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Union Bank of California Offers Program to Help Lower-Income Borrowers
By James Comtois
Borrowers with limited resources and little or no established credit have been able to buy homes without facing the risks of a subprime mortgage through the Economic Opportunity Mortgage program at Union Bank of California.
"While the foreclosure rate soars in California and other parts of the nation as a result of the subprime lending meltdown and falling home values, it's good to see that our low- to moderate-income EOM borrowers have been able to keep their homes and build significant equity," said Craig Cole, senior vice president and division manager for residential lending at Union Bank of California.
"This program, which does not involve any subprime lending ... is carefully structured to ensure that borrowers will be able to repay their debt."
Union Bank of California has originated more than $2 billion in these loans since the EOM program was launched in the early 1990s. The bank now has about $474 million in its EOM portfolio.
To be eligible for this program, the borrower's stable annual household income must be 80% or less of the median in the census tract where he or she is buying or refinancing. For example, the maximum income to qualify would be about $45,200 in Los Angeles County, $62,960 in Orange County and $69,200 in San Francisco County.
Borrowers can also qualify by purchasing or refinancing property that is located in an 80% or less median income census tract.
"An EOM enables borrowers to purchase a home with very little money down, without having to pay standard lender fees or points," added Mr. Cole. "This program has helped a lot of first-time buyers become homeowners. For those who have mortgages and may have a problem making their payments down the road, this may be a great way to refinance into a better situation."
In addition to breaks on fees and points, EOM borrowers receive a 0.625% discount from the bank's standard interest rates. And private mortgage insurance is not required if the borrower makes a downpayment of at least 10%.
The bank also assists lower-income borrowers by expanding its underwriting criteria for EOM loans. While borrowers must have credit records free of recent delinquencies, they can submit nontraditional credit references such as utility bills, cell phone credit plans and rent payments in place of FICO scores.
All EOMs are held and serviced by Union Bank of California. "This is important because if any of these borrowers run into serious delinquency or financial hardship, we have a number of ways to assist them in retaining their homes," said Mr. Cole.
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