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The Color of Money

Follow-ups and reaction

Some families with very little
in savings may be able to buy home

By Bill Dedman, The Atlanta Journal-Constitution

Published May 14, 1988, Page A10

Copyright 1988, The Atlanta Journal-Constitution

A family with $1,500 and pretty good credit can buy a house -- and the city may provide the $1,500.

That's the bottom line on the $65 million in home loans announced Friday by Atlanta banks and savings and loans.

Most of the loans are aimed at low-income and middle-income families, mostly on the city's predominantly black Southside.

The loans will be made at low interest rates, with low closing costs, for more of home value than normal, with no private mortgage insurance required.

As an example: Under First Atlanta Bank's program, a homebuyer must put down only 3 percent of the loan value plus $300 in closing costs, for a total of $1,500 on a $40,000 home.

And the city's housing bureau already offers $1,500 grants to some homebuyers for down payments in working-class neighborhoods, raising the possibility some families with little money in the bank could buy a home.

The bank programs:

Nine lenders will offer $20 million in home-purchase and home-improvement loans. Participating lenders include Bank South, C&S, Citizens Trust Bank, First American Bank, First Atlanta, First Union Bank, Fulton Federal Savings and Loan, Georgia Federal Bank and Trust Company Bank. Banking officials said other lenders may be added.

Targeted neighborhoods and maximum income limits will be announced within 30 days. The consortium will make 30-year, fixed-rate loans for 97 percent of appraised value, with no private mortgage insurance required. Interest rates will be from half a point to 1 1/2 points below market rates -- or lower if interest rates rise. No discount points will be charged.

Credit rules, such as debt limits, will be more liberal than usual, and utility payments and rent payments will be accepted as proof of credit history. "Sweat equity," in which a homebuyer improves a property in lieu of part or all of a down payment, will be allowed, as will the use of gift money for down payment.

Citizens and Southern Bank (C&S) will offer $25 million -- $10 million for home-purchase loans and $15 million for home-improvement loans. The loans will be offered at low interest rates and low closing costs to families with incomes of $35,000 or less who live in any part of the metro area.

The C&S program for homebuyers calls for 30-year, fixed-rate loans at interest rates 1 percent below the Federal Housing Administration (FHA) rate, with no discount points charged. Closing costs will not exceed $300. Loans will be made for up to 95 percent of appraised value with no private mortgage insurance required, up to a maximum loan amount of $60,000. Credit rules will be somewhat relaxed. Applicants may live in any neighborhood, but the maximum household income is $35,000.

For home-improvement loans, C&S is offering fixed-rate loans of 9.5 percent up to $5,000, at 10 percent above that level. A discount of half a point will be available to customers who pay by automatic deduction from checking accounts. The maximum loan will be for $25,000 for 10 years. Closing costs will not exceed $300. Inquiries for either program will be accepted at any C&S branch.

First Atlanta Bank will make $10 million in loans for home purchase and home improvement to families with incomes of $30,000 or less in specific working-class neighborhoods.

The bank will offer 30-year, fixed-rate home loans of up to $50,000 at prime rate, locked in for five years; the rate could increase by up to 1 percent a year thereafter, with a lifetime cap of 11 percent. Closing costs will be capped at $300. Loans will be made for up to 97 percent of appraised value, with no private mortgage insurance required. Buyers can save on interest payments by making mortgage payments every two weeks.

Up to 30 percent of the loans could be set aside for home improvement, to be done by contractors on a First Atlanta list.

The First Atlanta program will be available beginning May 21.

Credit requirements will be more flexible than usual, and sweat equity will be accepted.

Trust Company Bank will make $10 million in loans to homeowners and homebuyers in targeted neighborhoods. The loans will be made at 1 percentage point below normal interest rates, on loans of $20,000 to $75,000. Home-improvement loans will have a $50,000 maximum.

C&S and First Atlanta also will make changes to improve access to loans on the Southside.

C&S will place loan officers in its East Point, south DeKalb and Greenbriar branches on the Southside, and perhaps others; will call on members of the Empire Real Estate Board, a black group; will use FHA and Veterans Administration programs; and will advertise extended hours, including Saturdays.

First Atlanta will open some Southside branches on Saturdays to accept applications for home loans and other consumer loans, and will contact Southside real estate agents, churches, civic groups and the media to advertise the loan programs.

First Atlanta also plans to adopt a neighborhood, offering for five years a mortgage subsidy of up to $15,000 a year for five police officers who choose to live in the neighborhood and improve a property. The maximum amount per officer will be $2,400 a year. The bank will ask other businesses to provide building materials at a discount to neighborhood homeowners, and bank employees will be encouraged to participate in community events.

"We believe the best guarantee of security is a uniformed policeman in the neighborhood," Riddle said.


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