Brainstorming in Annapolis

February 15, 1992

Government isn't known for being at top of the responsiveness curve. But the Schaefer administration has hit the mark by relaxing income and price margins on the well-known but lately underutilized Maryland Mortgage Program to accelerate housing demand from first-time homebuyers.

Under the temporary adjustments, individuals or families making $47,100 can qualify for 8 percent mortgages on homes up to $124,875. The income cut-off was previously $32,000 for single purchasers and $40,000 for families. These well-timed changes coincide with a relative surge in demand from new homebuyers taking advantage of the lowest mortgage rates in 20 years. In the last quarter of 1991, new home sales in the region jumped 14 percent -- suggesting a modest rebound in the local market. The price of a median-priced home -- a barometer of trends and demand -- rose 10.8 percent to $113,000. Nationally, median home prices dipped from $101,900 to 99,000.

By raising the income ceiling for both families and individuals, the state has made MMP an option for middle-income people. Depending on who insures the loan, a purchaser could end up with an 8 percent fully-financed mortgage, paying only for the closing costs. The state has also raised the loan limit from $60,000 to $127,500 in its loan insurance program for buyers in depressed areas.

There's nothing revolutionary about these ideas. They make use of existing funds to massage Maryland's economy. Yet success is far from guaranteed. Lenders are understandably excited, but consumers are still cautious about taking on new financial responsibilities.

We are encouraged by this innovative thinking. It is the sort of brainstorming that could make a difference in an era of doing more with less. State and local economies are hurting with no easy, painless solutions in sight. What's needed is a fresh look at existing programs and new ways of doing things. The Schaefer administration's timely response to developments in the housing market is such an example. We hope to see more of this kind of creativity from our government leaders.

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