Umpqua Bank Provides Affordable Mortgage for Bay Area Family
By Jeff Bounds | April 28, 2016
Late in 2015, the five-member Palacios household in San Francisco faced eviction when the apartment they’d rented for more than a decade in the southwestern part of the city was being converted into a condominium.
They would have been left with few options in a city where a condominium unit costs an average of $1 million.
Umpqua Bank stepped in to provide an affordable mortgage to the family under San Francisco’s Below Market Rate (BMR) program. This ensured they could keep their home.
Fannie Mae’s support enabled Umpqua to make the mortgage. The company purchased the mortgage in late 2015.
Program with a Cause
Lenders may have shied away from the BMR program because of a provision the city added in 2007.
That provision gives the city a second lien on BMR properties that survives foreclosure – complicating the process of re-selling properties that go into foreclosure.
But Maria Benjamin, director of homeownership and below market rate programs at the Mayor’s Office of Housing and Community Development, doesn’t think the provision was to blame. “It wasn’t the change in the program that I think caused the issue. The foreclosure crisis made everyone more aware that these units could not easily be re-sold.”
Fannie Mae’s willingness to buy BMR loans has enabled lenders to serve a market in great need of affordable housing. Now, the nine participating BMR lenders are moving to take advantage of the program.
Umpqua, for one, has nearly 60 BMR loans either in process or pre-qualified.
“They’re kicking butt,” Benjamin says.
Ultimately, Fannie Mae’s decision to support BMR loans made the difference in resolving the dilemma facing the Palacios family, Benjamin says.
“If Fannie Mae had not collaborated with its lenders to better serve low-income buyers, then I don’t know if Umpqua could have stepped up to help,” she says.
Condo Conversion Causes Crisis
Established in 1992, San Francisco’s BMR program today requires certain real estate developers to sell or rent at least 12 percent of the units in new developments at prices that are affordable to low- and middle-income households.
Benjamin says that since the program’s inception, banks have made more than 2,000 affordable mortgages under BMR.
The Palacios home is in Tiffany Gardens, a 2003 Mission District building that includes 35 two-bedroom, two-bath residential units.
As part of the conversion process, the Palacios family was given the opportunity to buy their home with support from the BMR program – but they only had six months to get the deal done.
Like many first-time homebuyers, Luis and Brenda Palacios had credit issues they needed to resolve. For help, they went to the Mission Economic Development Agency, a non-profit that helps low-income people in the neighborhood build wealth.
Nonetheless, four lenders turned down the Palacios’ loan application. Ultimately, they were unable to meet the six-month deadline, and Tiffany Gardens’ newly created homeowners association began eviction proceedings.
Umpqua to the Rescue
The Palacios’ fortunes began to improve when a housing counselor referred their case to James Deschamps, an Umpqua loan officer.
“The family met all agency lending guidelines,” Deschamps says. “They had a strong credit and employment history. Our team worked to maximize their qualification, and we identified resources within the city of San Francisco to help break down potential barriers in the process.”
Within weeks, Umpqua guided the Palacios household from pre-approval to a completed loan.
The Umpqua mortgage allowed the Palacios to become homeowners, Benjamin notes. “The Palacios family has their condominium at an affordable price. They’re blessed.”
The Palacios loan was the first that Fannie Mae purchased under the BMR program. Fannie Mae is today the only secondary market purchaser of mortgages made through the BMR initiative.
“We were thrilled to see Umpqua assist a hard-working family like the Palacios in achieving their dreams and to be part of that,” says Paul Barretto, senior product manager at Fannie Mae. “The city has a great BMR program and it presented us an opportunity to demonstrate our ability to work with our lenders to find a solution to support the city’s program.”
Over time, other municipalities in the U.S. may adopt programs similar to the BMR effort in San Francisco, Barretto adds. “Fannie Mae already provides loans and underwriting flexibilities that support inclusionary zoning initiatives – such as Community Seconds®, resale restrictions, and community land trusts – that lenders can use today to solve affordable housing challenges,” he says. “I see prudent growth ahead in this area for us.”
Jeff Bounds is a freelance writer based in Dallas. He has been writing about financial topics since the early 1990s.