A Massachusetts firm that acquires foreclosed homes and sells them back to their former owners under more affordable loan terms is expected to announce Friday its expansion into Maryland.
This would be Boston Community Capital's first foray outside its home state.
"Maryland has a very big foreclosure problem," said Elyse Cherry, CEO of the community development financial institution.
Cherry is scheduled to announce the move at the 2013 Governor's Housing Conference in Baltimore.
The firm's Stabilizing Urban Neighborhoods Initiative was launched four years ago, using money largely raised from foundations and private investors. The group said it has provided more than $62 million in mortgage financing that saved about 425 families from eviction.
"What we really did was to perfect the model in Massachusetts," Cherry said.
Boston Community works with struggling homeowners who are behind on their mortgage payments or being foreclosed upon. It negotiates with the lender to buy the house at market value, typically at a steep discount from what the homeowner paid. In Massachusetts, the average reduction is 40 percent, Cherry said.
The nonprofit then sells the property back to the homeowner and provides the 30-year fixed-rate mortgage. The interest rate is about 6.375 percent, which is higher than the national average this week of 4.32 percent, according to Freddie Mac.
That national average is for people with good credit, Cherry said, and her group is working with homeowners who usually can't find anyone willing to lend to them. Plus, Boston Community's cost of funds is about 4 percent, a much higher interest rate than that of national banks, she said.
Homeowners undergo a financial analysis to make sure they can afford the new mortgage. They must have a stable income and show that they fell behind on their old mortgage because of a hardship, the group said. And they need to make a $5,000 down payment on the house.
Mortgage payments are made every two weeks, instead of monthly, and a portion of that money is set aside for the homeowner in an account to help with home repairs or pay down principal, Cherry said.
"It doesn't work for everybody," she said.
Homeowners seeking more information can call 855-604-4663, email the group at firstname.lastname@example.org or visit the website at sunhomehelp.org.
"It's a really solid program. We are really happy to see them come," said Marceline White, executive director of the Maryland Consumer Rights Coalition. "It keeps people in their homes and gets them out of their toxic home loans that we saw proliferating in 2007 and 2008."
Keeping houses occupied is also good for neighborhoods, preventing homes from becoming dilapidated, she said.
"We have too many of our residents who are struggling with housing issues," said Gerard Joab, executive director of the St. Ambrose Housing Aid Center in Baltimore. The Boston Community program "won't be for everybody, but I do think it will help residents of our city who fall within the purview of their program."