ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Sunday, February 9, 1997 TAG: 9702120008
SECTION: HORIZON PAGE: 5 EDITION: METRO
Habitat builds the homes, then serves as the mortgage company. Habitat offers an interest-free mortgage that families pay back over 20 to 25 years, with monthly payments ranging from about $200 to $450.
Habitat uses the payments to build other houses.
Habitat sometimes hands over ownership of the houses to families at closing, but sometimes makes families prove themselves as renters for six months or longer.
To discourage homeowners from immediately selling their homes for a profit, Habitat typically has them sign a ``soft second mortgage'' for the difference between the home's low sale price and its higher appraised value. Homeowners satisfy the second mortgage not with money but by staying in the house. The homeowners must split any profit with Habitat if they sell before the second mortgage is satisfied.
For example, Habitat sells a house for $35,000, but its appraised value is $60,000. The homeowner signs one mortgage for $35,000, to be paid off over 20 years. The homeowner signs a soft second mortgage for $25,000. In the first year the family lives in the house, a twentieth of the second mortgage will be forgiven, in the second year another twentieth will be forgiven, etc. If the homeowner decides to sell after living there one year, Habitat will receive nineteen-twentieths of the profit and the homeowners get a twentieth of the profit.
When homeowners fall behind in payments, Habitat typically customizes a new budget plan. Habitat will:
Let families catch up over a period of time.
Toss missed payments onto the end of the mortgage.
Permanently lower the monthly payment and extend the length of the mortgage.
If Habitat must evict a family, there are several methods:
Foreclosure: 0.8 percent of Habitat homeowners default on their loans through foreclosure.
Deed in lieu: 0.7 percent of Habitat homeowners voluntarily give back their homes to Habitat to avoid foreclosure.
Outside financing: An unspecified number of families avoid foreclosure in other ways, such as by finding outside financing.
Eviction: An unspecified number of families are evicted before they take ownership of the house.
Source: Habitat for Humanity.
LENGTH: Medium: 60 linesby CNB