OceanFirst slices hundreds of dollars off monthly mortgage. But can buyers find the homes?

MARLBORO - Patricia Kelly signed up for affordable housing 2½ years ago, hoping to buy a place of her own where she and her disabled daughter, Jessica, could live with security, steady payments and, finally, their own bedrooms.

Last fall, a two-bedroom townhouse came onto the market. Its walls were black. It smelled of cigarette smoke. But Kelly didn't hesitate to make a bid.

"It's beautiful," Kelly, 61, said recently, the walls repainted and boxes still needing unpacking. "It's the only word I can use for it. It's beautiful."

After getting dinged by federal regulators for discriminatory lending practices, OceanFirst Financial Corp. is ramping up NeighborFirst, a mortgage program for low- and moderate income buyers such as Kelly that discounts interest rates and waives insurance, saving them hundreds of dollars a month.

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The Toms River-based bank is seeing the program virtually double each year, even as overall mortgage lending has slowed. And there are signs that it could grow faster than that except, affordable housing advocates say, there aren't enough homes to meet the demand.

OceanFirst is the biggest bank headquartered at the Shore, with assets of $13.5 billion. It launched NeighborFirst in 2022, opening the program to low- and moderate-income homebuyers who make up to $108,240 a year.

The details:

• It offers a 0.5 percentage-point discount on the interest rate.

• It requires buyers to make a down payment of 3%.

• And it waives private mortgage insurance that buyers can be required to buy if they put down less than 20%.

The result: The program allows a consumer with a credit score of 680, for example, to save $637 on their monthly mortgage payment, said Thomas Vogel, an OceanFirst loan officer.

"It makes that buyer more competitive," Vogel said. "They can stretch a little bit — or reduce their expense."

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'Hold banks accountable'

Other banks have similar affordable housing programs, but NeighborFirst is a chance for OceanFirst to show progress after receiving a rating of "Needs to Improve" by regulators examining whether the bank was complying with the Community Reinvestment Act.

The 1977 federal law is designed to ensure banks meet the credit needs of communities they serve, including low- and moderate-income neighborhoods. After a series of mergers, regulators said OceanFirst in 2018 and 2019 fell short of the communities' needs, particularly in Middlesex County.

The low rating can lead to denials of bank applications when seeking to expand, merge or acquire other banks, said Leila Amirhamzeh, director of community reinvestment for New Jersey Citizen Action, a consumer group.

It isn't clear how OceanFirst ran into trouble with regulators, but Amirhamzeh said fast-growing banks are susceptible. They can inherit discriminatory lending practices from banks they acquire. Or they often consolidate operations by closing branches, taking away access.

The Community Reinvestment Act "is a way for us to hold banks accountable when there are issues or areas of concern that are raised by federal regulators," Amirhamzeh said. "And it's one of the best tools we have to ensure that New Jersey communities, in particular low- and moderate-income and communities of color, are being served by the banks that are taking their deposits."

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Citizen Action has been working with OceanFirst to expand access, and, while the two haven't formalized a reinvestment agreement, "the team they have in place is really committed to increasing their commitment to New Jersey communities," Amirhamzeh said.

Joseph Lebel, president and chief operating officer of OceanFirst Bank, said the downgrade from regulators caught him by surprise, but he sounded confident the bank has responded to their concerns. The company, for example, opened a branch in New Brunswick earlier this month.

And it has seen NeighborFirst grow from 66 loans in 2022 to 138 last year, Lebel said.

"We said to ourselves, 'We need to be better,' for a variety of reasons, one of which is the fact that it's more and more expensive to live in New Jersey," Lebel said.

More homes needed

Not that the program is running at full speed. It remains hamstrung by the lack of homes on the market, even though sales of condominiums and townhomes in Monmouth and Ocean counties began to increase the first three months of the year, according to New Jersey Realtors, a trade group.

"The problem is right now is inventory," said Linda Osborn, a housing counselor with the Affordable Housing Alliance, a nonprofit organization that provides financial counseling. "It's just few and far between. They get sold very quickly, and people are holding on to them; they're not selling them because there's nothing to buy right now."

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Patricia Kelly can relate.

Kelly works at Wegmans' Manalapan store in customer service and was renting a one-bedroom apartment in Old Bridge, where she lived with Jessica, now 22. Hoping to buy a home, Kelly signed up with Affordable Homes New Jersey, an agency that manages affordable housing programs, and began to receive emails when properties became available.

Kelly visited 10 to 15 homes from Old Bridge to Jackson before seeing a townhouse in a 55-and-older community in Marlboro that was well within the top end of her price range of $130,000. It wasn't her top choice; the home was less than 700 square feet, and it needed lots of work. But she also knew it would scare other buyers away, leaving her with little competition.

Kelly made a winning bid and walked away with the home with monthly mortgage payments of less than $500, about a third of what she was paying in rent. It left her with extra money she used to hire a contractor to paint the walls — lavender in Jessica's bedroom, white in the rest of the house.

Kelly gone through her belongings and thrown out what she didn't need. "As you can tell, it just doesn't fit," she said. "But it's my home. It's mine. It's not a rental. It's mine, so I'm good."

Jessica agreed: "It feels good having privacy," she said. "And being able to decorate, too."

Michael L. Diamond is a business reporter who has been writing about the New Jersey economy and health care industry for more than 20 years. He can be reached at mdiamond@gannettnj.com.

This article originally appeared on Asbury Park Press: OceanFirst makes mortgages more affordable, if you can find the home