Bank Debuts Low-Cost Home Loan In Paterson

The Record ( — March 12, 2016

Staff Writer
The Record

To smooth the way with regulators for an expansion in Florida, Valley National Bank pledged a year and a half ago to make more loans to those of modest means and to buyers of homes in low- and moderate-income neighborhoods.

That can be difficult in a high-cost state still struggling to recover from the last recession, and when the mission is to make loans that will be repaid.

But, on Friday, the Wayne-based bank advanced its $30 million first-time homebuyer plan by announcing a new loan offering with an unusually low 30-year fixed interest rate of 2.99 percent.

"That's the lowest rate we've ever had in our first-time home-buyer program," said Brian Haag, sales manager in the bank's residential mortgage division.

The average 30-year mortgage rate nationwide this week was 3.68 percent, according to Freddie Mac, a non-government entity that buys residential mortgages in the secondary market.

Haag outlined the underwriting criteria for Valley National's Community Advantage loan at a luncheon Friday at The Brownstone in Paterson, attended by more than 50 people, including housing counselors, community and religious leaders, and affordable housing developers from several North Jersey counties.

3 percent down payment

According to Bernadette M. Mueller, who was named Valley's senior community reinvestment act officer — a new position — in October, the bank had teamed up with New Jersey Citizen Action, a non-profit consumer advocate, to come up with the loan's structure and underwriting criteria. These include down payments as low as 3 percent of the home's purchase price, no private mortgage insurance requirement, and flexibility on evaluating a borrower's credit history — with less reliance on credit scores.

Borrowers' total debt payments, including the mortgage and property tax and insurance payments, can be no more than 43 percent of their gross income. Borrowers also must complete a homebuyer education requirement.

Victoria Lindsey, a housing counselor for HOMECorp, a non-profit group in Montclair, said the program sounds like a reasonable alternative to Federal Housing Administration loans — which are also geared to those who would not qualify for a conventional mortgage loan.

The flexibility on credit histories that the Valley program offers may be particularly important for some of her clients, Lindsey said.

"If I had some bad debt three years ago, and I can recover, that is huge," she said. "People's credit scores are still scorched," she said.

Haag said a strong rent and utility payment history may offset a low credit score, when underwriters weigh an application.

Some of the major challenges to meeting the bank's amped up community reinvestment goals include scant availability of affordable homes, a high cost of living and high property taxes, Mueller said.

Valley and other banks often turn to local non-profit groups to help market their community reinvestment loans, she said.

"This is a good way to kick-start it," she said after the luncheon.

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