'First-time' homebuyers see money from mortgage-industry settlements
Mortgage 1 closed on two new mortgages Monday in which the buyers received the new first-time homebuyers grant, according to Daniel Grzywacz of the Kentwood branch.
Grzywacz, a Mortgage 1 branch manager, said “first-time” homebuyer is actually defined as someone who has not owned a home as their principal residence for at least three years.
The Assistance to Homebuyers grants — $3,000 for anyone or $5,000 for military veterans — are funded by $15 million from the Michigan share of the $25 billion National Mortgage Settlement announced in February. Forty-nine state attorney generals — including Michigan’s — and the federal government reached the historic settlement with the nation’s five largest mortgage servicers: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo.
The settlement provides relief to distressed borrowers and direct payments to states and the federal government and is the largest multistate civil settlement since the Tobacco Settlement in 1998. State and federal investigations revealed that the five mortgage servicers routinely signed foreclosure-related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct, both violations of law, according to a federal website.
In addition to Michigan’s $1.5 billion share of the settlement, the state also received $97 million from the five mortgage servicers. Attorney General Bill Schuette, Gov. Rick Snyder and the Michigan Legislature set up the Michigan Homeowner Protection Fund to make sure the money benefits victims of foreclosure. The Assistance to Homebuyers grant is just one of nine state programs using the $97 million. Others range from foreclosure-scam restitution to foreclosure counseling for homeowners to blight elimination.
With the government defining “first time” as not having owned a home for three years, Grzywacz said he thinks the intent may be to provide some financial help to people who lost their homes to foreclosure three or more years ago.
Grzywacz said the only other requirement is that the grant cannot be more than 25 percent of the home sale price. Grants are available for any type of loan program, with no high limit on the price of the home or the buyer’s income level. The grant does not have to be re-paid.
The money can be applied toward the down payment, or to closing costs, escrows of taxes and insurance, or even toward re-payment of the principal.
“This is just free money. There’s no reason not to (apply for) the grant,” he said.
Not all mortgage lenders will be able to access the grant, however, according to Grzywacz. He said it is being administered through the Michigan State Housing Development Authority, and some companies won’t bother filing the paperwork with MSHDA, because the grants are expected to run out within a few months.
Grzywacz said now is a great time to buy a home, because with values low, there are so many “excellent deals,” and interest rates are at historic lows — between 3 and 4 percent or lower.
Mortgage 1, which has its headquarters in Sterling Heights, has 22 branch offices around the state.
“Last month, we did $900 million in business,” said Grzywacz. He said he believes Mortgage 1 is the fifth-largest lender in the state. Across the state, about 33 percent of its business is in re-financing existing mortgages. That percentage for West Michigan, in particular, is about 25 percent.
“For the average banker, those numbers are reversed,” he said, meaning that many banks’ mortgage business is actually about 70 percent re-financing.