Mayor Jane Campbell is expected to announce today that June is Homeownership month in the city of Cleveland. Owning a home is often described as the American Dream. But for some the process is more like a nightmare. Over the past few years, people have complained about the lack of opportunities for low to moderate-income families to get an affordable mortgage loan. Credit problems and extensive background checks have deterred many people. Some have even turned to predatory lenders. But now the local government and the banking industry are trying to address the problems that prevent the "underserved" from realizing that American Dream. 90.3 WCPN's Tarice Sims reports.
Tarice Sims: Six months ago, Kim Foreman decided she wanted to buy a home for her family. As a single mom and recent college graduate, she knew she could qualify for a housing assistance program to help her attain her dream. Guided by her real estate broker Foreman went through the normal credit check to get pre-approved. But, she soon found herself facing major roadblocks.
Kim Foreman: It started getting frustrating with that because, the person that I spoke with first hand and gave him he had my credit report he looked at it. He came back to me months later saying he missed some things on my credit report. Whereas I have not purchased anything new, nothing is new, except I started paying my school loans. So, I was very upset because that decreased the amount of money that I could get. And so therefore I was stuck and had to start all over thinking about where I could look.
TS: Originally Foreman says she wanted to buy two homes - one for her and her family, and another income property. But, after the approval process stalled she was advised to work toward purchasing a single home. Foreman says she and her two children had their hearts set on house on Menlo off of Kinsman Road on the east side of Cleveland. But recently she found out she didn't get it. Foreman says the bank she is using is in California, and is classified as a sub-prime lender. She says she was told sub-prime lenders are easier to deal with for someone at her income level.
KF: I don't make $40,000 or $50,000 a year so I'm assuming that from what she told me that the bank is a little harder to get financing and they make you go through more. But, if they're more strenuous than this I don't know if I want to go to a bank.
TS: Foreman is being guided through the process by real estate broker Helemn Barclay Jones. Jones started working in real estate with Smythe Cramer in the early 80's before starting her own realty company. She says sub-prime lending options are a necessary alternative for many people, mainly minorities.
Helemn Barclay Jones: The problem with our society our people we don't know about preserving our credit to be credit worthy for some prime lenders. So we have to take another route, which isn't bad. I mean the key is to get in the door. And then once you've cleaned your credit up then you can, if you wish, you can refinance and get the lower interest rate.
TS: Recently Freddie Mac, a national home financing organization, reported that the average interest rate for a 30-year home loan was 6.7%. For a 15-year loan it's 6.18%. That's the lowest rate so far this year. But the rate tends to go up if the loan applicant has less than an A-1 credit ranking. Keith Burgess is Assistant Vice President of Community Development for Charter One Bank - one of several prime lenders that is starting programs for what he describes as the "underserved" population. Burgess says they partnered with Fannie Mae, a company that has financed more than 40 million mortgages, for their program. Fannie Mae researched the target market and found that not everyone was concerned about the kind of loan they got, they simply wanted a house.
Keith Burgess: Their main concern was to get to yes, get to yes, get them approved. You know they really weren't concerned with the terms of the loan or all the particulars. The big concern was maintaining or improving self-esteem. And that research probably indicates why often times you'll find low and moderate-income families, minority families, African American and Hispanics over represented in the books of sub-prime lenders and predatory lenders.
TS: Burgess says education is a key component for homeownership. Linda Hudecek agrees. She is Director of Community Development for the City of Cleveland. Hudecek says the city is trying to spread information on housing initiatives they have that can help people become homeowners without creating unmanageable debt.
Linda Hudecek: And what we have is 100% tax abatement. Whether it's a rehab house you're doing and buying or whether it's a new construction home. The term defers 12 years for rehab, it's 15 years of 100% abatement for new construction and that is available to anybody moving into the city of Cleveland.
TS: Hudecek says they also have programs that help Cleveland residents with home repair. This weekend the city of Cleveland will play host to two housing conferences. A Housing Summit organized by Congresswoman Stephanie Tubbs Jones kicks off today. And tomorrow representatives from both prime and sub-prime lending companies will gather at the National Association of Mortgage Brokers convention in downtown Cleveland.
Meanwhile, Kim Foreman plans to attend the Housing summit to learn more about the process. Also she remains hopeful she will be able to close on a home of her own very soon. In Cleveland, Tarice Sims, 90.3 WCPN News.