EBSB Helping Homeowners with Troubled Mortgages

The East Boston Savings Bank has made a $25 million loan to Boston Community Capital (BCC) that could potentially help 1 in 5 homeowners with troubled mortgages nationwide. The deal was finalized last week and arranged by Zions Bank’s non-profit public finance group, Stabilizing Urban Neighborhoods (SUN) Initiative.

The deal between EBSB and BCC is a first of its kind investment backed by revenue from a pool of mortgages SUN has made to homeowners who were previously facing foreclosure.

The $25 million investment by EBSB allows for a major expansion of the SUN Initiative. The new program allows lenders and homeowners to work together with fair market loans. While lenders can continue to invest in troubled borrowers, homeowners will be kept in their homes with new affordable mortgages. This will help build healthy communities across the nation.
In exchange for the new investment of $25 million, EBSB will receive a regular stream of revenue from mortgages BCC has assembled, as homeowners in the SUN Initiative pay off their fixed-rate mortgages over the next 30 years.

“Through the SUN Initiative, Boston Community Capital has a proven track record of helping good borrowers stay in their homes following a hardship, and we’re extremely proud to partner with a program so effective at stabilizing our communities,” said Vice President of EBSB Jeff Dickinson, “With the strong underwriting standards employed by the program, we feel confident that the underlying mortgages represent a reliable source of repayment going forward. This was a good investment for East Boston Savings Bank and Boston Community Capital, but more importantly for the communities hardest hit by the recession.”

Boston Community Capital estimates that its approach could help 1 in 5 homeowners nationwide whose homes have significantly dropped in market price, and who are either in default or foreclosure and currently have few, if any, options for obtaining a mortgage.

“Our model works, and our transaction with East Boston will help us expand the SUN Initiative here in Massachusetts and beyond, potentially keeping thousands of families in their homes,” said Boston Community Capital CEO Elyse Cherry. “What’s innovative here is that we’ve taken a transaction that is routine in the residential mortgage market but applied it to a new group of borrowers – those who were facing foreclosure. This new infusion of capital proves financial institutions can invest with confidence and be part of a nationally scalable, sustainable solution to the mortgage crisis that keeps defaulting and foreclosed homeowners in their homes as productive members of their communities.”

Started in 2009, the SUN Initiative has been praised by community, elected and financial leaders, including Federal Reserve Chairman Ben Bernanke, as a pioneering, sustainable, and scalable strategy for tackling the foreclosure crisis. As the only program of its kind in the United States, it offers qualifying homeowners facing foreclosure the opportunity to buy back their homes at current market value and make monthly mortgage payments they can afford. On average, homeowners pay about 40 percent less per month on their new mortgages.

The SUN Initiative has provided more than $56 million in mortgage financing for 270 properties to help 381 families remain in their homes. Borrowers’ original outstanding mortgage principal has been reduced in the aggregate by more than $30 million. The new investment will allow BCC to expand the program beyond Massachusetts, working with partners in states hit hard by foreclosures. “This highly successful program is another example of the innovative ways underway to help families stay in their homes,” said Massachusetts Attorney General Martha Coakley. “The SUN Initiative makes sense for both homeowners and lenders, and shows how principal reduction can be a successful tool to help solve the foreclosure crisis.”

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