University making changes to homeownership programs
Posted May 15, 2012; 10:17 a.m.
The University will be making changes, effective July 1, to the terms, management and eligibility requirements of its programs that support the purchase of homes in the Princeton area by faculty and staff.
The changes will affect the Standard Mortgage Program, the Tenancy-in-Common Program, and the Broadmead and Gray Farm purchase plan programs.
University employees who are currently participating in the programs will remain under their original terms as long as they own their current properties. Employees who are eligible for the programs as of June 30 but whose eligibility will change under the revised policies will still be able to enter into the programs at their current level of eligibility, under the revised terms, until June 30, 2013. To participate, employees must submit a fully completed mortgage application by June 30, 2013.
The University is also working with several local financial institutions that have an interest in providing mortgage-related products and services to faculty and staff, such as new mortgages and refinancing opportunities, subject to the lending practices and standards of the institution.
"For many years, the University has generously provided various types of assistance to faculty and staff who want to own a home in the Princeton area," said Executive Vice President Mark Burstein. "Given the dramatic changes in the regulatory environment due to the 2008 mortgage crisis, the increased cost of the programs, and our desire to ensure that the programs achieve target recruitment and retention objectives, we decided the University needed to streamline and revise its homeownership offerings. The proposed revisions will achieve cost savings, enhance compliance and better support the objectives for which the programs were originally established. At the same time, we're working to improve the management of the programs to provide better service."
The review was conducted by individuals in the Office of the Dean of the Faculty, the Office of the Executive Vice President, the Office of Finance and Treasury, the Office of General Counsel, the Office of Human Resources and University Services.
Major changes to the Standard Mortgage Program, which allows eligible University employees to purchase a single-family home within nine miles of the central campus or in Trenton at mortgage rates below the prevailing local commercial rates, include:
- Discontinuing the $258 mortgage application fee. Fees for property appraisals will continue to be required as part of the application process, and payment for appraisal services will be made directly by the applicant to the appraiser.
- Adding a rate floor to the University interest rate, which targets a rate of 1.5 percent below the prevailing local commercial bank rate for residential mortgage loans. The floor will be equal to the long-term monthly applicable federal rate, as set by the Internal Revenue Service.
- Limiting loans to terms of 30 and 40 years, at the same interest rate. Loan terms of less than 30 years will no longer be offered.
Changes to the Tenancy-in-Common Program, which allows eligible faculty and senior staff to purchase homes in partnership with the University, include:
- Making detailed information about the program more readily available.
- Modifying the process for making major improvements to properties and adjusting ownership percentages. The minimum capital investment for major improvements will be reduced from $55,000 to $50,000, or 5 percent of the property's appraised value, whichever is less. Also, to protect homeowners in a declining market, they will receive a credit for, at minimum, 50 percent of their approved expenditures on major improvements when the calculation of ownership percentages is computed at the completion of the improvement.
The Princeton Faculty Residential Purchase Plan combines the previously established Broadmead and Gray Farm homeownership programs under single management. The program will allow eligible faculty and senior staff to buy and sell properties on the two tracts from the University at a fair-market value price established by the University. Changes include:
- Subjecting all of the 140 Gray Farm and Broadmead properties to the terms, conditions and restrictions of the properties in the former Broadmead program.
- Increasing the emphasis on home stewardship through education and resource support.
- Revising the administrative procedures for carrying out the program.
Mortgage rates are near record lows, so employees who entered the Standard Mortgage Program years ago may be able to attain lower rates from commercial banks through partnerships that have recently been negotiated by the Office of Finance and Treasury.
"Some members of our community continue to carry University mortgages that charge high interest rates relative to existing commercial rates, which may not be in their best financial interest," Burstein said. "The University program does not permit refinancing with the University, but refinancing with an external lender could reduce their interest payments and enhance their current financial situation."
Letters have been sent to all faculty and staff who are currently eligible for the programs, and additional information about the homeownership programs and changes to them may be found on the Housing and Real Estate Services website and the Office of Finance and Treasury website.
For specific questions about eligibility, contact Jennifer Ealy, associate director of Housing and Real Estate Services, at firstname.lastname@example.org or 609-258-5026. For questions about mortgage terms and conditions, contact Lorrie McGough, loan officer in University Mortgage Services, at email@example.com or 609-258-3123.