In 1978, the Circle Jade Apartments on 9th Avenue in Kaimuki, where we had been living for nine years, was sold and we had to move out as the units were converted to condominiums. We already had two cats, and we were having a very hard time finding a reasonably priced rental that would accept our cats.
So we started exploring the option of buying our first home. It wasn’t a good time for buyers. Mortgage interest rates at that time were very high, with 30-year mortgages averaging over 9.6 percent.
But we were lucky. Meda was working for the University of Hawaii teaching at Honolulu Community College, and as a state employee qualified to apply for a reduced-rate mortgage funded through the Employees Retirement System. It was one of the major benefits of public employment. At that time, and at our age, the retirement plan was a benefit in theory, but the mortgage discount was a real immediate benefit.
It didn’t magically result in a low interest rate, but it was at least a percent, perhap more, below the prevailing rate, enough to bring monthly mortgage payments meaningfully lower. The discounted mortgage was one of the things that made it possible for us, as young first-time home buyers, to buy. We agreed to buy a two-bedroom townhouse above Kahala Mall that one of Meda’s HCC colleagues had been trying to sell for a while. It was a unit that experience damage from subsidence and had been previously repaired, but to us it represented a great deal. And it allowed us to get a foot in the door of the housing market, which eventually served us well
With housing costs so much of an issue today, I began to wonder when the state stopped making these ERS mortgages. The mortgages used ERS financing but were serviced by local banks.
I’ve done a quick search on Newspapers.com and failed to find any useful information on the withdrawl of the ERS from the mortgage market.
Does anybody recall when and why this happened?
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It appears from the ERS website that the system still assists with member home acquisition.
https://budget.hawaii.gov/wp-content/uploads/2023/05/Chapter-27.pdf
Jack
They appear to have statutory authority to do it, but there’s no indication for years that they are actually funding member mortgages any longer. Check the list of member/public employee benefits. The ERS mortgages are no longer mentioned.
I remember that ERS mortgages were indeed a benefit for government workers. I don’t recall when they stopped.
I’m thinking that it may be that the lending institutions don’t want to administer the program anymore if the requirements are too cumbersome versus other government loan programs like FHA or VA loans. An old-time mortgage broker would know.
If you can believe it, in the very old days if you worked for a bank you could get a small discount on your interest rate too.
The Employees’ Retirement System (ERS) Mortgage Loan Program in Hawaii was discontinued in 1994 primarily due to financial and administrative concerns. Some of the key reasons for its termination included:
Financial Risks & Sustainability – Managing a mortgage loan program required ERS to allocate a significant portion of its funds toward loans instead of investments that could generate better returns for the pension system. Over time, it became less financially viable.
Administrative Challenges – Running a mortgage lending service required extensive oversight, including loan processing, risk assessment, and servicing. This added complexity and costs that were not aligned with ERS’s primary goal of managing retirement benefits.
Market Competition – By the 1990s, private banks and mortgage lenders were offering more competitive mortgage rates and loan options. This reduced the necessity for ERS to provide such a service.
Pension Fund Priorities – ERS ultimately decided to refocus on its core mission: managing retirement benefits and ensuring the long-term stability of the pension fund rather than acting as a mortgage lender.
When my wife & I bought our first apartment in 1984 we received a mortgage through the ERS at 12% which was a bargain. A few years later, we were offered the chance to refinance, again through the ERS, at 9 1/2%. We thought we had hit the jackpot.