Freddie Mac is actively seeking partnerships with teacher-retirement systems across the United States to develop an innovative program that offers zero-down-payment mortgages to teachers and other school employees. The housing-finance company initially introduced this program, known as the CalSTRS Home Loan Program, in California. It was the first program in the nation to involve public pension funds and aimed to assist lower- or middle-income employees in purchasing their own homes. Dwight Robinson, a spokesperson for Freddie Mac, based in McLean, Virginia, stated that the company packages mortgages and sells them to investors to ensure a steady supply of affordable housing.
The CalSTRS program has gained significant popularity in California, prompting Freddie Mac to consider replicating it in other parts of the country. Educators and school workers with modest salaries often struggle to afford homeownership, and this initiative aims to address that issue. Furthermore, this program serves to attract and retain educators during times of teacher shortages, contributing to the stability and prosperity of the communities they reside in, according to Mr. Robinson.
He noted that when the program was launched in 2000, their goal was to provide $100 million in loans over the next few years. However, they ended up financing $400 million of teacher mortgages within just 12 months, surpassing their expectations by 40%. Thus far, over 1,400 individuals in California have taken advantage of this opportunity, and approximately 661,000 currently employed or retired school employees are eligible for the program in the state.
Mr. Robinson explained that the program is advantageous for teachers and other participants because they are not required to make a down payment, which can amount to thousands of dollars. In the California model, participants must take out two loans. The first loan, covering 95% of the home’s cost, is obtained from a credit union or commercial lender and is repaid through monthly mortgage installments. Freddie Mac purchases these bank loans. The second loan, which goes towards the down payment, is funded by the California State Teachers’ Retirement System (CalSTRS) and does not need to be repaid until the property is sold. For the program to be implemented in individual states, the teacher pension plan must agree to participate.
This program effectively increases a teacher’s buying power by approximately 25%, as stated by Brad German, a spokesperson for Freddie Mac. Gary Lynes, the chairman of the board of California’s retirement system, expressed his satisfaction with the zero-down-payment option, emphasizing that it will enable California to address the pressing need to recruit and retain teachers in classrooms. Robert J. Reid, a member of the board of directors for the Center for Housing Policy, highlighted the challenges educators face in regions with high living costs, which often deter them from relocating or remaining in the profession. The Center for Housing Policy is the research affiliate of the National Housing Conference, a nonprofit membership organization promoting high-quality affordable housing based in Washington, D.C.
To attract and retain teachers, many states and districts are offering various incentives. The U.S. Department of Housing and Urban Development initiated a housing program for teachers last year, but it was recently suspended due to instances of fraud and abuse by eligible police officers ("HUD Suspends Housing Program for Teachers," April 11, 2001).
