The SoftSecond Loan Program was developed in 1991 by the Massachusetts Bankers Association, the Massachusetts Housing Partnership and the Massachusetts Affordable Housing Alliance to address community concerns over low levels of mortgage lending to traditionally underserved borrowers and neighborhoods.  Launched in Boston, the program was expanded statewide in 1992 and is now available in every city and town in the Commonwealth through numerous participating lenders.  The program is funded by the state legislature and administered by the Department of Housing and Community Development and the Massachusetts Housing Partnership. 

he SoftSecond program was designed to reduce the substantial down payments and large monthly mortgage bills that often present insurmountable obstacles to lower-income homebuyers.  The program requires only a three percent down payment and provides qualified homebuyers with two 30-year fixed-rate mortgage loans; the first for 77 percent of the price of the home and the “soft second” mortgage for the remaining 20 percent.  The second mortgage is interest-only for the first ten years and, in many cases, monthly bills are further reduced by public subsidies of these interest payments.  SoftSecond loans have no points, no mortgage insurance fees and, in most cases, below-market interest rates. 

Expanding Homeownership Opportunity II: The SoftSecond Loan Program 1991-2006 updates the information presented in an earlier report on the SoftSecond program released by MCBC in 2004.  Both reports were prepared for MCBC by Jim Campen.  Based on analysis of SoftSecond loan activity and performance statewide, the report finds: 

• By the end of 2006, the SoftSecond Loan Program, through its participating lenders, has provided mortgage loans to 9,622 income-qualified borrowers (the 10,000 loan milestone was reached inmid-2007).  During the 2004-2006 period that is the main focus of the report, 2,596 households received SoftSecond loans. 
  

• The statewide SoftSecond delinquency rate (2.2% at year-end 2006) has consistently been well below the delinquency rate for all mortgage loans in Massachusetts (4.5% at year-end 2006). 
  

• SoftSecond loans have facilitated home purchases for families in almost two-thirds of the cities and towns in Massachusetts (226 out of 351).  In recent years, the city of Boston has received about one-third of total loans, while the rest have been distributed throughout the state.


• Twenty-seven currently operating lenders (26 banks and one credit union) made at least one SoftSecond loans during the 2004-2006 period, although a handful of large banks account for the great majority of loans. 
  

• The median household income of SoftSecond borrowers between 2004 and 2006 was $45,000.  During that period, almost two-thirds (65.0%) of all SoftSecond loans went to borrowers whose household incomes were 50,000 or less; nearly one out of ten loans (9.7%) went to borrowers with income of $30,000 or less.

• Statewide between 2004 and 2006, 25.6% of SoftSecond loans went to Latinos (who account for just 5.0% of the state’s households); 16.8% of loans went to blacks (who account for 4.7% of total households) and 7.3% of loans went to Asians (who account for 3.1% of total households. 
  

• Statewide between 2004 and 2006, an average 6,210 in public funds leveraged nearly $210,000 in private mortgage financing per household.  Since the program’s inception in 1991, $51 million in public funds have been spent, leveraging over 1.4 billion in private mortgage financing.

Thomas Callahan, executive director of the Massachusetts Affordable Housing Alliance and co-chair of MCBC’s Mortgage Lending Committee, strongly supports the SoftSecond program.  He said “The SoftSecond has become a model program.  It started as a community and bank response to racial disparities in Boston mortgage lending and now it serves as a roadmap for lenders looking to engage in responsible lending in our state.” 

Esther Schlorholtz, director of community investment at Boston Private Bank & Trust Company, also endorses the program.  She said “At Boston Private Bank, we have found the SoftSecond program to be highly successful in helping many lower-income, first-time homebuyers buy their own homes and giving us solid, well-performing loans on our books.  During this challenging time, when many subprime borrowers are at risk because of the inappropriate loans they received, SoftSecond lenders like ourselves remain proud that loans originated under this program remain stable, affordable and sustainable for our borrowers.”  Between 2004 and 2006, Boston Private Bank was the largest single SoftSecond lender in the city of Boston. 

About the Massachusetts Community & Banking Council 

The Massachusetts Community & Banking Council (MCBC) was established in 1990 to encourage community investment in low- and moderate-income and minority neighborhoods.  MCBC brings together community and bank representatives to promote a better understanding of the credit and financial needs of lower-income neighborhoods and provides information, assistance and guidance to banks and community groups in addressing those needs. 

MCBC is funded through the financial support of member banks.  MCBC 2007 bank members include Avon Co-operative Bank, Bank of America, Bank of Canton, Benjamin Franklin Bank, Boston Private Bank & Trust Company, Braintree Cooperative Bank, Cape Ann Savings Bank, Central Bank, Chelsea-Provident Co-Operative Bank, Citibank, N.A., Citizens Bank of Massachusetts, Dedham Institution for Savings, Eagle Bank, East Cambridge Savings Bank, Eastern Bank, Everett Co-Operative Bank, Fiduciary Trust Company, Hudson Savings Bank, Hyde Park Co-operative Bank, Hyde Park Savings Bank, Mt. Washington Bank, North Cambridge Co-operative Bank, Reading Co-operative Bank, Sovereign Bank, State Street Corporation, StonehamBank, TD Banknorth, The Bank of New York Mellon Corporation and Wainwright Bank. 

Expanding Homeownership Opportunity: The SoftSecond Loan Program 1991-2006 is a companion publication to Changing Patterns, MCBC’s annual report on mortgage lending patterns.  All MCBC reports are available on MCBC’s website at www.masscommunityandbanking.org.

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