On November 21, the Maryland Department of Housing and Community Development (DHCD) announced the first finalized home purchase under the Maryland Smart Buy program, a new mortgage assistance initiative formed under the existing Maryland Mortgage Program. Under this program, prospective Maryland home owners will be able to eliminate most if not all of their outstanding student debt, and purchase a move-in ready home in the process.
“With the launch of Smart Buy, Maryland is among the first in the nation to actively address student debt as an obstacle to home ownership,” said Maryland Lt. Governor Boyd K. Rutherford, speaking at the purchase celebration for the 3-bedroom, 2.5 bathroom townhome purchased by Jasmine Townsel and Brian Hawkins for $205,000 under Smart Buy. “We recognize that first-time home buyers play a pivotal role in the health of the housing market, which is critical to the strength of Maryland’s overall economy.”
The program, which was introduced in Maryland’s 2016 Legislative Session, was created with the intent of helping prospective millennial home buyers who were struggling under student debt. “Through the other programs that we’ve had where we’ve assisted people burdened with student debt to get into home ownership, there was that belief that…there might be some way to pair the need of millennials to find a way to resolve their student debt issues to some degree, and to get into home ownership, with our state-owned properties,” said Michael White, Director of Public Information at the DHCD. “So we put all that together and created a program that might be able to help Marylanders.”
Another part to the motivation behind this project comes from a desire to prevent the “brain drain” that occurs when college-educated Marylanders leave the state after graduation. White hopes that offering to pay off these students’ loan debt will entice them to stay.
In order to qualify for the Smart Buy program, potential buyers must have at least $1,000 in outstanding student debt, either in repayment or deferred, up to a maximum of 15% of their chosen home’s purchase price. Most other requirements are consistent with standard Maryland Mortgage Program requirements, apart from a higher required credit score of 680, as all Smart Buy loans must be manually underwritten. If the buyer’s student loan debt exceeds 15% of their home’s purchase price, they are responsible for paying off the remainder – and the loan must be paid off in full before the home purchase.
As of December 2016 the DHCD has sixteen properties available for purchase under Smart Buy, priced between $70,000 and $310,000 and listed through Cummings&Co. and Long and Foster. Prospective Smart Buy participants are able to pick one of these properties to purchase. The homes are move-in ready, fully-renovated, REO-owned, and hand-selected for first-time young buyers.
“We got inquires if we can add other properties that are out there in the market…if we can add properties that are owned by other investors and add them to our lease,” said Maddy Ciulu, Director of Single-Family Housing at the DHCD. “We got inquiries from builders who either built houses or renovated existing houses, asking if we can add them underneath the program. Well, the answer is again no. The program is focused on properties that are in our portfolio.”
So far, Maryland is the only state with a student loan elimination program of this nature, but the DHCD has received questions about Smart Buy from other state governments, including Massachusetts, Washington, Idaho, Illinois and the District of Columbia.
“I’d love to think that this program would go nationwide, that other states would adopt similar programs, to offer the paying off of student debt,” said Matthew Heckles, Assistant Secretary and Director of the Community Development Administration. “If there’s someone that’s burdened with student debt but wants to get into home ownership, we’d love to think that we were the first to do this program that spreads across the nation.”
“It is a wonderful program, first of its kind,” said White. “We’re at the vanguard of resolving the issue of student debt in the state of Maryland.”
