Bank of America says it will provide up to $300,000 of insurance coverage with special mortgages designed to help police officers, firefighters, teachers and medical workers buy homes in the communities they serve.
Bank of America says the insurance — which covers the mortgage payments of public servants who are killed, paralyzed or dismembered — is not a marketing ploy.
The North Carolina-based lender says the program was born out of its experience with Adam Pierce, an Orange County, Fla., sheriff’s deputy who feared he would lose his home after he was shot and wounded in the line of duty in 2005.
Bank of America says it paid off Pierce’s mortgage, and has grandfathered in another 8,000 mortgages originated to date through the bank’s “Neighborhood Champions” loan program.
Borrowers eligible for the Neighborhood Champions program include full-time police officers and others working in law enforcement; firefighters and fire department employees; full-time medical workers including nurses, nursing-pharmacy-dental assistants, medical technicians and employees of a hospital, nursing facility or doctor’s office; and full-time educational staff in primary and secondary schools, colleges and universities, as well as part-time teachers.
All told, an estimated 16 million U.S. residents may qualify for a Neighborhood Champions loan, said Floyd Robinson, president of Consumer Real Estate for Bank of America.
Although teachers and medical workers don’t usually face the same risks as police officers and firefighters, Bank of America decided to provide death and dismemberment insurance for all occupations that qualify for a Neighborhood Champions loan.
“We’re committed to helping those four groups achieve home ownership and begin the wealth-building process,” Robinson said. “They are all neighborhood champions to us … we want them to be able to live in the communities they so honorably serve.”
The Neighborhood Champions program gives loan officers some flexibility on credit scores and credit histories, and is available with 100 percent financing or minimal down-payment options.
Robinson said the cost of the death and dismemberment insurance will not be passed on to borrowers, and that the Neighborhood Champions loan carries a competitive rate.
“We’re comfortable with the economics around the program,” Robinson said. “It’s not a marketing ploy.”
Borrowers who are approved for Neighborhood Champions Protected Mortgage loans do not have to qualify for the insurance, which is provided by Minnesota Life Insurance Co. They and their spouse (or other co-listed borrower) receive coverage regardless of their health status.
Loans of all sizes are eligible for the insurance, which covers the balance of the loan up to a $300,000 limit.
Other lenders providing assistance to public servants include mortgage repurchaser Freddie Mac, which last year expanded its Home Possible program to include members of the military in addition to teachers, firefighters, law enforcement and healthcare workers.
The Home Possible program offers no or low down payments and temporary buy-downs that can reduce a borrower’s initial interest rate by up to 1.5 percent in the first year, increasing home-purchasing power by up to 30 percent.
Some state housing-finance agencies also provide assistance for teachers. The California Housing Finance Agency, for example, provides second loans of $7,500 to $15,000 to be used as down payments on the agency’s first-lien loans. Interest payments on the loans, which are offered to teachers and administrators who work in underperforming schools, are deferred.
Local governments and employers may also subsidize loans for teachers, police officers and other public servants who would otherwise be unable to live in high-priced communities.