Freddie Mac, Wells Fargo Home Mortgage, and the Neighborhood Reinvestment Corporation, founder of the national NeighborWorks® network of community-based nonprofit organizations, today kicked off a multi-million-dollar lending initiative to offer financing alternatives to families and neighborhoods targeted by predatory lenders.

The new Home Equity Loss Protection (HELP) initiative being launched in six pilot cities combines a new, flexible refinance mortgage product developed by Freddie Mac with special long-term education and counseling requirements offered by NeighborWorks affiliates. The mortgage is designed to help homeowners with impaired credit and excessive debt to obtain refinancing dollars on affordable terms.

Freddie Mac will purchase up to $20 million in HELP loans, which will be originated by Wells Fargo Home Mortgage and insured by Mortgage Guaranty Insurance Corporation (MGIC) of Milwaukee and PMI Mortgage Insurance Co. of San Francisco.

NeighborWorks organizations selected to participate in the HELP initiative are among those serving communities hardest hit by predatory lending. Additionally, Neighborhood Reinvestment is continuing to work with Freddie Mac and lending partners to devise effective anti-predatory lending strategies.

“Freddie Mac created the new refinance mortgage to protect homeowners from predatory lenders by giving them an affordable and practical mortgage alternative. The mortgage is designed to help debt-burdened families with blemished credit to avoid predatory lenders and protect their hard-earned home equity by qualifying for an affordable conventional mortgage,” said Craig Nickerson, vice president of community development lending at Freddie Mac.

The HELP Mortgage is a fixed-rate market rate mortgage with 15-, 20- or 30-year terms. As part of the refinancing, homeowners will obtain personalized financial counseling and may use up to 10 percent or $10,000 of the new refinanced mortgage – whichever is greater – for debt consolidation provided borrowers meet certain requirements. There is no limit on the amount of the loan proceeds that may be used for rehabilitation. Borrower debt-to-income ratio is limited to 42 percent and may go up to 50 percent provided that the borrower’s overall monthly payments after the debt consolidation are less than before the refinance.

The Neighborhood Reinvestment Corporation is creating a $200,000 fund to be used by borrowers who have difficulties making mortgage payments under the HELP initiative.

Predatory lenders often target the elderly, minority families, immigrants, and financially
less-sophisticated borrowers with tactics designed to strip the owner’s equity away from the property.

“Predatory lenders threaten to strip the wealth from some of our most vulnerable families and neighborhoods,” said Ellen Lazar, executive director of Neighborhood Reinvestment Corporation. “This new effort between Freddie Mac, Wells Fargo Home Mortgage and the NeighborWorks® network will offer a dual approach—prevention and intervention--in select markets, and will further strengthen the effort in communities throughout the country to eradicate predatory practices in mortgage lending.”

Boston was chosen as one of the initial pilot sites, because of the city’s leadership in anti-predatory lending initiatives including the innovative “Don’t Borrow Trouble” public information and prevention-counseling campaign. Two NeighborWorks organizations, Nuestra Comunidad Development Corporation and Neighborhood of Affordable Housing, have agreed to lead the pilot in Boston and to extend their loan and counseling services to residents citywide. In August, Freddie Mac announced that it was funding a 12-city expansion of the Don’t Borrow Trouble campaign.

“We are very pleased to be one of the pilot cities for this new mortgage product that will help homeowners already at risk of foreclosure,” said Thomas M. Menino, mayor of the City of Boston. “The ‘Don’t Borrow Trouble’ campaign has helped us to raise consumer awareness of predatory lending practices – our rate of referrals to counseling services continues to rise. However, public awareness of the issue of predatory lending is only the first step in combating the problem. This new mortgage product gives us a tangible way to help homeowners at risk by offering them realistic and prudent terms for refinancing their mortgage. This product is a critical next step for our most at-risk homeowners.”

NeighborWorks® will also enlist other participants and encompass other facets of
anti-predatory lending and prevention assistance to consumers, particularly those in
lower-income neighborhoods. These will focus on family financial literacy, credit education, and development of viable loan alternatives to unaffordable subprime loans.

"Far too many Americans have fallen prey to lenders who do not have the homeowner's best interests at heart," said Andre Brooks, Wells Fargo Home Mortgage vice president, emerging markets. "Together with our partners in this effort, we will work toward the long-term financial success of homeowners, not the short term gains predatory lenders seek. We're excited to help more Americans achieve the dream of home ownership, and do so fairly and affordably."

Private mortgage insurance, which protects mortgage investors against default losses associated with loans to borrowers who make less than 20 percent down payments, will help make HELP loans possible.

“Freddie Mac, Wells Fargo Mortgage, and NRC, national leaders in affordable housing, have created a program that will lower the cost of home ownership for families that are proving they deserve home ownership," said Joseph Birbaum, Vice President - Affordable Housing at MGIC, the nation's largest PrivateMI company. "We're pleased that, once again, PrivateMI is part of an affordable housing solution and will assist in making HELP loans a reality."

“We are very pleased to be working with Wells Fargo Mortgage, Neighborhood Reinvestment Corporation and Freddie Mac to offer affordable refinancing alternatives to urban homeowners that will preserve their equity, while permitting them to accomplish their financial goals,” said David Katkov, PMI’s Senior Vice President Product Development, Pricing and Portfolio Management.

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets. Over the years, Freddie Mac has opened doors for one in six homebuyers and more than two million renters in America.

Based in Des Moines, Iowa, Wells Fargo Home Mortgage, Inc., is a subsidiary of Wells Fargo & Company (NYSE: WFC). It is a leading originator and servicer of residential mortgages. With a presence in more than 1,200 mortgage and Wells Fargo bank stores serving all 50 sates, Wells Fargo Home Mortgage operates the leading mortgage lending network in the country. Combined, its retail and wholesale lending operations provide funding for approximately one of every 15 homes financed annually in the United States.

The Neighborhood Reinvestment Corporation is a public, nonprofit established by Act of Congress in 1978 to develop strong partnerships that revitalize America's urban, suburban and rural communities and make housing affordable. The Corporation accomplishes this goal through providing training, technical assistance, program risk monitoring, and strategic funding to expand and maintain the strength of the NeighborWorks® network. In 1999 alone, the network generated more than $1 billion in local reinvestment.

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