First-in-Nation Fannie Mae Land Trust Certification in Conjunction with Mortgage Revenue Bonds

MAHP IN A MINUTE

Volume 2, Number 11: May 9, 1997

More low and middle income residents will gain an opportunity to realize their dream of home ownership, thanks to Fannie Mae’s recent certification of MAHP’s land trust lease process.

A land trust makes new construction of affordable housing possible by allowing loan applicants to separate the cost of their home from its land. Prospective home buyers are then able to finance cost of the house only, significantly reducing both their up-front cash outlay and their monthly mortgage payment. The land is purchased by MAHP, and is held in a 99 year renewable lease; the homeowner pays $25.00 monthly to maintain the lease, and MAHP assumes the tax liability for the land.

Apart from the obvious advantage of making home ownership more affordable, a land trust perpetuates the properties’ affordability throughout its life span, by virtue of its (renewable) 99 year lease. As the original owners’ circumstances and needs change, the properties can be re-sold to new qualifying low and middle-income families who will assume the land trust lease while reaping the benefit of no additional financing necessary to purchase the land.

Land trusts are by no means a new arrow in MAHP’s quiver; our first land trust property was built in 1995. Since that time, 4 more have been completed and occupied, and one is presently under construction.

What’s new is Fannie Mae’s approval of the land trust/Mortgage Revenue Bond (MRB) concept. Prospective home buyers who qualify for mortgage financing through one of 345 Iowa banks participating in the Iowa Finance Authority’s First-Time Home Buyer Mortgage Loan program can also apply for a land trust (IFA issues Federal tax-free MRB bonds to provide financing for the First-Time Home Buyer Mortgage Loan program). Now, with Fannie Mae’s certification of land trust/MRB financing, all IFA participating lenders can offer first time home buyers that land trust/MRB option, and sell the resulting mortgage back to Fannie Mae. Obviously, this opens up the land trust/MRB option to other non-profits, lenders and first-time home buyers statewide.

MAHP is honored to have pioneered (along with our Fannie Mae and IFA partners) such an innovative means for achieving home ownership. We eagerly look forward to working with IFA, Fannie Mae and other non-profits statewide to expand the use of land trust/MRB financing as a tool for creating affordable housing and revitalizing communities.