Prince George's County Executive Lawrence J. Hogan yesterday proposed using $10 million in county pension funds to make low-interest home mortgage loans available to county residents.
According to Hogan spokesman Carl Gagliardi, Hogan's proposal is based on a plan unveiled by Maryland Gov. Harry Hughes two weeks ago in which a savings and loan obtained $20 million in mortgage money from the state's pension system under a plan developed by the Federal National Mortgage Association (Fannie Mae).
In Hogan's plan, as in the governor's, the pension money would not go directly to mortgages, but would be used to buy marketable, federally insured Fannie Mae securities. Fannie Mae then would channel the money to one or more designated savings and loans, the traditional sources of mortgage funding.
By moving pension funds into mortgage money, Hogan said in a prepared statement, pension plans will "realize a much higher yield" on their investments "and at the same time provide lower than prevailing interest rate mortgages to families who purchase homes in this county." The plan will also, Hogan said, provide "the housing market in this county with a much needed boost." Finally, the plan will provide the county "additional revenue from housing-related taxes," he said.
Hogan, who is seeking the Republican nomination to a U.S. Senate seat, serves as chairman of the board of trustees of the $75 million county-administered pension system, developed for the county's police, fire and hospital workers.
The $10 million would come from the portion of the pension fund, about $27 million, which is reserved for fixed-income investments.
In announcing the proposal, Hogan did not say when he would take the plan before the pension system trustees. Nor did he specify the interest rate the fund would receive, the banks that would administer the money, or the rate to be charged for the mortgages. He said details will be released later.
The plan undertaken with the state pension funds is the first in the nation to enable homeowners to tap into pension funds for mortgages. The state pension fund will receive a 16 percent return on its investment, and mortgages will be made available to homeowners through Loyola Federal Savings and Loan of Baltimore at either 13.5 or 15 percent, depending on purchase arrangements. Home builders will have to make up the difference between the interest rate charged homeowners and the cost of the loan, as they are already doing on many loans.