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MADISON, Wis. – Wisconsin residents seeking to buy a home for the first time got a boost Friday when the state's affordable housing agency announced plans to resume lending after a 17-month suspension.
The Wisconsin Housing and Economic Development Authority stopped issuing mortgages to low- and middle- income home buyers in October 2008, when the economic collapse left no market for the revenue bonds that finance them.
At a news conference Friday, WHEDA Executive Director Antonio Riley said a new 30-year mortgage product with significantly reduced closing costs will be available starting March 1.
"WHEDA is back in business," Riley said, prompting applause from employees assembled in a conference room in agency headquarters in downtown Madison.
Real estate and banking leaders said they expected the loan to be popular immediately with would-be home buyers who have good credit but little money saved for down payments and closing costs. As little as $1,000 cash-out-of pocket will be needed for borrowers.
The news comes as the housing market picks up speed as first-time buyers rush to take advantage of an $8,000 federal tax credit for homes purchased before April 30.
"The timing is just incredible," said John Horning, incoming chair of the Wisconsin Realtors Association. "Most loan programs have required 5 percent down or thousands of dollars in closing costs. What WHEDA is doing is going to enable many buyers to come in to the market that have not been able to."
WHEDA's return to the market is being made possible by a U.S. Treasury program announced last year to help state and local housing finance agencies crippled by the downturn. Treasury has agreed to purchase $325 million of WHEDA's long-term bonds this year, which gives the agency the cash it needs to invest again invest in single-family mortgages.
Wisconsin's housing agency is the first to take advantage of that program and to offer a new loan developed for the agencies by the U.S. government-controlled mortgage finance company Fannie Mae, Riley said. Others are expected to follow suit in coming weeks, he added.
The program will feature higher income limits and home purchase prices but stricter guidelines for a borrower's credit than WHEDA's previous loans.
To qualify, borrowers will generally need a credit score of 660 or higher unless they can put more money down, said WHEDA official Geoffrey Cooper. In the past, 85 percent of WHEDA borrowers have met that requirement, he said.
The loan will also not be allowed for the purchase of condominiums, which are seen as a riskier investment, under a restriction imposed by Fannie Mae, Cooper said.
Income limits vary by county from $66,000 to $83,900 for one- or two- member households, which make up the majority of WHEDA's borrowers. For targeted neighborhoods in some cities, the limits are higher. The price purchase limits are $235,000 or $280,000 depending on the county.
The initial interest rate for the loans have not been set, but are expected to be above market rates, Cooper said. The lower closing costs and fees and a protection that covers up to six months of mortgage payments for borrowers who lose jobs will still make it a better deal, he said.
In all, WHEDA plans to issue $180 million in loans or more this year to roughly 1,800 borrowers. Before the suspension, the agency was issuing up to $500 million of loans per year to 5,000 borrowers. Riley promised to unveil other loan products in coming months.
