Public funds to pay for private debt Houston aims to clear balances so some can buy homes By CAROLYN FEIBEL Copyright 2009 Houston Chronicle Feb. 23, 2009, 10:19PM Houston taxpayers could start footing the bill to help first-time homebuyers pay off debts and improve their credit scores, under a proposal before City Council this week. The âCredit Score Enhancement Programâ will give up to $3,000 in grants to individuals who are trying to qualify for mortgages through the cityâs homebuyers assistance program. City officials say some applicants fall short of eligibility by only 10 or 20 points on their credit scores, and paying off some debt balances can quickly improve their numbers. The proposal has aroused critics who say the city should not use public funds to help people pay down car loans, credit card balances, or other debts â even if the slight credit bump would help them realize the dream of home- ownership. âWe just canât give away government money to help people with their credit scores,â Councilman Mike Sullivan said Monday. âYouâre giving them other taxpayersâ money to pay off the bills.â Councilwoman Anne Clutterbuck called the program well intentioned but said it would go too far. âIf this credit crisis has taught us anything, we need to focus on paying off our debts and saving more,â she said. âUsing government money to help someone pay off their debts is not the same as asking them to pay off their debts themselves.â The $444,000 for the program is leftover money from a $1.5 million appropriation the city made for emergency home and roof repairs after Hurricane Ike. The city has three programs that provide grants for down payments and closing costs for qualified homebuyers. The most generous one offers a $37,500 grant to buy a home that costs $135,000 or less, but only in certain disadvantaged Houston neighborhoods the city is trying to revitalize. Participants cannot earn more than 80 percent of the Houston median income. Some support Affordable housing advocates were cautiously optimistic about the proposal Monday. The tightening credit market has made it harder for previously qualified families to get mortgages, said Stephan Fairfield, president of Covenant Community Capital Corp., a Houston nonprofit that helps low-income families build assets. Some banks previously had accepted credit scores of 580 or 600 as a qualifying threshold, but most are now requiring 620, Fairfield said. âNew tools are needed to help families move forward towards home ownership,â he said. âIf there are lenders that are offering loan approvals subject to retiring the outstanding payables, or if there is something that can help them get over the credit score threshold, it certainly makes sense.â John Henneberger, co-director of the Texas Low-Income Housing Information Service, called the Houston plan âa very aggressive approachâ to housing assistance. He said he needed to know more details but ventured that it could work if the city provided a good pre-purchase homebuyer education program. The city requires all applicants to complete an educational program. Henneberger said the subprime meltdown and global financial crisis has made housing advocates take a âmore conservative tack.â âWeâve certainly learned that we donât do low-income people a whole lot of favors when we get them overly extended on credit.â âA bad ideaâ Anti-tax activists also cited the harsh lessons of the housing crash and recession. âI just donât see any way someone could justify this with everything that has gone on in the credit market,â said Michael Quinn Sullivan, president of Texans for Fiscal Responsibility. âThis is precisely what got us into it, with the playing fast and loose with the credit score.â âOne would think from the federal problem weâve just had, the city of Houston officials would have learned from that,â said Peggy Venable, state director of Americans for Prosperity, a limited government advocacy group. âItâs a bad idea.â Program backers defended the proposal, saying it certainly is not for people with poor or damaged credit. âWe donât talk to them about this unless their credit score is pretty close,â said Brian Stoker, community banking manager for Amegy Bank. The bank is one of the lenders the city uses for its affordable-housing programs. âFor somebody who really qualifies and should have a home, it doesnât take much to help them get there,â Stoker said. âI think it would be a really innovative and good program. And, of course, itâs not for everybody.â The city made 130 grants to homebuyers last year and hopes to raise that to 540 in 2009, according to Juan Chavez, manager of the cityâs Homebuyers Assistance Program. âWhat weâve seen is that $3,000 will increase a credit score significantly and relatively fast,â Chavez said. Not every applicant will need that much, and the eligibility will be very strict, he added. âWe wanted to be conservative in this case and concentrate only on those folks who have overextended as opposed to somebody who needed a lot of hand-holding to repair their credit.â http://www.chron.com/disp/story.mpl/front/6277344.html
Within the last couple of weeks I have seen these 3 offers: HYUNDAI - Under the program, first announced last month, Hyundai allows buyers who lose their income to return their new car to the dealership they bought it from and walk away from the payment with no penalty, no obligation to pay the depreciation costs, and no hit to their credit report. The offer made Hyundai almost the only major automaker to report a sales increase in January, when nearly all of its rivals reported huge losses. AXP - $300 bucks to close your account. Toll Brothers - High-end homebuilder Toll Brothers Inc. is offering a mortgage protection plan that will cover a buyerâs mortgage for up to six months if there is a job loss, the company said. Under the program, Toll (NYSE:TOL) buys involuntary unemployment insurance on behalf of buyers who use Tollâs financing subsidiary to close and fund their home loan. The plan will cover up to six months of mortgage payments, including principle, interest, real estate taxes and homeowner insurance â up to $2,500 per month â if the borrower incurs a job loss within 24 months of closing on the home. There are other requirements, such as buyers canât have knowledge of a pending job loss at the date of settlement.