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To spur stagnant neighborhoods, new group offers cheaper money

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The Daily Record
By KATHLEEN JOHNSTON JARBOE
Daily Record Business Writer
November 2, 2005

Community groups and 10 regional banks have formed a $38 million loan fund to offer below-market mortgage and home improvement loans to targeted Baltimore neighborhoods.

The group called Healthy Neighborhoods Inc. planned to celebrate the start of the fund today. It started accepting applications earlier this week.

The program aims to pump capital into 10 city neighborhoods that could blossom with a little extra investment. The communities are Belair-Edison, Garwyn Oaks/Hanlon, lower Charles Village, Greater Mondawmin, Ednor Gardens-Lakeside, Patterson Park, Reservoir Hill, Highlandtown/Bayview, and the neighborhoods of Greater Lauraville and Midtown.

The program is the second this week aimed to help get potential homeowners into homes. Earlier this week, a group of 61 credit unions said they had amassed a $1 billion loan fund to offer below-market mortgages to households earning below their area’s median income. The initiative, offered through the Credit Union National Association, is called Home Loan Payment Relief.

Under Baltimore’s Healthy Neighborhood program, sponsors chose areas where home prices have lagged increases seen in the general market. The neighborhoods also were chosen for their high levels of homeownership — at least 60 percent.

“These are not Baltimore’s best neighborhoods, and they are not Baltimore’s toughest neighborhoods,” said Mark Sissman, president of Healthy Neighborhoods.

Sissman said that stagnant home prices in the program’s areas had made it hard for homeowners to sell and attract others to move in.

The initiative offers mortgage loans up to 1.5 percent below prime and home repair loans up to 1 percent below the best market rates.

The program lets homeowners borrow money up to 20 percent over the renovated home’s value, under the idea that home values will catch up with time and as neighbors improve their houses, too. Public and philanthropic groups will guarantee the first 10 percent of the loan over the home’s value. Participating banks will cover the remaining risk for the amount of the loan beyond the home’s value.

On top of loans, community groups can apply for grants for tree planting, gardening and other neighborhoods improvements.

Bradford Bank will take applications and approve the loans. Other banks participating include Provident Bank, Mercantile-Safe Deposit and Trust, M&T Bank, Susquehanna Bank, Chevy Chase Bank, Madison Square Federal Savings Bank, Hamilton Federal Bank, Fraternity Federal Savings and Loan Association and Madison Bohemian Savings Bank.

“It is something we believe is a terrific local and national model for how neighborhoods can revitalize themselves,” said Will Backstrom, a vice president at Bradford Bank. “If we just give them a little shot in the arm of investment … we can actually bring some investment back into those neighborhoods to shore them up.”

The initiative follows a four-year pilot program, which in turn was based on a program started in Battle Creek, Mich. Sissman said the pilot program saw considerable success in raising home values and prompted community leaders to expand it.

Patrick Francis recently bought a five-bedroom brownstone in Reservoir Hill and plans to renovate it with a Healthy Neighborhoods loan. The Prince George’s County resident wants to expand the kitchen and add a bathroom to the second floor, among other plans. He said the progress in the community was vital in his family’s decision to move to Baltimore.

“We would not go into that neighborhood if we didn’t know there was a plan to improve it,” Francis said.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.