December 8, 2004
INNOVATIVE HUD PROGRAM INCREASING HISPANIC HOMEOWNERSHIP NUMBERS IN COLONIAS REGION
WASHINGTON - One year ago families like the Quinnones family of El Paso, Texas, could only dream of owning a home. An innovative U.S. Department of Housing and Urban Development program, the Targeted Lending Initiative (TLI), made their dream of homeownership a reality. With HUD's TLI, an increasing number of families in rural communities, located along the Southwest border region in the states of Arizona, California, New Mexico and Texas are becoming homeowners.
Under the TLI, Ginnie Mae, a division of HUD, increases the supply of affordable housing by reducing the guarantee fee by as much as 50 percent when approved issuers originate or purchase home mortgage loans in the Colonias. The reduced fee lowers lender's expenses and provides them an incentive to make more loans in the Colonias.
"Seeing the daily struggle of some of these families energizes our Colonias staff to look for creative solutions," explained Frank Davis, Director of HUD's Office of Departmental Operations and Coordination. When Ginnie Mae originally launched the TLI in 1996, the Colonias region, an area that often lacks adequate infrastructure and other basic services most Americans take for granted was not included.
Davis and his staff believed the Colonias were a perfect fit for the TLI, a program that has experienced success in the southeast. They worked closely with Ginnie Mae, to expand the TLI to include census tracts encompassing the Colonias. "Just as we predicted, the program is working exceptionally very well, helping to provide homeownership opportunities for deserving families" Davis said.
The Colonias became eligible for Ginnie Mae's Targeted Lending program in July 2004. In the first three months, the TLI generated more than $82 million for affordable housing. "We believe the incentive of reduced fees will continue to result in additional mortgage lending in the Colonias," said Davis. "Lenders like Rocky Mountain Mortgage and others have been very responsive to the program. Since its expansion into the Colonias, the program has generated more than 800 home loans."
In addition to the TLI activities, other HUD efforts to increase homeownership in the Colonias include a housing counseling program that addresses the unique and complicated nature of title and property ownership.
"We realize that encouraging lending is not enough. The lack of banking experience and financial literacy of many of the residents make potential homeowners in these communities particularly vulnerable to inflated appraisal's, unreasonably high interest rates and unaffordable repayment terms," explained Larry Reyes, acting coordinator of HUD's Southwest Border Region, Colonias and Migrant Farm worker Initiatives Team. "HUD has invested thousands of dollars in counseling to ensure new homeowners don't fall prey to predatory lending practices."
Since 2000, HUD has also invested more than $87 million in the Colonias through 20 different grant programs ranging from Youthbuild to the Family Self-Sufficiency Program.
"One family at a time, we are making a difference," said Davis. "We are committed to showing Colonias residents that as a result of their hard work, they too can share in the American Dream."
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