Originally created 11/20/02

Agency creates leasing program



In January, the Augusta Neighborhood Improvement Corp. will begin structuring a lease-purchase home-ownership program, which it will market to moderate- and low-income Augusta residents by midyear, ANIC Director Robert Cooks said.

The program hinges on ANIC's issuing five-year, tax-exempt, lease-revenue bonds through the Richmond County Development Authority. The bonds will be underwritten by a banking or credit institution approved by Freddie Mac, a government-supported enterprise that concentrates on providing affordable housing through federal agencies.

Here's how the program works:

  • Series A bonds are used to purchase Freddie Mac securities backed by lease-purchase mortgages; Series B bonds are used to make the down payment and pay closing costs.
  • Lease purchasers are qualified using flexible underwriting criteria. They select the home, and ANIC purchases it on their behalf by taking on a first mortgage, making the down payment and paying the closing costs with money from the bond proceeds.
  • The lease purchaser moves in and leases the home for 39 months.
  • During the lease period, the lease purchaser maintains the home, makes timely lease payments and establishes a credit record.
  • The lease purchaser exercises a purchase option with no additional down payment by assuming the unpaid principal balance of the existing mortgage.
  • The lease purchaser then owns the home and receives the value of the equity that might have accrued during the lease.
  • The bonds are tax-exempt because the homes are owned by a governmental entity during the lease period. Bond proceeds are held by a trustee in a guaranteed investment contract. The cost of issuance, program startup costs and required reserves are funded from bond proceeds.

    No equity or down payment is required, but lease purchasers must have a durable and stable source of income. To be eligible, a couple's income cannot exceed 140 percent of $74,850, the median household income in Augusta. Single applicants' income cannot exceed 45 percent of the median income.

    Lease purchasers must occupy the property during the term of the lease and cannot own other residential property during that time.

    The program benefits local lenders, real-estate brokers and purchasers, Mr. Cooks said. There is no financial risk or liability to ANIC, he said.

    ANIC is a private, nonprofit corporation, funded by state tax money, to revitalize some Augusta neighborhoods.

    Reach Sylvia Cooper at (706) 823-3228 or sylviaco@augustachronicle.com.

    The Augusta Neighborhood Improvement Corp. is expected to have a lease-purchase home-ownership program in place by midyear that will be marketed to moderate- and low-income Augustans.