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The Northwest Side Housing Center’s Affordability Gap Loan program is a loan product that reduces the amount a family owes on their home by up to $50,000. The homeowner can finance out of a loan with predatory characteristics, and into a quality mortgage they can afford for the long term.
Eligible homeowner must live in zip codes 60634, 60707 (Chicago portion), 60639, 60641, 60647, 60651, and 60618; and meet certain income guidelines.
During the 15-year term of the Gap Loan, the homeowner makes no payments on that loan. After 15 years or upon sale of the home or refinance, the borrower is responsible for repaying the amount of the loan plus a percentage of the appreciation.
The housing center will work with qualified applicants to refinance by obtaining quality mortgages more suited to their incomes. The gap loan is used to make up the difference between the loans since the new mortgages tend to be for lesser amounts – based on what the applicant can truly afford as well as the reduced value of most homes.
The program will make more than $500,000 available to homeowners facing foreclosure, and whose original loans had predatory characteristics.
There is also an incentive for paying it off early in the first five years. Housing counseling is also a key component of the program.
Chapman and Cutler partner John Hitt, who provided legal services on a pro bono basis to the housing center, said he helped structure the program and draft the loan documents.
The legal legwork turned out to be fairly complicated, Hitt said. They tried to find similar programs around the country, but could not find any.
Residents of Chicago’s Northwest Side has been especially hard hit by the housing melt-down, with more than 1,700 home foreclosures started since 2007, an increase by over 500 percent in the past 15 years, according to the law firm’s press release.
The first loan closed about a month ago, and everyone involved hopes the word will get out about the program so that others take advantage of it, and so other financial institutions are encouraged to participate, Hitt said.
“I think it’s particularly gratifying for a couple of reasons,” he said. “We’re trying to use this program to get funds to help keep people in their homes and help stabilize the neighborhood, and that is obviously a good thing.”
For more information about the Gap Loan Program, please contact Liz Caton at (773) 836-1179.