Saving bank steps in to assist with closing costs gap
NEW ORLEANS - Down payment and other closing costs present formidable obstacles to mortgage affordability, both in and out of Indian country. Traditionally, tribes have made it a public policy of theirs to assist their members to be able to qualify for a loan, either through grants or "soft second" mortgages. Now, that may be starting to change.
That's because the nation's largest mortgage lender, Washington Mutual Bank of Seattle, announced a $1 million program to help individual Indians with closing costs on reservation mortgages at the annual meeting of the National American Indian Housing Council.
The savings bank said it will provide up to $2,000 in assistance for tribal members using its home loan programs, meaning at least 500 individuals or families could receive the assistance.
Washington Mutual won't be making down payment grants, since they are not allowable for the loan types being used, said Beth Castro, vice president, community and external affairs division. But the assistance can be used towards other closing costs like attorney fees, appraisals, and loan fee discount points, she said.
"I think this is the first time a major lending is stepping in" to provide assistance in this area, she said.
First use of the program will be on the Nez Perce reservation in Idaho, where the Housing Authority is developing 40 units of housing. The housing authority will be the borrower on HUD section 184 loans, with eligible tenants going into a lease purchase program utilizing the closing cost grants.
Castro said she thought individual Nez Perces are in a savings program for the down payment and may also receive assistance from the tribe.
Three different affordable housing loan programs at Washington Mutual will be eligible to disburse the grants to qualified Indian borrowers. They are the savings bank's own Portfolio Loan for Individual (Allotted) Trust and two government mortgages, the Housing and Urban development section 184 and Federal Housing Administration section 248 guaranteed Indian loans.
The section 184 loan is the most successful government-guaranteed loan, with more than $100 million in volume. In contrast, the FHA 248 has been underused; however, Washington Mutual is one of the few lenders that has made consistent use of it.
In addition, Washington Mutual has granted $40,000 to NAIHC itself for its Mortgage Partnership information exchange, and to help fund NAIHC's annual legislative conference, its annual convention, and new leadership training.
Washington Mutual's work in Indian country is part of a 10-year, $375 billion affordable housing commitment nationwide.
Gary Gordon, NAIHC executive director, said financial support from lenders like Washington Mutual will help boost economic development in Indian country.