‘Cash Flow’

Banc of California Inc.’s PacTrust Bank and HomeStreet Inc.’s bank are among lenders accepting borrowers with FirstRex participation.

The customers can have very good credit and “typically have very good cash flow,” said Jeff Seabold, managing director of residential lending at Irvine, California-based PacTrust, which has started selling some of the FirstRex-tied loans it makes to other regional banks. Even for those borrowers, jumbo mortgages often require 25 percent or more for down payments, resulting in particularly steep amounts in cities such as San Francisco or Los Angeles, he said.

HomeStreet and PacTrust both allow the shared down payment for loans of any size that can qualify to be held in their portfolios. Both like the fact that an additional party has an interest in avoiding foreclosures, their executives said.

First Republic

FirstRex said First Republic Bank, the San Francisco-based lender that specializes in wealthy customers, also is a partner. RPM Mortgage Inc. plans to sell its FirstRex-linked loans to an unnamed bank. RPM CEO Rob Hirt predicts 5 percent to 10 percent of its borrowers “will seriously take a look at this program.”

Borrowers also benefit because the equity investment lowers monthly payments by shrinking their debt or helping them avoid mortgage insurance, Hirt said. That may become even more important to lenders with the industry facing new government rules next year, which will expose them to greater legal risk when consumers’ borrowing costs exceed 43 percent of their incomes, he said.

Housing prices across the U.S. soared 12.1 percent in June from a year earlier, according to an S&P/Case-Shiller index of property values in 20 metropolitan areas, though they remain 23 percent below their 2006 peak values. The median price of existing homes sold in July was $213,500, so a 20 percent down payment would total $42,700, according to the National Association of Realtors.

Non-Profit Assistance

It takes more cash in expensive markets such as San Francisco, where the median sales price from June to August was $850,000, or New York, where it was $1.1 million, according to real-estate website Trulia Inc.