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By Mortgage Cadence
“We thought that when we moved to Seattle chances were slim that we would be able to buy a house.” According to Pam Ovendale, a newcomer to the Puget Sound area, homeownership wasn’t even an option in this ‘crazy’ real estate market. Pam and her husband, Tom, do own their home, though. It happened because a local housing authority and a credit union are working together to make the dream of homeownership an affordable reality for residents in their community.
Thomas Place is the neighborhood the Ovendales call home. It’s a charming development of approximately 40 manufactured homes in Snohomish County, Washington, just north of Seattle. Charming now, but with an inauspicious beginning.
Creating what would become Thomas Place began with the Housing Authority’s purchase of the Thomas Lake Mobile Home Park in 1994. At the time it was a decaying neighborhood of roughly twenty trailer homes. The streets were in disrepair, many of the homes were vacant, the septic systems were failing and crime was on the rise. Snohomish County purchased the Park, rebuilt the infrastructure and prepared the land so that up to 50 manufactured homes could be built on this five-acre parcel.
The purpose of this project was to provide low-cost housing to county residents, something that’s becoming increasingly difficult as the demand for affordable homes rapidly and increasingly outstrips supply. Snohomish County’s answer: retain ownership of the land to keep land rents affordable and use site-built manufactured housing to keep costs low for homebuyers.
There was one other challenge to overcome: financing. The Housing Authority searched for a lender willing to provide a 30-year mortgage program at rates comparable to those available for conventional “stick built” homes. However, because the homeowner does not own the land, no lender came forward. Consequently, the only financing option available were loans for personal property, an option that carries both a much higher interest rate and shorter term, both which conspire to increase monthly housing costs.
Undaunted, Snohomish County, through a bond issue, created a loan program that allowed homeowners to take out a 30-year mortgage at 7%. While a major step forward, the program didn’t allow borrowers to combine their mortgage, insurance and ground rent costs into one monthly payment, which made budgeting difficult. It also made the re-sale of these homes more cumbersome, again since conventional mortgage financing remained illusive.
This financing approach worked, though, from 1998 when the development opened, until the Housing Authority was introduced to BECU in 2005. “We saw no reason Thomas Place homeowners shouldn’t live the traditional American Dream with traditional, affordable 30-year mortgage financing,” said Joe Brancucci, Vice President and Chief Lending Officer of the $5.4 billion dollar Seattle-based credit union that serves more than 400,000 members State-wide. “We tried several banks,” commented Norma Hall, a neighbor of the Ovendales, “but they were only interested in providing a mortgage loan if we owned the land.” That’s when the Halls and the Ovendales and many other residents of the development were introduced to BECU. The credit union offered traditional financing at current market rates, substantially lower than their existing 7% financing arrangements. Moreover, monthly payments would now be all-inclusive, eliminating the need to budget and manage ground rent and insurance payments separately. To date, the credit union has contacted every Thomas Place resident, refinancing 15 homeowners in a few short months.
“We’re thrilled to be a part of this project,” continued Joe Brancucci. “Our Thomas Place members benefit from more affordable, conventional mortgages and enhanced liquidity should they decide to sell their home. For the Snohomish County Housing Authority, the long term viability of Thomas Place is now assured since it is able to free up funds to continue with the important, crucial work of providing affordable housing. BECU has an opportunity to help build community, the very reason credit unions were founded and have flourished in this country for more than seventy years,” he concluded.
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July 4, 2005
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