SAN JOSE, Calif. – Add Meriwest Credit Union and itswholly-owned CUSO Meriwest Mortgage to the growing list of CUs inCalifornia that are responding to rising home prices by offeringbelow-market interest rate mortgage financing through partnershipwith the California Housing Finance Agency (CalHFA). The programallows first-time homebuyers an opportunity to enter the marketwith limited funds, currently offering rates with a 4.75% APRmaximum on the first mortgage. The state program also providessubsidies for down payments and closing costs. According to theCalifornia Board of Realtors, the median price of a single-familydetached home rose to $485,700 in January 2005. In such anenvironment, programs such as CalHFA are necessary for mostfirst-time buyers to enter the housing market. “Our loanconsultants were telling us how hard it was to put first-timebuyers into homes, even at the pre-approval stage,” said AnitaDomondon, VP of Loan Administration of the $930 million, 68,000member Meriwest. The CU's community charter includes five countiesin the San Francisco Bay area – Contra Costa, San Mateo, Alameda,Santa Clara and San Francisco. “They were running the numbers andfinding we could only approve members for $300,000, which doesn'tbuy much of anything around here.” Meriwest CU, headquartered inSan Jose, has seen more than its share of increases in home prices.While many areas have seen prices rise during the past few years,the San Jose market also experienced a sizeable jump in the mid tolate 1990s, during the height of the dot-com boom. These twoeconomic factors priced homes out of reach for many first-timebuyers, and the trend continues, Domondon said. “Back in the late`90s, when stock options were the rage, we saw multiple bids onhomes – people had cash, there was so much money then,” she said.“Even now, we still see multiple bids. The demand is stilloutrageous.” Although home prices have risen considerably inCalifornia, the state-run program has kept pace with the trend,offering maximum loan amounts up to $496,000. While a half-milliondollar loan may not be enough to finance a single family home inMeriwest's Santa Clara County, it will fund a townhouse or acondominium, which will “at least get them started in propertyownership,” Domondon said. “Right now, we're trying to educate ourmembers to show them the maximum is higher than they think.” Theprogram's maximum annual income limits also reflect high wages inCalifornia. A household of two may earn up to $113,000, while ahousehold of four may earn up to $130,000. Meriwest offers threeCalHFA programs, which allows members to finance 100% of themortgage, including closing costs, when they participate in allthree programs simultaneously. The first program, the High CostArea Home Purchase Assistance Program (HiCAP), targets borrowerswho live in eight California counties that represent areas of highemployment and/or high housing costs, increasing the need foraffordable housing sources. Meriwest's field of membership includesfive of those eight counties. HiCAP provides two loans: abelow-market rate first mortgage, and a low interest rate secondmortgage up to $25,000 to be used for a downpayment. The secondloan features a low, simple interest rate, currently at 5% APR.Payments on the second loan are deferred for the life of the firstloan. The second program, CalHFA Housing Assistant Program (CHAP),provides additional downpayment assistance, up to 3% of the salesprice. Like the HiCAP second loan, the CHAP second features simpleinterest, 5% APR, and is deferred. The third program, CaliforniaHomebuyer's Downpayment Assistance Program (CHDAP), provides anadditional 3% of the sales price for downpayment, and features thesame rate and terms as the CHAP. Demand for the program within thestate has risen recently, said Ken Giebel, CalHFA Director ofMarketing. “We have to stay competitive within the market, so ourinterest rates are typically a point to a point and a quarter belowmarket. For awhile, the market was really low, and our business wasflat from November through the end of February. But now thatinterest rates are on the rise, our business has picked up,” Giebelsaid. He said the state will likely raise rates soon to keep pacewith the market, adding, “We don't want to price ourselves too farout of whack with the market and get too busy.” Althoughgovernment-run programs have a reputation for requiring long,involved application processes, the CalHFA program was surprisinglyeasy for Meriwest to set up. “From beginning to end, we wereapproved in about three weeks,” Domondon said. Upon approval, thestate sends personnel to train credit union staff on everythingfrom sales and marketing to delivering the loan to CalHFA. Oncecompleted, Meriwest sells to loan to CalHFA, which also handles allloan servicing. “Our CFO was very clear on that,” Domondon said,“That it was a servicing release loan, not something we would keepon our books.” She added, “At 4.5%, they will probably keep thoseloans for a very long time.” -

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