PROVIDENCE – A new pilot homeownership program launched Thursday aims to expand access to affordable mortgage options for first-time buyers in Rhode Island with the backing of state deposits, General Treasurer James A. Diossa announced.
RI AnchorHome is a "community deposit" program designed to back qualifying mortgages issued by Navigant Credit Union, Centreville Bank and BankNewport with matching deposits from a state investment fund.
With those deposits, the lenders pledge to offer qualified first-time homebuyers a starting interest rate of 3.99% (subject to market conditions) on a fixed-rate 30-year mortgage, no private mortgage insurance, and assistance for down payments and closing costs.
Buyers will be required to enroll in homeownership counseling.
The initiative received unanimous approval from the State Investment Commission, according to Diossa.
The state is not guaranteeing the mortgages – the banks and the credit union still bear underwriting risk, state officials said. The benefit to financial institutions is that the state deposits are high-quality, low-cost capital that makes lenders more comfortable in offering lower rates and no private mortgage insurance.
Such a program also helps banks fulfill Community Reinvestment Act obligations and can strengthen local relationships and reputations.
“RI AnchorHome is going to help hundreds of Rhode Islanders finally achieve their dream of owning their home,” Diossa said in a statement
. “With this program, we are helping families navigate an increasingly difficult housing market one step at a time because when we invest in housing, we invest in the future of Rhode Island.”
Under the program, when a first-time homebuyer is approved for a qualifying mortgage through Navigant, Centreville or BankNewport, the state will deposit matching funds into an account at that same financial institution.
The treasury cash manager is authorized to allocate up to $10 million per institution under RI AnchorHome. With the three participating banks in the pilot program, this allows an investment of up to $30 million, which could finance up to 90 mortgages, Diossa's office said. This amount could increase as other financial institutions join the program.
“RI AnchorHome has all the right components for success: lower monthly costs, closing-cost assistance and financial counseling,” said Gov. Daniel J. McKee. “But its real value comes from helping more Rhode Islanders realize the dream of owning their own home.”
Diossa credited Navigant Credit Union, the state's largest, with working with his office from the outset to design and test the model.
“By opening more pathways to affordable homeownership, the RI AnchorHome program will make an immediate and tangible impact on the financial well-being of our neighbors across Rhode Island,” said Kathy Orovitz, CEO and president of Navigant Credit Union. “We have been proud to work alongside Treasurer Diossa and his team since the earliest development stages of this program, and we look forward to continuing to collaborate with state leaders and our colleagues in the financial sector as it comes to fruition.”
