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December 11, 2002

Miami-Dade NHS creates Secondary Market for Surtax loans

By John Little

Miami-Dade Neighborhood Housing Services, Inc. has announced a breakthrough agreement with Miami-Dade County and others that will, for the first time, provide a secondary market for "Surtax" loans. The Agreement will result in a dramatic increase in the amount of Surtax funds available for additional lending to low income homebuyers.

Until now the County, unlike a bank, has not sold any of its closed Surtax loans to entities such as FannieMae or FreddieMac. As a result, Surtax funds have not been effectively replenished and the impact of the program on eliminating poverty has been stunted.

The secondary market is being provided by another of the parties to the agreement, Neighborhood Housing Services of America (NHSA), a subsidiary of the Neighborhood Reinvestment Corporation (NRC) which was created and funded by the U.S. Congress.

The concept underlying the agreement is the creation of a seamless "one stop" interface that will eliminate some of the barriers inhibiting low income families from becoming homeowners.

Miami-Dade NHS is a community based nonprofit organization that is affiliated with NHSA's parent The other partners to the agreement are HSBC Bank and Bank Atlantic.

The County will initially sell $2.9 million of its previously closed Surtax loans to NHSA. Miami Dade NHS will get a cash closing fee of $140,000 that will be used to help underwrite the operation of the newly created program. Out of its sale proceeds the County will allocate $1.45 million to be used solely for second mortgage loans originated by Miami Dade NHS as part of the new program.

Thus, a seamless system will have been created for the homebuyer. Miami Dade NHS will originate both the 1st mortgage loans (from the two participating banks) and the low interest Surtax loans from the County. Prior to the closings on the loans the files will be sent to NHSA for approval. NHSA will purchase the loans subsequent to closings. Miami-Dade NHS will provide the low income borrowers a homebuyer education program and will assist them in working through any pre-closing issues.

As part of the agreement NRC is making a $500,000 grant to Miami-Dade NHS that will be used to provide further subsidy for certain very low income home purchasers.

For more information contact Arden Shank at Miami-Dade NHS (305 751 5511 x 231).