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$25 million loan aimed at saving homes

Nonprofit buys houses, resells them to owners; group’s loan portfolio backs bank funding

Boston Community Capital plans to use a $25 million loan from East Boston Savings Bank to buy more than 75 properties and sell them back to owners in danger of losing their homes.

The nonprofit organization purchases homes that have mortgages in default or are subject to foreclosure from banks at reduced market prices. It then resells the properties to the owners and issues new, more affordable 30-year mortgages. The organization has financed 270 properties for 381 families since late 2009.

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Chief executive Elyse Cherry said the East Boston Savings Bank loan is unusual because it is backed by the revenue from a collection of 160 mortgages issued by Boston Community Capital. She said the new commitment shows that the nonprofit’s real estate model is sustainable.

Typically, Boston Community Capital steps in to help homeowners whose property values have fallen sharply below the amount they owe on their mortgages.

“What we’ve been able to establish is that if we give these folks, who are in a difficult situation because the market price of their home was way above the [current] value of the home, a properly priced home, they can afford it just like anyone else,” Cherry said.

Boston Community Capital approached about a dozen banks before it found one willing to entertain the idea of loaning money against the mortgages. Then East Boston Savings Bank spent about three months reviewing the nonprofit’s borrowers and underwriting process before approving the 20-year loan.

The nonprofit and the bank said the loan, which will fund purchases in Massachusetts and other states, has a fixed interest rate of less than 5 percent for 10 years. They declined to provide further details.

“It’s definitely not conventional bank financing,” said Jeff Dickinson, a vice president at East Boston Savings. “Boston Community Capital’s ongoing oversight of the loans and commitment to the success of the borrowers provided a great deal of comfort.”

The improving economy and growing market value of homes made the investment “a good bet,” he added.

The Warren Group reported Monday that the pace of home foreclosures in the state dropped 74 percent in March from the same month a year ago.

The figures suggest the foreclosure crisis may have run its course, after taking more than 50,000 homes from Massachusetts families.

Steve and Lindsay Edeman of Tewksbury almost became one of those families.

The couple owed $330,000 on their two-bedroom, ranch-style home when Steve Edeman was laid off from a construction job in 2008 and they welcomed their first of two children.

For months, the Edemans used their savings and credit to pay a $2,500 monthly mortgage, but fell into a financial hole dug deeper by charges for missed payments.

Lindsay Edeman contacted Boston Community Capital for help in June 2012, a month before foreclosure notices began arriving in the mail.

The nonprofit reviewed their financial history and negotiated with the Edemans’ bank to buy the house for $155,000 last October, $5,000 over the appraised value. That same day, it sold the couple the home for $204,000 with a new 30-year loan that cut their mortgage payment by $900 a month.

“I can’t tell you the stress I no longer feel anymore from coming home with a voice mail from the bank and creditors calling,” Lindsay Edeman said. “It’s a whole new world.”

Taryn Luna can be reached at taryn.luna@globe.com.
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