Originally published in the St. Louis Post-Dispatch, March 23, 1977, and reprinted in The Paper, April 1977. Historic mortgage terms are not present-day offers or financial advice.
Several innovative approaches to home mortgage financing are being tried as part of a Federal National Mortgage Association experimental loan program in two city neighborhoods.
Fannie Mae’s new techniques are presently available only in the target neighborhoods of Shaw and SkinkerDeBaliviere although research continues in other city neighborhoods which are expected to be eventually added to the program, that was announced this past week.
Mortgages are often sold by the financial institution originally making the deal. Fannie Mae, a private organization with five of its 15 directors appointed by the Federal Government, is the largest secondary investor in mortgages in the United States.
Bennie H. Dixon, program co-ordinator at Fannie Mae’s St. Louis office, said it would continue its standard conventional mortgage arrangement along with the experimental techniques. ‘Fannie Mae allows as little as 5 per cent down on 30-year mortgages up to $42,000 and 10 per cent on mortgages up to $55,000 under that plan. Many of the structures in the target area could qualify for the standard conventional mortgage,
Dixon said.
The Fannie Mae conventional mortgage approach differs from that normally utilized by financial institutions in that it allows for lower down payments and longer repayment periods than investors generally are willing to extend on older properties.
Dixon emphasized that the Fannie Mae experimental techniques are not subsidies and are aimed at attracting middle income persons who can contribute to urban neighborhoods.
As a result, many of the techniques being tried in this pilot project are aimed at homeowners whose income will grow in coming years, such as medical students or struggling young professional persons.
For example, the varying amortization plan allows a mortgage repayment plan that is basically on a 40-year basis the first year, a 35-year basis until no later than the 121st payment, and then reverts to a 30-year mortgage basis.
Fannie Mae will also purchase mortgages in which the principal payments are deferred for a number of years—usually no more than two—Dixon said. A plan is also available under which hazard insurance and taxes are initially capitalized as part of the mortgages charges but must be paid up in no more than three years.
In addition, for the first time in its history, Fannie Mae will consider buying the second mortgage on a property if the sum of the first and second mortgages does not exceed the lesser of 80 per cent of the property’s loan to, value ratio or $55,000. It will do so even if it does not own the first mortgage on the property.
Dixon explained that potential homeowners may choose a combination of the new techniques being offered in the target areas.
Persons who purchase residences in the areas may include the cost of rehabiliation in their mortgage loans. Professional rehabilitation firms wishing to buy properties will be required to have a 25 per cent downpayment and will be limited to 20-year mortgages.
To have its mortgage purchased by Fannie Mae, a structure must be able to pass city inspection. Mortgage bankers who will be allowed to earn origination,- construction income and servicing fees on the loans are expected to use prudent judgment in the acceptance of potential loan customers, Dixon said.
He emphasized that persons wishing to take advantage of one of the experimental techniques being offered in the target areas should contact one of the 18 mortgage bankers who will co-operate with Fannie Mae. Dixon said Fannie Mae hopes its new program will serve as a catalyst for inner city investment. Max Robinson, program manager at Fannie Mae’s St. Louis office, said, “What we anticipate happening is that the lender will begin to look at a city loan like any other loan.”
ST LOUIS POST-DISPATCH Wed., March 23. 1977
Originally published in The Paper, April 1977.
Read this article in the original newspaper issue.
Original source: SD_Times1977_04.pdf, printed page(s) 8; PDF page(s) 8.
