BLOG VIEW: When County Government Turns Mortgage Originator

I am sure you have heard the expression ‘It's a nice place to visit, but I wouldn't want to live there.’ Well, there's another expression that seems more appropriate to many parts of the country: ‘It's a nice place to work, but I can't afford to live there.’

During the boom years of the housing market, many of the higher-priced areas of the country saw a significant problem in regard to their workforces: People who were employed in municipal jobs or the lower-paying private sector positions found themselves unable to afford to live in the cities and counties where they worked. That's still going on today – if you were in San Francisco for the recent Mortgage Bankers Association's Annual Convention, you may have seen the long lines at the municipal bus stops of people waiting to get on board for their long trips outside of that still-expensive city.

For the most part, the majority of the cities and counties experiencing this problem are pretending it doesn't exist. But Virginia's Prince William County is an exception, and their example deserves to be noted.

Last week, the Washington Post noted that Prince William County's board of supervisors agreed in principle to start offering home loans to county employees. (About 3,500 people are on the county payroll, with entry-level jobs averaging $44,000 a year.) It appears many of the employees need to drive long distances to their jobs because they cannot afford to buy homes in the county.

There is certainly plenty of vacant housing to be found, too. Prince William County has the highest number of foreclosures of any Virginia county.

According to the Washington Post article, the Prince William County government would invest up to $50 million in pass-through certificates of deposit at SunTrust Bank, with the proceeds going to offering mortgages for the county's employees. The maximum home price would be $300,000, and the loans would be made available through the Federal Housing Administration.

I am looking at this development with mixed feelings. On the surface, it is wonderful for the Prince William government employees, since this will give them the opportunity to live closer to their jobs. It also addresses the absence of affordable housing in the county – that should have been addressed years ago, but that's another matter.

But on the flip side, it provides another example of the government stepping in to handle matters that should be within the bailiwick of the private sector. There is no reason to suspect these loans will bear any resemblance to the notorious subprime products that whacked the industry.

Still, anything that can encourage homeownership and affordable housing is deserving of commendation. I hope Prince William County's example will be considered by other counties and cities around the country where similar socio-economic situations prevail. This could easily be the start of a new – and responsible – housing boom.

Follow-Up: Regular readers may recall that I previously called for a national moratorium on foreclosures. Last week, Fannie Mae and Freddie Mac announced they were suspending foreclosure sales and evictions on certain properties until January. This is an excellent idea, I believe, and I am glad that someone in Washington has finally recognized that strategy can help lenders and borrowers work out the thorny issues relating to troubled loans.

– Phil Hall, editor, Secondary Marketing Executive.

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