If you're a member of a participating AFL-CIO union, you could get a break on a mortgage under a new program set up by the labor federation and the Federal Home Loan Mortgage Corp.
The 6-week-old Union Member Mortgage program allows members to buy a home with a down payment as low as 5 percent. And, under an offshoot announced this week, eligible first-time home buyers would have to come up with only 3 percent out of their own pocket.
The lender is PHH US Mortgage Corp., a New Jersey subsidiary of Hunt Valley-based PHH Group. US Mortgage will service the mortgage for the life of the loan. Private mortgage insurance is through GE Capital Mortgage Insurance Corp.
The Federal Home Loan Mortgage Corp., known as Freddie Mac, is guaranteeing the secondary mortgage market.
The mortgages are for single-family, owner-occupied dwellings. For first-time buyers, the home must be a primary residence. Other union members can use the program to buy a second home.
In addition, there is a cap on household income for the first-time home buyers program -- $50,025 in the Baltimore area. There are no income restrictions for the wider program.
To be eligible, a worker must belong for at least a year to a participating AFL-CIO union. So far about 40 of the roughly 90 unions that belong to the 14.1-million-member federation have joined, with more anticipated.
"We expect almost all the unions to sign on to this," said Jon Ross, an official with Union Privilege, an arm of the AFL-CIO.
Interested union members should contact their international for more information.
Ross said the arrangements for both first-time and other buyers have advantages, including strike protection, welfare assistance and discounts on homeowners' and mortgage life insurance.
Convenience also is a major factor, Ross said.
"It's a lot easier," Ross said. "You can do everything on the phone. You just call an 800 number. Second, the people you talk to are trained mortgage advisers. They're there to give a member the best mortgage for his needs -- a 7-year adjustable rate, or 15-year fixed rate or whatever. They're not tied in to anyone."
First-time home buyers would be limited to 30-year fixed-rate mortgages at market rates.
Ross outlined these steps designed to make a home more affordable for first-time buyers:
* A 3 percent out-of-pocket down payment. A member of a participating union for at least three years can borrow the other 2 percent as an unsecured loan from Amalgamated Bank of New York, a union-owned institution, at the same rate and terms as the mortgage. The member also can get the other 2 percent as a gift or loan from relatives or as a loan from employers.
* A 40 percent discount on the initial private mortgage insurance premium.
* The option of a "no-points" mortgage. That would add .38 of a point to the interest rate.
* A waiver of the requirement to have two months of payments in reserve.
* Allowing closing costs to be covered by gifts from relatives or grants from non-profit or government agencies.
* Looser underwriting requirements. Monthly housing costs can be as high as 33 percent of a borrower's monthly income, and payments for all debts as high as 38 percent.
For the regular program the underwriting requirements are the industry norm -- 28 and 36 percent, respectively.
The program also allows extended periods for locking in interest rates, up to six months for a union-built house.
"We'll be flexible if we feel the person has compensating factors, like money in the bank or an impeccable credit record," said Peter Connors of US Mortgage.
Under the strike assistance plan, borrowers pay the first three payments after a strike begins and half of the next three payments, with US Mortgage covering the other half. US Mortgage pays all of the next three payments.
The plan, Ross said, was designed to get a union member through 9 months of a strike.