DURHAM, North Carolina — Bank of America Corp. is doubling the amount of money it’s committing to a partnership with Durham-based Self-Help Ventures Fund and Freddie Mac to help lower-income people become homeowners, the company announced Thursday.
The program is called the Affordable Loan Solution, and BofA is expanding its annual commitment to the partnership from $500 million to $1 billion. The expansion comes after Charlotte, North Carolina-based BofA had been in the partnership for only six months.
“Since our introduction in February, the Affordable Loan Solution program has been meeting the needs of [low- and moderate-income] borrowers who desire a responsible mortgage product at an affordable entry point,”
Bank of America Consumer Lending Executive D. Steve Boland said in a statement. “We’re especially proud of how the Affordable Loan Solution program has become a popular choice for creditworthy first-time homebuyers, many of whom live in underserved communities.”
The Affordable Loan Solution mortgage program allows down payments as low as 3 percent on the purchase of a primary, single-family residence, with no reserve funds required in most situations. Customers are not required to pay mortgage insurance.
“Folks have the idea that home ownership is impossible if you have credit blemishes or if you are young,” said Deborah Momsen-Hudson, director of Self-Help’s Secondary Market Program. “But there are a lot of programs out there designed to help, and this is one of them.”
Momsen-Hudson added that BofA’s expanded commitment spoke to how well the partnership was performing and how well the experience has been for one of country’s largest banks.
For the partnership, BofA mortgage loan officers work directly with homebuyers to originate the loans. The bank sells the loans to Self-Help, which provides post-closing counseling for any borrowers who might be experiencing payment difficulties.
Freddie collaborated with Self-Help and BofA to define credit terms and approved Self-Help as a seller and servicer to facilitate the offerings to borrowers. Freddie, a government-sponsored enterprise that provides capital for lenders, then purchases all of the eligible Affordable Loan Solution mortgages originated by the Self-Help and BofA partnership.
The partnership reduces the risk that BofA and Self-Help take in issuing loans to low-income homebuyers, which then allows the two financial institutions to expand the possible pool of potential mortgage buyers, with many being minorities or from underserved neighborhoods.
The program is working in about 30 states right now, and the vast majority of users are first-time home buyers. Many are less than 30 years old and 25 percent of users are minority families, according to Momsen-Hudson.
Self-Help has provided over $7 billion in financing to 112,000 families, individuals and businesses since 1980. The company provides financing opportunities and responsible lending to groups that traditionally are underserved such as low-income individuals, rural residents and minorities. For many of its clients, home ownership is an important step toward long-term financial security.
Self-Help has had partnerships with BofA since the 1990s, and Self-Help Chief Executive Officer Martin Eakes is on the BofA’s community advisory board, which seeks to improve responsible lending.
Self-Help would not reveal how many mortgages have been serviced through the partnership with BofA.
