D.C. housing director Robert L. Moore has announced that the 40 remaining city-owned properties on Bates Street NW, a problem-ridden urban renewal project in Shaw, will be sold at bargain prices and below-market mortgage interest rates beginning next week.
Moore told an organization of area housing officials on Tuesday that the city will offer the homes with 30-year financing at 11 percent--well below the current 17 percent market rate--because of an agreement worked out between the city and the Federal National Mortgage Association (FNMA).
Bennie Dixon, the FNMA community development director who negotiated the agreement with the city, said the interest rate will be 12.5 percent, not the 11 percent announced by Moore.
But Dixon confirmed that under the agreement, the city in effect will subsidize the mortgages, estimated to eventually total about $3 million. In turn, FNMA has agreed to purchase 60 percent of the total mortgage exposure.
The agreement is the city's latest attempt to complete the moribund project, which was launched as a showpiece for Mayor Marion Barry's housing program and an opportunity to display new opportunities for minority developers.
After an initial sales surge brought about 60 new homeowners to Bates Street and its surrounding blocks, escalating interest rates combined with average sales prices of $80,000 to price the houses out of the range of young professional singles and couples, the group first attracted to the area.
"It's a godsend," said Moore, speaking of the agreement Tuesday following the meeting of the Potomac Chapter of the National Association of Housing and Renewal Officials. "It's a new way to provide home ownership in a high-interest market."
With lowered prices of $63,000 and long-term financing at 11 or 12.5 percent interest, the monthly payments of principal and interest will range from $619 to $693, instead of $927 a month at 17 percent.
Under the complicated agreement, the city will lend the developers of the Bates Street project--Jack W. White, George Holmes, John E. Haley and Dennis Makielski--$1.2 million interest-free to renovate the gutted two-story brick shells into three-bedroom homes with air-conditioning, wall-to-wall carpeting and fireplaces.
Usually the developers would have to go to a bank to get such construction loans, and would then repay the lender in full as the properties were sold. In this case the city is the lender, and has agreed to accept only 60 percent of its money at sale and the rest over the 30-year life of the mortgage at 1 percent interest--an arrangement that amounts to a city subsidy.
Inner-City Federal Savings and Loan Co. will provide the mortgage money to the home buyers, and then FNMA will purchase 60 percent of that loan exposure. When a homeowner pays the mortgage each month the money will be split three ways--60 percent to FNMA, 35 percent to the city and the remainder to the savings and loan.
Moore told the housing group that the city had a commitment for up to $50 million in loans from FNMA that would go toward other projects. But FNMA official Dixon said that was "absolutely not correct" and that his agency was committed only to the Bates Street project, although it would consider involvement with other projects if they fit FNMA's criteria.
The Bates Street project has been beset with financial problems and accompanying delays practically from the beginning. Subcontractors complained they were not paid, and by late last year nearly $3 million in liens had been filed against the developers. The developers could not be reached for comment yesterday on the status of the liens.