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The Color of Money

Follow-ups and reaction

Banks to offer $20 million in low-interest home loans

By Bill Dedman, The Atlanta Journal-Constitution

Published June 19, 1988, Page A1

Copyright 1988, The Atlanta Journal-Constitution

Beginning Monday, moderate-income homebuyers will have the opportunity to apply for $20 million in low-interest loans offered by nine Atlanta banks and savings and loans.

In addition, the nine lenders, calling themselves the Atlanta Mortgage Consortium, have announced $1.2 million in loans to revive a housing rehabilitation effort in Cabbagetown in east Atlanta and finance a new Henry Aaron subdivision in southwest Atlanta.

Applications for the $20 million in loans will be accepted at 69 branches, including many that will be open on Saturday for the first time. The program is available only to low- and moderate-income buyers of single-family, owner-occupied homes in targeted working-class neighborhoods in Fulton, DeKalb, Cobb and Cherokee counties.

The loan programs are a response to a series of articles published in May in The Atlanta Journal-Constitution. The articles showed that banks and savings and loans made five times as many home loans in white neighborhoods as in black neighborhoods of the same income, had closed branches and reduced hours in black neighborhoods and were not accepting applications for home loans in offices near black neighborhoods.

The $20 million program is part of $65 million in loans previously announced, including $25 million from Citizens and Southern National Bank (C&S) and $10 million each from First Atlanta Bank and Trust Company Bank.

As with the earlier programs, the consortium did not acknowledge any past inequities and targeted neighborhoods by income, not race. The program is intended to "upgrade deteriorating housing in some areas of the city, as well as to develop new housing to make home ownership more affordable for more of our citizens," said Jim Mynatt, consortium spokesman and first vice president of Trust Company Bank.

"Whether or not they want to admit any past error is irrelevant," said the Rev. Craig Taylor, a non-profit housing developer. "We will watch to see how far this goes into the future."

Participating lenders in the consortium are 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. Mynatt said every lender in the metro area was invited to join, and he hopes others will.

The lenders would not divulge the amounts contributed by each, but they said the $20 million was split roughly according to the size of the institutions.

The program might be extended in the future to multifamily housing and commercial loans, Mynatt said.

The project in Cabbagetown, a predominantly white community of wood-frame mill houses, could erase one of the city's greatest failures in efforts to encourage affordable housing. The city of Atlanta now owns much of the neighborhood after lending $400,000 in federal funds to a neighborhood cooperative that became tangled in neighborhood squabbles.

The $400,000 from the city bought the land, but the cooperative failed to secure rehabilitation money from a consortium of banks.

"The cooperative never could get its act together," said Mynatt.

Six years later, more than half of the 46 houses are vacant and deteriorating.

"If this Cabbagetown project works, we'll be turning around a disaster area," said Taylor, organizer of the Cabbagetown Revitalization and Future Trust (CRAFT), which has submitted a proposal to the city to buy, rehabilitate and resell many of the properties to low-income and middle-income families. "It could build a lot of credibility for future projects. Everybody wins: the city, the banks, the neighborhood, the families."

Taylor had previously applied to Trust Company Bank for the $800,000 in financing, but the request was delayed and referred to the consortium. C&S actually will make the $800,000 loan for rehabilitation, then the consortium will make mortgage loans to residents.

The Cabbagetown residents who formed CRAFT are being advised by the Atlanta Economic Development Corp., and received a $65,000 grant from the Metropolitan Community Foundation.

Also in Cabbagetown, two other non-profit housing developers, Habitat for Humanity and Interfaith, have plans to build new houses on some of the vacant lots in Cabbagetown. The mortgage consortium says it "hopes to play a role in financing these homes."

In a predominantly black neighborhood in southwest Atlanta, the new Henry Aaron subdivision is being developed by Interfaith. The 10 lots are off Martin Luther King Jr. Drive near Westview Cemetery. The group has applied to the city for $141,000 for streets, sewers and other improvements.

A $225,000 construction loan for the subdivision has been arranged through the consortium from Atlanta Civic Enterprises, a quiet group of 10 corporations including large banks, the Journal-Constitution and several other businesses. The same organization has made an identical loan to Taylor's South Atlanta Land Trust, the model for CRAFT.

The $20 million loan program of the consortium has these features:

-- Fixed-rate loans with a $20,000 minimum and a $60,000 maximum for purchase, or for purchase and rehabilitation, with rehab costs no more than 50 percent of the loan. The loan term would be 30 years or the economic life of the property, whichever is less.

-- Applicants must have household income of $33,500 or less and must live in areas with household incomes below 80 percent of the metro area's median income, as defined by the 1980 census. Most of these areas are in south Fulton and south DeKalb counties, with some in Cherokee and Cobb counties.

-- The initial interest rate will be 9 percent, nearly 2 percent below market rates. The consortium says it intends to keep the rate in the 8 percent to 10 percent range "for the foreseeable future."

-- Loans qualifying for Federal Housing Administration (FHA) or Veterans Administration (VA) guarantees may be made for up to 97 percent of appraised value, and may be made under the Georgia Residential Finance Authority and other loan programs.

-- Conventional loans funded by the consortium may be made for up to 95 percent of appraised value with no private mortgage insurance, no discount points and no origination fees. Closing costs will be the lesser of 3 percent of the loan or actual expense. A non-refundable $150 application fee will be applied to the closing costs.

-- Credit standards will be relaxed to allow homebuyers to spend a greater portion of their income for housing. The limits are up to 35 percent of gross monthly income to be used for mortgage payment on conventional loans, or 30 percent of net effective monthly income on FHA or VA; and up to 50 percent of gross monthly income for all long-term debt on conventional loans, or 35 percent of net effective monthly income on FHA or VA.

-- "An active effort will be made to confirm good credit through timely utility bill and rent payment history, etc.," where other credit records are unavailable.

-- One month's mortgage payment should be available in reserve, as opposed to two or three months normally required.

-- Cash down payments or other verifiable sources of equity, such as "sweat equity,'' subordinated financing, and gifts will be allowed.

The consortium also has appointed a community advisory board to monitor the program.

Members of the board are Jon Abercrombie of CHARIS Community Housing; Jimmy Bennett of DeKalb/Fulton Housing Counseling Center; Eugene H. Bowens of Interfaith; Lynn Brazen of the Georgia Housing Coalition and the Fulton County Department of Planning and Economic Development; Carrie Copeland of the Atlanta Housing Authority; City Councilwoman Myrtle Davis; L.C. Fagin, member of the Association of Communities Organized for Reform Now; Robert C. Gray of the Atlanta Department of Community Development; Fulton County Commissioner Michael Hightower; Jonathon Jones of Southeastern Reinvestment Ventures; Noel Kahil of Gibraltar Land Inc.; Robert D. Lupton of Family Consultation Services; and Taylor.


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