of mortgage • Long 30-year amortizing term • Predictable payments for life of mortgage

17. MH4L Meets the Challenge New Mortgage Products

18. MH4L Meets the Challenge New Mortgage Products

19. MH4L Meets the Challenge Enhanced Closing Cost Assistance • Downpayment and Settlement Expense Program (DSELP) • Maryland Mortgage Program Plus (MMP Plus) • House Keys 4 Employees (HK4E)

20. MH4L Meets the Challenge Enhanced Closing Cost Assistance • Closing cost assistance can be used to: • Assist with settlement costs • Pay for points to buy down the rate • Provide for a down payment

21. Who MH4L Can Serve • DHCD can serve: • First-time homebuyers (exceptions for designated target areas) • Incomes up to $125,020 (varies by location and household size) • Home purchases up to $525,091 (varies by location)

22. Who MH4L Can ServeIncome and Purchase Price Eligibility – Washington, DC Metro Area

23. Who MH4L Can ServeIncome and Purchase Price Eligibility – Baltimore Metro Area

24. MH4L Results (January 2003 thru April 30, 2006) • Average household income: $45,356 • 54% Minority Borrowers • 94% First-time Homebuyers • Total loans: 3,659 • Total loan amount: $436,784,349 • Average loan amount: $119,373 • Average home purchase price: $121,706

25. MH4L Results • Reservation Activity (January 1 thru April 30, 2006) • # of Loans Reserved = 1,342 • $ of Loans Reserved = $253,547,633 • Average Loan Amount = 188,933 • % Loans - Conventional = 59.24% • % Interest-only Loans = 27.65%

26. Ongoing Homeownership Opportunities • Ongoing Opportunities: • Meet the dream of homeownership for new and existing homeowners • Meet the challenge of rising house prices and/or interest rates with innovative and flexible mortgage solutions • Maintain the lowest possible mortgage rates by utilizing creative financing techniques • Ensure Marylanders are aware of and understand the benefits of MH4L

27. Ongoing Homeownership Opportunities • Future plans to meet opportunities • More interest-only, fixed-rate mortgage products • More downpayment options • Acquisition/Rehabilitation program • Refinance program to help homeowners with exotic mortgages • No mortgage insurance product

28. DHCD Contacts • Community Development Administration Tonna Phelps, Director Single Family Programs 100 Community Place Crownsville, Maryland 21032 Telephone: (410) 514-7509 • Web sites: • www.mdhousing.org • www.morehouse4less.org