Hollister Second program offers loans of up to $50,000
Low- and moderate-income Hollister residents who feel locked out
of the housing market have another funding option with the
redevelopment agency’s announcement that its down payment
assistance program has been extended for another year.
Hollister Second program offers loans of up to $50,000
Low- and moderate-income Hollister residents who feel locked out of the housing market have another funding option with the redevelopment agency’s announcement that its down payment assistance program has been extended for another year.
Designed to “mitigate the effects of the foreclosure crisis,” the Hollister Second Program will provide loans of up to $50,000 to help close the funding gap for people seeking their first home.
“It’s accomplishing a major goal of the RDA, which is to help first-time home buyers,” said Bill Chow, the RDA’s program manager. “One of our policies is that home ownership is stabilizing to the community because home owners live here and pay their taxes” and typically are more invested in their community than are renters.
“Applicants are very excited to be able to obtain home ownership – the American dream,” Chow said.
In a report to the City Council, the RDA noted that Hollister has been “impacted severely” by the foreclosure crisis, with more than 900 local homes in some stage of foreclosure as of late August. The report said that as of the end of last month, 345 homes were bank-owned; 191 were scheduled for trustee sale; and 376 were in the pre-foreclosure process.
Those numbers are expected to worsen, the report notes, due to a high number of mortgages with variable interest rates that are due to reset in the near future, “thus producing an increase in mortgage defaults and eventual foreclosures.”
In a recent foreclosure prevention workshop offered locally, “the public’s concern confirmed the severity of the foreclosure crisis and expedited the need to continue developing a proactive foreclosure prevention strategy,” the RDA report said.
To that end, the City Council – in its capacity as the RDA board – approved the allocation of $500,000 to fund the second mortgage program as it did last year, when 21 applications were received and 10 families received assistance.
The program offers deferred, 30-year-term mortgages at 2 percent interest. The loan is recorded as a second mortgage, with the borrower paying no principal or interest as long as he or she owns the home. The entire principal and interest is due if the property is sold, refinanced, transferred or if the home owner defaults on their first mortgage. If the loan-holder lives in their home for the entire 30-year term, the loan amount is forgiven.
Applicants must have a low or moderate income, based on a formula associated with the county’s median income, and may not have owned a home within the past three years. Loan recipients must contribute at least 3 percent of the purchase price as a down payment toward the purchase of the home and preference will be given to applicants who live and work in Hollister.
“The program encourages home ownership, particularly for first-time home buyers,” Chow said. “It will help some people acquire foreclosed homes, which is another benefit to the city.”
Unlike last fiscal year, when the city set a deadline to apply for the Hollister Second funding, the program will accept applications this year until all of the $500,000 allocated for the program is loaned out.
Each approved loan applicant must attend an approved home-buyer counseling class and will be given 90 days to secure a primary loan for the housing unit they hope to purchase. Single-family dwellings including townhouses, condominiums and manufactured homes within the RDA’s project area are eligible for funding.
In order to preserve the affordability of participating homes, the Hollister Second program requires that residences have a 45-year resale restriction agreement recorded against the property. That means that if a housing unit is put on the market, it must be sold as an affordable unit to very low-, low- or moderate-income households.
For more information, call Bill Chow at 636-4316.
