SoftSecond program hails milestone

Hyacinth and Andrew Doman bought a Dorchester home last August, paid $220,000, and this story isn't headed where you might think. Today I'm writing about good news. The Doman's mortgage bill is $1,350 a month, an amount they can comfortably afford. And this morning, state officials gathered to celebrate Hyacinth Doman as the 10,000th recipient of a loan from a state program designed to encourage home ownership.

The SoftSecond program basically reduces the cost of ownership by as much as 20 percent for buyers who qualify and agree to take ownership classes. The program, which began in 1991, has a foreclosure rate of 0.35 percent, lower than the rate on loans to borrowers with the best credit and qualifications.

Demand is on the rise: The program made 1,138 loans last year, the highest annual total in its history.

"If foreclosures are a hurricane, then this is an eye of the hurricane," said Ruston Lodi, a spokesman for the Mass Housing Partnership, which administers the program.

The idea of a "soft second" is that the buyer takes a second mortgage loan instead of making a downpayment. This was a common practice during the mortgage boom, often with disastrous results because it left buyers with little or no equity in the home. When prices fell, those buyers had no room to refinance and no ability to sell.

The MHP program works a bit differently. Buyers still need to make a 3 percent downpayment, preserving a small equity cushion. They get a first loan for 77 percent of the house price at an interest rate slightly below the market rate. Then they get a second loan -- the "soft second" -- for 20 percent of the purchase price, with no principal payments for the first 10 years of the loan. Some buyers also qualify for a 75 percent reduction in the interest payments on that second loan.

Basically, a borrower can get a house for about 80 percent of the monthly payments that even the best-qualified borrower might otherwise be making.

Importantly, to qualify, borrowers must take a home ownership class. Such classes are shown to reduce defaults and foreclosures, at least in part simply because the people who sign up are walking more seriously into home ownership.

The program is only for first-time buyers and there are income restrictions. For more information and a list of participating lenders, visit the Mass Housing Partnership's Web site or call 1-800-752-7131.

A final note: The Domans also bought a home subsidized by the City of Boston through its 1st Home Program. I wrote in Januaryabout the city's struggle to sell these homes, part of a broader slowdown in the demand for subsidized housing. I noticed a few weeks ago that Boston is now advertising the homes on certain MBTA buses. On the bright side, that's a nice way to subsidize affordable housing and public transportation. It also means there's still a chance for people to use the same kind of loan as the Domans to buy the same kind of home. More information is available here.

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