THE HOUSING SCENE Lenders set their sights on new ‘niche’ markets

For example, there are now loans that provide an added bit of security for an estimated 16 million professionals who often fall under the classification of first responders. Meanwhile, some lenders are targeting rural home buyers who want to be part-time farmers, while others are offering products to international borrowers who purchase vacation homes in the United States.

Bank of America was inspired to add an insurance feature to its community-lending product by one of its borrowers, Adam Pierce, a 26-year-old Orange County, Fla., sheriff’s deputy who was wounded while on duty in 2005 and left paralyzed.

Policemen like Deputy Pierce, who was shot twice while chasing a suspected drug dealer, face the constant threat that they could be wounded or killed, and they understand and accept the dangers of their jobs.

But with BoA’s Neighborhood Champions Protected Mortgage, at least they’ll have peace of mind knowing their families will be protected should tragedy strike. Under the program, the mortgages of policemen, firefighters and medical workers will be repaid up to $300,000 in the event of accidental death, permanent paralysis or dismemberment. Teachers also are covered under this insurance feature.

Coverage, which is free, applies to the first two listed co-borrowers. Better yet, borrowers don’t have to qualify, and they receive insurance regardless of their health status.

Bank of America has grandfathered more than 8,000 existing Neighborhood Champion borrowers into the program, which is aimed at housing affordability issues confronting those who are employed in what one of the country’s largest financial institutions calls “occupations of honor.”

Many also consider farming to be an honorable occupation. And home buyers who want to move to the country and farm as a sideline are eligible for mortgages of up to $3 million from Farmer Mac, a government-sponsored enterprise similar to Fannie Mae and Freddie Mac.

Known more formally as the Federal Agricultural Mortgage Corp., the little-known GSE was created by Congress in 1988 to produce a secondary market for agriculture real estate and rural housing mortgages.

Farmer Mac doesn’t make mortgages directly to borrowers. Rather, it buys the loans made by local lenders. And among the products it buys are part-time farm/residential loans. Under the program, properties must be owner-occupied, single-family detached residences or second homes with enough acreage to support agricultural production. The property can’t be just a house on a large lot or in the woods somewhere.

There are no minimum or maximum acreage requirements. But if the property is less than five acres, a minimum of $5,000 in annual gross sales of agricultural products must be documented. There is no income requirement for properties larger than five acres.

Better yet, there are no geographic restrictions like those on rural housing loans backed by the Department of Agriculture’s Rural Housing Service. While part-time farm loans are normally found in rural areas, says Farmer Mac’s Patrick Kerrigan, there are no population limitations.

Farmer Mac also buys full-time farm loans from local lenders. If the property is secured by more than 1,000 acres, the maximum loan amount is $7.9 million.

The large number of international home buyers is another intriguing target for lenders. According to the National Association of Realtors, one-third of its members had at least one international client between April 2006 and April 2007. And of those, more than half sold their clients stateside houses.

“All real estate is local, but all buyers are not,” says Lawrence Yun, the NAR’s chief economist. “We live and do business in a global economy. And with the weak U.S. dollar compared to the euro, U.S. real estate is now selling at a 30 percent to 40 percent discount compared to five years ago.”

In many cases, foreign nationals pay cash for their second-home vacation properties. But if they want a mortgage, there are plenty of lenders from which to choose, especially in hotbed markets like Florida, California and New York, where the international set likes to hang out.

“The timing of foreign nationals interest in the U.S. is ideal,” says Paul Decoff, executive vice president of lending operations at Thornburg Mortgage in Santa Fe, N.M. “As a relatively new and underserved demographic market, international borrowers can be targeted to help alleviate slowing originations that are a result of a softer housing market.”

Of course, documenting foreign borrowers is more onerous than underwriting loans for U.S. citizens. For example, they must provide identification in the form of a visa, entry permit, citizen’s ID or U.S. passport.

Most lenders require international customers to have the equivalent of 12 months of principal and interest payments safely deposited away in an American bank account. But some want further verification. For instance, Coral Gables-based FirstBank Florida requires three credit references translated into English, plus an accountant letter, also in English, confirming the borrower’s source of income or type of employment.

It’s almost as complicated to qualify Native Americans for a mortgage, if only because of complex questions regarding the ownership of the land on which their homes sit.

In a nutshell, the tribes or their members do not own a great deal of tribal land. Rather, Uncle Sam holds it for them in a trust. As such, it cannot be mortgaged.

That’s just one among a number of reasons that the ownership rate among Indians is an appalling 33 percent, according to the National American Indian Housing Council. That’s half the rate of the general population and the lowest rate among minority groups.

But the Federal Housing Administration, the government agency that insures lenders against losses incurred if borrowers default on their loans, has a guarantee program specifically for American Indian and Alaska Native families.

Under Section 184, which was enacted by Congress in 1992 to improve access to mortgage money for Native Americans, borrowers pay a 1 percent loan-guarantee fee at closing. But the fee can be paid in cash or rolled into the loan amount. And down-payment requirements are minimal — just 2.25 percent if the loan is more than $50,000 and only 1.25 percent if it is less than $50,000.

Like Farmer Mac, the FHA doesn’t make loans. But it does back those made by participating lenders or, if the borrower is leasing tribal land, by the borrower’s tribe and the Bureau of Indian Affairs.

Credit unions also are also starting to make inroads into the Native American market, and some major lenders are taking a look at it as well.

Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing and housing finance industry publications.