Low Income Assisted
Mortgage Program State of West Virginia

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The Low Income Assisted Mortgage Program (LAMP) is brightening the homeownership prospects for low-income families in West Virginia. Before LAMP, home financing for such families was available only on a very limited basis. Through a special trust arrangement, LAMP enables local lenders to buy low-interest mortgages issued by community-based nonprofit housing groups that construct or rehabilitate single-family

homes. With their funds no longer tied up in long-term mortgages yielding only 0 to 3 percent, the nonprofits can build additional low-income housing.

The idea for LAMP originated in 1989, when representatives of a local chapter of Habitat for Humanity, a national nonprofit housing provider, approached the West Virginia Housing Development Fund seeking a grant to expand home production for poor families. Fund officials, along with representatives of the local Habitat and lending institutions, hit upon the idea of creating a secondary market for home mortgages issued by nonprofits like Habitat as a way to leverage the state housing agency's resources for wider effect.

Because the interest rates charged by nonprofit housing providers are so low, most banks are not interested in taking them over. LAMP allows lenders to buy the mortgages at a substantial discount to produce a yield of 50 percent to 80 percent of market. For example, a bank could purchase a $30,000 mortgage for $18,000. To help defray the discount's cost to the nonprofit, a $6,500 grant from the Housing Development Fund allows the nonprofits to recover part of the discount and to establish a six-month escrow fund to cover any missed payments by the homebuyers. The nonprofit emerges from the sale with $24,000 to build or renovate another house.

By 1993, 35 families had become or were in the process of becoming homeowners as a result of LAMP. In one new project, where mortgages were slated to be sold through LAMP, 22 new homes were under construction.

The typical home whose mortgage is sold through LAMP has 1,000 square feet, one bath, and three bedrooms. Monthly mortgage payments average $150. To date, no loans have been foreclosed.

Banks are increasingly attracted to LAMP because of its successful track record and because it helps them satisfy requirements of the federal Community Reinvestment Act, which stipulates that banks must provide credit in the communities where they are located.