If you remain in your home for five years or longer, the repayment is limited to the lesser of the amount of the subsidy used or 20 percent of the net appreciation gained at the time of sale. However, in no event shall this amount, when combined with your other secured debt, exceed 95 percent of the property's value. If you choose to refinance the second mortgage, subsidy money can no longer applied to your monthly payment. The amount you repay will be calculated in the above manner. Banks participate by originating the first and the second mortgages under the program.
Some banks sell the first mortgages on the secondary market.
The MHP Fund has worked with Fannie Mae to obtain approval for the program guidelines and for the loan closing documents. The banks' ability to sell the first mortgages in the secondary market reduces bank risk over time and greatly leverages the use of bank commitments to the program. Generally, the second mortgages are held by the banks in their own loan portfolios. In order to make this mortgage product even more affordable to first-time buyers, the banks in Boston participating in the Soft Second Loan Program are offering first and second mortgages at one half of a percent below conventional interest rates. Communities are encouraged to negotiate the interest rate of these mortgages with participating lenders.