Where a Little Mortgage Goes a Long Way

Park Community Credit Union, which made Mr. Smith’s mortgage, wrote 35; JPMorgan Chase — the nation’s biggest bank — made 29.

The pilot project — which the Urban Institute is coordinating with the Homeownership Council of America and Fahe, a regional community development financial institution — is being funded with a $300,000 grant from Access Ventures, an investment firm, and additional financial backing from Fahe. Organizers hope to finance as many as 50 mortgages in Louisville and communities on the other side of the Ohio River in southern Indiana.

The program will mainly serve first-time home buyers with credits scores as low as 640 — which most lenders consider a below-average rating. Buyers, who must be employed full time, can borrow up to $100,000 and can finance the entire purchase price if they want, without paying for mortgage insurance.

That flexibility comes at a price: The loans carry a 4.5 percent interest rate. The average rate on a conventional 30-year fixed mortgage is about 3 percent.

Fahe, a nonprofit organization that focuses on providing mortgages to residents of the Appalachian region, aspires to build the pilot project into something bigger. The organization, which is a licensed lender in 16 states, hopes the demonstration project will attract financial support and backing from more traditional banks

“Profit is important to us, too, but mission is more important,” said Laura Meadows, Fahe’s executive vice president for lending. “Scalability is something we are going to look at.”

Antoinette Hines, 44, who works as a counselor for troubled teens, is one of the first to apply for a mortgage under the pilot project. Ms. Hines, who was married in July, is looking to buy the $75,000 home she has rented for the last six years. If the deal goes through, she said, the monthly payment on her mortgage would be several hundred dollars less than she pays in rent.

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