Incentives added for homebuyers

PHOTOGRAPHER: James Schlett

Attempting to whet renters’ appetite for homes, the federal government recently sweetened the incentives of a homeownership program for first-time buyers, who are increasingly walking into local banks and credit unions.

The Federal Home Loan Bank of New York in February raised the maximum grant amount homebuyers can receive under its First Home Club. The program helps people save for houses by providing matching funds that can go toward down payments and closing costs.

The FHLBNY, a congressionally chartered wholesale bank that serves 293 community lenders, raised its First Home Club contribution to $4 for every $1 deposited into a dedicated savings account, for a total contribution of up to $7,500. The savings match ratio used to be $3-to-$1 up to $5,000.

FHLB officials in December approved the match increase to counter the housing market’s high prices, which have outpaced many renters’ wages. Area lenders said the sweetened incentives slightly boosted participation in the program during the March enrollment period, though a greater jump is anticipated this summer.

“In March, there was a mini surge,” said Albert DeSalvo, a community reinvestment officer for M&T Bank.

In the Capital Region and Hudson Valley last month, M&T recruited a dozen people into the First Home Club, compared to zero a year earlier. Fifty-two people are in the pipeline for the program’s July enrollment period. The Buffalo-based bank has 33 customers signed into the program in the Capital Region and a total of 120 statewide, said bank spokeswoman Jean Hill.

Since Buffalo-based M&T joined the program six years ago, 135 bank customers completed the program and closed on a home. People can start saving for a home at any time under the First Home Club, but banks can enroll them in the program only during March, July and October.

SEFCU in March netted 10 new people for its First Home Club program, called the Mortgage Match Program. That kicked the Albany credit union’s enrollment in the program up to 35, compared with 20 a year earlier, said SEFCU spokesman John DeCelle.

HSBC Mortgage Corp. last year had 597 people enrolled in its First Home Club sponsored by the FHLBNY, making it the third-largest program lender in the Federal Home Loan Bank system. The lender last year saw its program enrollment jump 41 percent from 2006’s level and it anticipates even stronger growth in 2008. Statistics for this year were not available.

John Scarchilli, president and chief executive officer of Pioneer Bank, said he has noticed a “small uptick” in enrollment in the First Home Club since FHLBNY rolled out the higher subsidies. The Troy bank has about a dozen people enrolled in the program.

“We expect additional interest with credit tightening,” said Peter King, an affordable housing officer with the FHLBNY in New York.

The FHLBNY’s coverage area includes New York, New Jersey, Puerto Rico and the U.S. Virgin Islands. King warned higher gasoline prices this summer might curtail first-time homebuyer interest in the program.

Unlike elsewhere in the U.S., the greater Capital Region’s housing market has not seen severe declines in home values. For the first two moths of this year, the area’s median sale price was $190,000, up 3 percent from the same period of 2007. But during that period, the pace of closed single-family home sales slowed 23 percent to 940, according to the Greater Capital Association of Realtors in Colonie.

Even with the anticipated uptick in enrollment this summer, the First Home Club will not likely put a large dent in the nation’s housing slump. Nor will an increase in sale closings come swiftly.

The First Home Club, which launched in 1995, provides incentives to households with incomes not more than 80 percent of an area’s median income. First-time homebuyers must make regular deposits into a savings account for 10 to 24 months before becoming eligible for the matching funds. To receive the maximum $7,500 incentive, homebuyers would have to contribute $1,875, resulting in a total $9,375.

Program participants need to complete a homebuyer education program, which is offered by organizations such as Better Neighborhoods in Schenectady or the Affordable Housing Partnership in Albany. Homebuyers must obtain a mortgage from the FHLBNY member bank and sign a five-year subordinate mortgage with the bank in the amount of the FHLB subsidy.

“We know the value of that counseling is critical … It’s easy to get people into the home, but keeping them in there is harder,” King said.