New Hampshire is the fifth smallest state by land area and the ninth least populous of the United States. Its affluent population base coupled with its high rate of homeownership make it a competitive housing market. Add to that some of the highest average real estate taxes in the country, and the cost of homeownership can be challenging for credit union members.
According to 2013 U.S. Census data, 71.4% of New Hampshire residents owned a home and per capita income was $64,916, both higher than the average nationwide performance of 64.9% and $53,046 respectively. Statewide, total first mortgages granted by credit unions increased 10% between third quarter 2014 and 2015 to more than $1.7 billion, according to data from Callahan & Associates.
TOTAL FIRST MORTGAGES
FOR ALL U.S. CREDIT UNIONS | DATA AS OF 09.30.15
At St. Mary’s Bank ($880.1M, Manchester, NH) first mortgages comprise nearly 39% of the total loan portfolio. The $286 million it holds in first mortgages is much greater than the $184.5 million average at credit unions with $500 million to $1 billion in assets.
TOP 10 STATES WITH HIGHEST AVERAGE REAL ESTATE TAX
DATA AS OF 2015
“St. Mary’s Bank is the oldest credit union in the country, and its charter allows it to lend to anyone in New Hampshire. Its membership range includes a wide range of demographics. We help first time homebuyers of modest means to affluent purchasers of vacation properties in the lakes and mountain regions of our state. St. Mary’s Bank Mortgage Center holds dominant market share in its primary market serving many middle income borrowers as well,” says Karen Mayrand, vice president of residential lending at the credit union.
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In order to help its membership achieve homeownership, in 2007, the credit union partnered with the Federal Home Loan Bank of Boston to take advantage of its Equity Builder Program (EBP). The program provides grants for down payment, closing costs, homebuyer counseling, and rehabilitation assistance to households at or below 80% of the area median income.
Equity Building With A Helping Hand
The program is accessible to approved banks or credit unions that have undertaken a two-step process.
First, they must apply every year. St. Mary’s Bank receives notice from the FHLB shortly after the first of the year to complete the necessary paperwork, a task that Mayrand describes as simple.
“We get excited every year around this time for the opportunity to help bridge the divide. Homeownership is out of reach for some with property valuations and tax rates. Down payment assistance clears one of the financial hurdles,” she says.
Second, upon receiving approval to participate in the program, members are required to attend the FHLB’s online training programs before submitting enrollment and disbursement requests on behalf of income-eligible homebuyers.
In 2015, the FHLB of Boston approved 137 banks and credit unions to participate in EBP.
The FHLB awards EBP funds in increments of up to $11,000 on a first-come, first-served basis and cannot guarantee funds in advance. For their part, participating banks and credit unions cannot exceed the EBP’s aggregate maximum funding cap of $110,000.
Until two years ago, the credit union partnered these funds with CUNA’s Home Loan Payment Relief program (HLPR), which helps credit unions make below market rate mortgage loans available to borrowers with household incomes at or below their market median.
“The grant covered the 3% down payment St. Mary’s required plus the majority of closing costs,” Mayrand says. “If, in some cases, borrowers needed additional funds to cover closing costs, the credit union allows the use of a seller credit.”
“One of the biggest challenges faced by first time borrowers is saving for the down payment and the closing costs,” Mayrand says. “What’s great about the [equity builder] program is we can assist first-time homebuyers with minimal funds available to purchase a home.”
Two years ago, the credit union transitioned from using the Home Loan Payment Relief Program (HLPR) program and instead designed an internal first-time homebuyer program to complement the EBP, although members who haven’t qualified for the EBP grant are still eligible for St. Mary’s Welcome Home program.
The program offers first-time buyers with low-to-moderate income low rates and down payment options.
First-time homebuyers are defined as those making their first house purchase or who have not owned a home in the past three years.
“Quality affordable housing in the state of New Hampshire is hard to find,” Mayrand says. “Combining our Welcome Home Program with grant funds makes homeownership possible. It is so rewarding to be present at the closing when such deserving individuals or families become homeowners.”
Combining our Welcome Home Program with grant funds makes homeownership happen for someone who might not have been able to afford it.
Marketing And Challenges
As soon as the FHLB approves the credit union to apply for EBP funds every year, St. Mary’s marketing department kicks into overdrive. The department distributes press releases, print flyers, and e-blasts to the New Hampshire Board of Realtors. Loan officers also visit local realtors to stand out amid the hundreds of banks and credit unions vying for limited grant money.
“We jump into action when funds become available,” Mayrand says. “If you don’t act fast, funds will be gone along with the opportunity to help a member.”
Today, the credit union routinely processes three to four mortgage loans a year that use the grants.
Because borrowers who apply for grant assistance typically have lower income and higher debt-to-income ratios, home prices must also be fairly low for the borrower to be able to repay the loan.
“New Hampshire does not have a large share of low-priced housing,” Mayrand says. “That can make it a bit challenging for the grant criteria to work.”
But work it does, as the members who’ve benefited from these grants can attest, members that include Mayrand’s own daughter.
“It may not sound like a large number when you say you help three to four people a year,” Mayrand says. “It would be great if it was 40 people. But it makes a difference. The more people we can get the word out to, the more realtors and borrowers, the more opportunity there is for us to help first-time homebuyers make homeownership a reality.”