State aid for home loans disappearing quickly

State aid for home loans disappearing quickly
Agencies compete for bond proceeds.

Published Wednesday, July 5, 2006

ST. LOUIS (AP) - With interest rates rising, so is the demand for a state program that helps first-time home buyers. But the program might have trouble getting more money.

The "First Place Loans" program offers below-market interest rates, and help with down payments and closing costs, to households that make less than $57,000 to $65,550 a year. It is administered by Missouri Housing Development Commission through a network of about 60 lenders.

With rising interest rates, "there’s a huge backlog of people wanting this program," said Joseph Bayer, president of First Integrity Mortgage Services in Maryland Heights.

Last month, single-family home buyers snapped up $60 million from the state program in less than two weeks, and the state has pumped $210 million into the program this year.

"Our money’s going out the door faster than we can ask for it," Pete Ramsel, the Housing Development Commission’s acting executive director, told the St. Louis Post-Dispatch.

In the past, state officials have easily authorized tax-exempt bonds to fund the program. But the head of the Department of Economic Development says the state must consider competing demands for the bonds.

Although the commission, headed by state Treasurer Sarah Steelman, wants authority to distribute $75 million more, Economic Development Director Greg Steinhoff wants to slow down the housing funding.

Steinhoff controls how the state allocates $464 million in so-called "private activity" bonds. By selling the bonds, the state generates money for the homeownership loans, as well as other projects.

While he supports the home loan program, Steinhoff said there are "other uses of private activity bonds that also want it just as bad." So far, pending applications seek a total of $369 million in bonds.

"We’re just trying to be wise and judicious," Steinhoff said. "We want to not give them all to one agency and shortchange everyone else."

One big user is the Missouri Higher Education Loan Authority, which using the money to offer breaks in student loans. Another potential user is utility company AmerenUE.

Last month, the state Environmental Improvement and Energy Resources Authority gave its initial blessing to as much as $250 million in tax-exempt bonds for pollution controls at AmerenUE’s Sioux coal-fired power plant in West Alton, just north of St. Louis.

But Steinhoff said his decision to slow down the housing agency’s funding was unrelated to Ameren’s proposal.

"We’re not holding back for any big project on the horizon," Steinhoff said.

Housing advocates say the home loan program should be a priority. It has helped 77,000 people so far. The typical loan is for $100,000.

"This is one thing the state really has done well for its citizens," said Bayer, the lender in Maryland Heights. "It has enabled people with good credit to put their roots down in Missouri."