SAN JOSE, Calif. – Add Meriwest Credit Union and its wholly-owned CUSO Meriwest Mortgage to the growing list of CUs in California that are responding to rising home prices by offering below-market interest rate mortgage financing through partnership with the California Housing Finance Agency (CalHFA). The program allows first-time homebuyers an opportunity to enter the market with limited funds, currently offering rates with a 4.75% APR maximum on the first mortgage. The state program also provides subsidies for down payments and closing costs. According to the California Board of Realtors, the median price of a single-family detached home rose to $485,700 in January 2005. In such an environment, programs such as CalHFA are necessary for most first-time buyers to enter the housing market. “Our loan consultants were telling us how hard it was to put first-time buyers into homes, even at the pre-approval stage,” said Anita Domondon, VP of Loan Administration of the $930 million, 68,000 member Meriwest. The CU's community charter includes five counties in the San Francisco Bay area – Contra Costa, San Mateo, Alameda, Santa Clara and San Francisco. “They were running the numbers and finding we could only approve members for $300,000, which doesn't buy much of anything around here.” Meriwest CU, headquartered in San Jose, has seen more than its share of increases in home prices. While many areas have seen prices rise during the past few years, the San Jose market also experienced a sizeable jump in the mid to late 1990s, during the height of the dot-com boom. These two economic factors priced homes out of reach for many first-time buyers, and the trend continues, Domondon said. “Back in the late `90s, when stock options were the rage, we saw multiple bids on homes – people had cash, there was so much money then,” she said. “Even now, we still see multiple bids. The demand is still outrageous.” Although home prices have risen considerably in California, the state-run program has kept pace with the trend, offering maximum loan amounts up to $496,000. While a half-million dollar loan may not be enough to finance a single family home in Meriwest's Santa Clara County, it will fund a townhouse or a condominium, which will “at least get them started in property ownership,” Domondon said. “Right now, we're trying to educate our members to show them the maximum is higher than they think.” The program's maximum annual income limits also reflect high wages in California. A household of two may earn up to $113,000, while a household of four may earn up to $130,000. Meriwest offers three CalHFA programs, which allows members to finance 100% of the mortgage, including closing costs, when they participate in all three programs simultaneously. The first program, the High Cost Area Home Purchase Assistance Program (HiCAP), targets borrowers who live in eight California counties that represent areas of high employment and/or high housing costs, increasing the need for affordable housing sources. Meriwest's field of membership includes five of those eight counties. HiCAP provides two loans: a below-market rate first mortgage, and a low interest rate second mortgage up to $25,000 to be used for a downpayment. The second loan features a low, simple interest rate, currently at 5% APR. Payments on the second loan are deferred for the life of the first loan. The second program, CalHFA Housing Assistant Program (CHAP), provides additional downpayment assistance, up to 3% of the sales price. Like the HiCAP second loan, the CHAP second features simple interest, 5% APR, and is deferred. The third program, California Homebuyer's Downpayment Assistance Program (CHDAP), provides an additional 3% of the sales price for downpayment, and features the same rate and terms as the CHAP. Demand for the program within the state has risen recently, said Ken Giebel, CalHFA Director of Marketing. “We have to stay competitive within the market, so our interest rates are typically a point to a point and a quarter below market. For awhile, the market was really low, and our business was flat from November through the end of February. But now that interest rates are on the rise, our business has picked up,” Giebel said. He said the state will likely raise rates soon to keep pace with the market, adding, “We don't want to price ourselves too far out of whack with the market and get too busy.” Although government-run programs have a reputation for requiring long, involved application processes, the CalHFA program was surprisingly easy for Meriwest to set up. “From beginning to end, we were approved in about three weeks,” Domondon said. Upon approval, the state sends personnel to train credit union staff on everything from sales and marketing to delivering the loan to CalHFA. Once completed, Meriwest sells to loan to CalHFA, which also handles all loan servicing. “Our CFO was very clear on that,” Domondon said, “That it was a servicing release loan, not something we would keep on our books.” She added, “At 4.5%, they will probably keep those loans for a very long time.” -

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