Focus, Banking & Finance, and Real Estate

Another $600K to Michigan for first-time homebuyer grants

It’s a remainder of the National Mortgage Settlement, and it won’t last long.

May 15, 2015
| By Pete Daly |
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Dan Grzywacz Mortgage 1
Dan Grzywacz, senior vice president at Mortgage 1, termed the grants “free money,” but warned that the opportunity won’t last long. Photo by Johnny Quirin

The National Mortgage Settlement turned over another $600,000 to the Michigan State Housing Development Authority in April to be used as grants and/or interest-free loans to first-time homebuyers.

MSHDA is now trying to alert prospective first-time homebuyers that they may qualify for the assistance, even though many think they don’t.

The National Mortgage Settlement also sent $634,180 to MSHDA in the form of Home Affordable Refinance Program funds.

In 2012, 49 state attorneys general, including Michigan’s, and the federal government announced a historic $50 billion settlement with the country’s five largest mortgage servicers: Ally/GMAC, Bank of America, Citi, JP Morgan Chase and Wells Fargo. The suit was to recover losses triggered by the banks’ actions that led to the mortgage industry near-meltdown at the start of the Great Recession.

Michigan received $97.2 million that went into a Homeowner Protection Fund, and a portion of that was appropriated by the Legislature to MSHDA. Of that amount, $15 million was allocated for the Homebuyer Assistance grant program to help first-time homebuyers buy a single-family/one-unit, owner-occupied principal residence. Funding for the program was exhausted by March 2013, but over time, unused funds have been turned over to MSHDA and are now available for the MI First Home loan program.

According to MSHDA, one of the greatest barriers for first-time homebuyers is the down payment, but a study from RealtyTrac and Down Payment Resource indicates more than 80 percent of homes and condos would qualify for down-payment assistance through programs such as MSHDA’s MI First Home and MI Next Home.

MSHDA can provide qualifying first-time and repeat homebuyers with down-payment assistance of up to $7,500 at zero percent interest and no repayment until the house is sold in the future.

Eric Dusenbury, a business development specialist at MSHDA in Lansing, said there are a lot of misconceptions about home affordability today.

One big misconception, he said, has to do with income limits. Many borrowers, plus some real estate agents and mortgage lenders, think the income limit levels will disqualify many who would like to get a MSHDA grant or interest-free loan, said Dusenbury.

In reality, according to Dusenbury, upper-income levels can range from $60,000 and up, close to $100,000, so “a lot of people can take advantage of the program.”

The purchase price of the home also used to disqualify many deals for MSHDA assistance, but the home price limit has been raised and is now capped at $224,500, said Dusenbury.

Dusenbury said about 1,200 people now take advantage of MSHDA down payment assistance in Michigan.

Mortgage 1 is an independent mortgage lender that specializes in first-time homebuyers and does more deals involving MSHDA assistance than any other mortgage lender in Michigan, according to Dan Grzywacz, a senior vice president at Mortgage 1.

The grant for first-time home buyers from the latest NMC payment is a great program, he said, noting it is limited: “Once the funds are gone, it’s over with.”

“This is free money,” he added. “It doesn’t have to be repaid.”

Dusenbury said in early May the $600,000 for first-time buyer grants might only last a few weeks. Grzywacz guessed it might last a couple of months. They said an estimated 200 first-time buyers can receive the down payment grants.

According to MSHDA, eligible first-time homebuyers are defined as someone who has not had an ownership interest in his or her principal residence for at least three years. First-time buyers who qualify can receive grants of up to $3,000. However, first-time buyers who are serving in the military or are military veterans are eligible for grants of up to $5,000.

Grant funds may be used only with a MSHDA MI First Home loan, with or without MSHDA's Down Payment Assistance.

The $7,500 down payment loan, which MSHDA offers under MI First Home, is for first-time buyers, but in 66 Michigan counties, MSHDA tries to stimulate home-buying by waiving the first-time buyer requirement. Buyers are only required to pay out-of-pocket at least 1 percent of the purchase price. A lien for loans of up to $7,500 is placed on the property, but no interest is charged, and the recipient only repays the loan when the home is ultimately re-sold.

Under MI Next Home, up to 4 percent of the purchase price or $7,500 is available toward the down payment.

“It’s very beneficial to people who may own a home that is under water, and they are unable to sell it to get the assets from that house to buy another,” said Dusenbury.

MSHDA can subsidize interest rates in the so-called Select Cities in Michigan, with Grand Rapids being one of the 18. All are cities where MSHDA has already invested funds in blight elimination, and where the state wants to stimulate home sales. The subsidized mortgage rates can be as low as 3.125 percent.

MSHDA maintains a list of Michigan lenders with experience in mortgages involving MSHDA assistance to the buyer. Its top lenders are from Mortgage 1, Lake Michigan Credit Union, Fifth Third Bank, MB Financial Bank, John Adams Mortgage, Ross Mortgage, AmeriFirst Home Mortgage, Wells Fargo and Union Home Mortgage.

Grzywacz heads the Grand Rapids area office of Mortgage 1 on East Paris and 32nd Street in Kentwood. The office has a staff of 23, including 14 loan officers. Mortgage 1’s business is about 95 percent home purchases and 5 percent re-financing of mortgages.

As home sellers, lenders and the real estate industry in general are very aware: Business is very good in Michigan now.

“Yes, houses are selling,” said Grzywacz. “It’s a good market — there is a lack of inventory. If a home is priced right, as soon as it comes on the market, there are buyers lined up.”

The Great Recession was very hard on home sales and especially on new home construction, but Mortgage 1 came through pretty well, according to Grzywacz.

“We didn’t have tremendous growth, but we were not moving backwards,” he said.

“We doubled our size” from 2011 through 2013, he added.

Rules for getting a mortgage are “still tight — kind of a maze. You have to work your way through” an application, he said.

“We certainly have a lot more regulation today, but the lenders are lending, and people with decent credit and job stability can get a mortgage.”

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