Early funding is worth its weight in gold

Eileen Fitzgerald,
CEO,
NeighborWorks America

(By Eileen Fitzgerald, CEO, NeighborWorks America) Developing affordable rental housing these days is a lot like putting together a puzzle – when the financing pieces are all in place, a thing of beauty results, but when there’s a piece missing for the puzzle (or in this case, a piece missing from the finance package for rental housing) the project just doesn't work. The result is fewer new affordable rental homes developed and more existing rental homes transitioning into market rate housing or being demolished. The bottom line: Families who need affordable rental housing may have a lot harder time securing the homes that they need.

Getting all of the financing pieces for affordable housing is difficult because nonprofit developers usually have to tap multiple sources of capital, either from one or more private sector banks, or from local or federal government sources such as community development block grants or state housing finance agency money. Essentially, nonprofits have to find all of the pieces to make an affordable rental housing project work.

However, often the private and public sources of financing needed to piece together an affordable rental deal want to see the developer have equity or “skin in the game” before they make the loan or approve the government financing.

That’s tough to do because even large nonprofit owners and developers of rental housing operate at very thin margins on existing projects that leave little room for the accumulation of excess capital to deploy to new projects.

This is why NeighborWorks America has been a long-time proponent of grant makers finding ways to make operating level or flexible funding available. After working with nonprofit rental housing developers for many years, NeighborWorks America knows that a nonprofit developer that has obtained general operating support and flexible money for qualified project on the books or in the planning stages has a leg up on securing other money to get the project done.

Rick Goodemann, chief executive officer of Southwest Minnesota Housing Partnership based in Slayton, Minn, and the owner and developer of nearly 900 affordable rental homes explained the value of early capital this way: “Patient, flexible capital, though limited, is available through such sources as foundations, financial institutions and housing finance agencies. Capital of that nature is extremely valuable and absolutely essential in supporting early feasibility analysis, due diligence activities, and securing real property. But it's most valuable when used to leverage debt, attract investors and provide a level of development and operational risk mitigation.”

Providing nonprofit developers with early funding that they could show other financial supporters is a core community development strategy at NeighborWorks America.  Nonprofits that could tap flexible capital from other sources such as national or community foundations, community development financial institutions (CDFIs) or state housing finance agencies enhances the ability of the organization to move quickly and build new or sustain existing affordable rental housing.

For example, in July of this year, the Massachusetts Housing Finance Agency provided just this kind of capital. Mark Dinaburg, the director of real estate development for nonprofit owner Codman Square Neighborhood Development Corp. said to a local newspaper, “With their help, we have finally been able to refinance and rehabilitate this 80-unit BHP-1 property. Previous to this, we had made multiple efforts to bring together an adequate financing package, while the properties slowly decayed, physically, socially, and financially. Indeed, the entire portfolio was threatened with foreclosure in the dark days of 2009. MassHousing’s willingness to step up with bridge financing, and to participate in a permanent financing package, was key to turning this around.”

Codman Square received more than $200,000 from NeighborWorks America to use as early, flexible capital for its rehab project that helped it secure state HFA funding.

Whether flexible funding helps to hire a development manager, an architect or exists as an early investment that attracts larger supporters, organizations that are able to secure this kind of financing have the best chance of getting a new affordable rental project done or to sustain an existing one.

NeighborWorks America encourages all of the potential sources of early, flexible and first-loss capital to be earlier participants in affordable housing deals. These sources of capital have to be the ones to take the first steps and jump-start affordable rental housing. Without their increased participation, too many deals that could be put together, won’t be completed, leaving some families by themselves to piece together their own affordable housing solutions.

Reposted from Rooflines, the Shelterforce blog.

Unconventional allies: Finding common cause with workers on the ‘front lines’ of communities

By Eileen Fitzgerald
Chief Executive Officer
NeighborWorks America

A woman with diabetes, evicted from her home after failing to keep up with her mortgage, is forced to find shelter with a string of friends. Unable to keep track of her medications or maintain a stable, healthy diet, her disease spirals out of control.

A youth’s grades plummet and he drops out of high school, unable to concentrate on his homework because he shares the same cramped living quarters with five siblings, his parents and grandparents.

An employee of a small business is chronically late and misses key deadlines because she cannot afford to live close to work or secure reliable transportation.


It’s true: Home matters. The lack of safe, clean, affordable housing concerns a wide network of frontline workers in the community. Talk to health care professionals, teachers and business managers, and the critical necessity of decent, accessible housing for health and productivity immediately becomes apparent.

Forty years of research show that reducing overcrowding, for example, lessens exposure to infectious diseases and promotes better health overall. One recent study by the University of Michigan illustrates that housing instability triggers depression and anxiety.

Likewise, teachers testify that children who live in safe, healthy, permanent homes do better in school. National Housing Conference research documents that children who move frequently are absent more from school, have trouble concentrating on their studies, and have difficulty making and keeping friends. In addition, children who live in overcrowded homes have lower math and reading scores, and are less likely to graduate from high school.

In the work world, managers at enterprises both big and small have learned firsthand that employees who are not stressed every month about how they will make their rent or mortgage payments—and ideally do not have arduous or expensive commutes—are more reliable and productive.

By remembering that safe, affordable housing affects virtually every aspect of a person’s life, the number and type of potential partnerships ripe for exploration expands exponentially.

This is re-posted from the Bipartisan Beat blog on the Bipartisan Policy Commission website.

Housing Education, Counseling and the Future of the Housing Economy

This thought piece was originally published September 6, 2012 on the Bipartisan Policy Center's website. The question was: What is the role of housing education and counseling in the future housing economy and finance system?

By Eileen Fitzgerald
Chief Executive Officer
NeighborWorks America

NeighborWorks America is a strong proponent of homeownership education and counseling. As the current economic crisis demonstrates, objective pre-purchase homeowner education — before shopping for a home or a loan — is the buyer’s best defense against delinquency and foreclosure. It is a critical element of sustainable homeownership — which is a homeownership opportunity that makes sense for a consumer’s current and expected budget and income, family situation and mobility needs. Homeowners receiving upfront homeownership education and counseling learn how to develop a budget, responsibly manage credit, and budget for and handle home maintenance. They also learn how to navigate the complicated home acquisition and financing process so that they can make the best choices for their situations. These homeowners find themselves facing foreclosure with far less frequency than other homeowners.

We encourage lenders, government sponsored enterprises, state housing finance agencies, USDA, VA and FHA to create meaningful incentives, such as higher loan-to-value requirements, or other preferred terms or rates for consumers to take advantage of pre-purchase education and counseling well in advance of applying for a mortgage. We also strongly urge these entities to track which borrowers receive homebuyer education and counseling and report on the performance of those borrowers in aggregate. This would provide all of us with a much better understanding of the impact and value of homebuyer education and counseling.

Core support for a homeownership education and counseling infrastructure is critical so that broad access can be available across the country. Standards of quality are essential for housing counseling agencies, and the current National Industry Standards provide a strong framework. The HUD Counseling Grant dollars and the new HUD Office of Counseling play a key role in ensuring access and standards of quality. However, HUD or any other governmental funding will be insufficient to meet the scale of the need for quality homebuyer education and counseling. So it is essential to integrate a market perspective. Lenders should provide significant product incentives or rebates to counseled borrowers to reflect the value the lender is receiving — a quality new borrower who is prepared, less risky and ready to go. If the market reflects the value of this service through incentives, then potential new homeowners will be more willing to pay a larger portion of the cost of the homeownership education and counseling since they will be refunded that cost and more (through additional product incentives).

There are many variations of this concept — different splits in payments between potential homeowners and the lenders, payments funded through the transaction and reflected on the HUD-1, or full cost recovery to the counseling agency, but with a small portion of the funds held back for two to three years and paid to reflect borrower performance.

Sustainable homeownership is essential to prevent a repeat of the current housing crisis. Homebuyer education and counseling is a critical element, and we must determine how to use a small amount of core federal dollars to leverage a market approach that will achieve greater scale and create more successful homeowners.

Communities Find Success with Nontraditional Forms of Homeownership

This thought piece was originally published August 7, 2012 on the Bipartisan Policy Center's website. The questions were: Do alternative forms of homeownership, such as shared equity models and rent-to-own programs, present viable alternatives for future homeownership? Can they be taken to scale in a way that can encourage stabilization of neighborhoods and housing markets?

By Eileen Fitzgerald
Chief Executive Officer
NeighborWorks America

NeighborWorks believes that community stabilization requires a comprehensive approach to housing opportunities, which employs strategies that support traditional and nontraditional forms of homeownership, as well as rental options. This approach includes providing affordable inventory and low-cost accessible mortgage financing.

We certainly support alternative forms of homeownership, like shared equity and rent-to-own, as part of the strategy. Alternative homeownership models benefit people and communities. For generations, families with the resources to do so have lent money so their children can buy homes prior to inheriting wealth. This is an informal shared equity model which can overcome the inheritance gap. Formalized shared equity models or lease-to-own programs provide a way for people with less privileged social networks to achieve homeownership, and provide for long-term affordability, benefiting future generations. Done correctly these models not only provide an affordable homeownership option, they come along with education and support to make sure they are a sustainable arrangement for residents.

A number of NeighborWorks organizations have had success with shared equity and lease-to-own models. For instance, Durham Community Land Trustees and Champlain Housing Trust in Vermont have effectively used the land trust model to build homeownership opportunities for lower income families. Beyond Housing in St. Louis, Missouri has had success with its lease-to-own program.

There are new opportunities for scaling up nontraditional homeownership approaches that face challenges, but are worth exploring. Sometimes these strategies are resource intensive, so it is important to develop the organizational and external (legal, financing) infrastructure necessary for success. Local market conditions can also dictate what resources are needed to achieve success. For instance, one of the best places to use shared equity is a community with an inclusionary housing requirement, as is currently happening in an Austin, Texas program run by Habitat for Humanity. In those communities, little or no additional capital is needed to undertake the model.

In closing, we believe the best way to further community stabilization is through multiple strategies, which support many different forms of homeownership, as well as rental housing. All of those elements of a successful approach require flexible resources that can sustain plans tailored to the needs and resources available in each community.

Making a Difference with NeighborWorks Week 2012

By Eileen Fitzgerald
Chief Executive Officer
NeighborWorks America

Every year NeighborWorks Week gives us an opportunity to step outside our normal routines, roll up our sleeves and connect with the people and places we work so hard to support. This year, NeighborWorks Week will take place June 2-9, and I am pleased to say that we have over 160 events planned thanks to the dedication of NeighborWorks network organizations across the country, and support from NeighborWorks America staff.

By volunteering this week, and throughout the year, we put our words into action and learn what’s working, and what challenges remain for local communities. These efforts enrich our work while providing much needed support and partnership to the communities we serve.

In FY2011, the NeighborWorks network generated 240,000 volunteer hours through the Community Building and Organizing program. This NeighborWorks Week I’ve invited all DC staff to a volunteer opportunity in Montgomery Housing Partnership in Silver Spring. We’ll be planting flowers, mulching playgrounds, painting and picking up trash around the property.

I hope that you, wherever you are, can volunteer at one of our many local NeighborWorks Week events, and that you will share your experiences and photos with us via Facebook and Twitter (#NWW2012).

To learn which events are near you, visit http://events.nw5.org/. You can also see pictures from last year’s events in our Flickr album.

Foreclosure Counseling Nearly Doubles Chances of Mortgage Modification, Reduces Likelihood of Re-default by at Least 67 Percent

By Eileen Fitzgerald,
CEO, NeighborWorks America

I’m excited to share with you today the results of a new report prepared by the Urban Institute on the consumer benefits of the National Foreclosure Mitigation Counseling (NFMC) Program.

The report shows that the NFMC program works incredibly well for homeowners and communities. Homeowners who received NFMC counseling were nearly twice as likely to obtain a mortgage modification as those who did not seek assistance from an NFMC foreclosure prevention counselor. Homeowners counseled through NFMC were at least 67 percent more likely to remain current on their mortgage nine months after receiving one.

The report also shows that homeowners received, on average, a mortgage modification that lowered their payment by $176 more per month, than homeowners who didn’t work with an NFMC counselor – a savings of close to $2,100 a year.This reduction in household expenses can free up funds for paying off debt, saving for college and meeting other needs.

The improved long-term sustainability of the borrower is led largely by the financial counseling that is a part of foreclosure prevention, not by the lower mortgage payment obtained. The personalized work nonprofit housing counselors do to help homeowners improve their overall financial situation had the greatest effect on a homeowner not falling behind again on their mortgages in the future.

The NFMC program also has benefits for mortgage servicers and investors. By significantly reducing the chance that a homeowner re-defaults after a mortgage modification, servicers are saved added expense. This tells us that increased servicer investment in partnerships with nonprofit counselors is a win for everyone.

If you’d like to learn more, I was recently interviewed about this report. See YouTube video.

NeighborWorks America Honors Senator Kit Bond with Lifetime Achievement Award



Former Senator Bond receives Lifetime Achievement Award.
(L-R): Kit Bond; Mark Stalsworth, executive director,
Kansas City NHS; John A. Wood, assistant city manager
 for neighborhoods, City of Kansas City;
Eileen Fitzgerald, CEO, NeighborWorks America 

NeighborWorks America, as part of its NeighborWorks Training Institute in Washington, DC this week, honored Former Senator Christopher S. “Kit” Bond with a lifetime achievement award for his more than 40 years of support to America’s families.
Presenting the award to Senator Bond, NeighborWorks America CEO Eileen Fitzgerald noted that he is known for a long string of accomplishments on behalf of families and accessible housing, beginning with his service as Missouri’s youngest governor and continuing through four terms as one of Missouri’s U.S. Senators.

“Senator Bond has been a leader for families and housing,” said Fitzgerald. “He continues that leadership as a co-chair of the Bipartisan Policy Center’s Housing Commission. We are excited and sincerely honored to recognize Senator Bond for all the work that he’s done and continues to do for housing in the United States.”

Learn more about Senator Kit Bond's work in support of affordable housing.

NeighborWorks Northeast Region Honors Two Visionary Leaders for Their Impact on Communities

More than 250 guests joined CEO Eileen Fitzgerald and Northeast Regional Director Deborah Boatright at the sixth annual NeighborWorks America Northeast Region Reception to honor two visionary leaders in Community Development: Marc Jahr, President, of the NYC Housing Development Corporation and George “Mac” McCarthy, Director, Metropolitan Opportunity Unit of the Ford Foundation.

L-R: Peter Meyer, president, New York Market, TD Bank; Eileen Fitzgerald; Marc Jahr; George McCarthy; Deborah Boatright; Dennis Lagueux, SVP, Community Development, TD Bank

Both men are widely admired for their integrity, intelligence and impact on communities. Marc Jahr has helped to create over 100,000 units of affordable housing in New York City over the course of his career, and is an icon in the field. George McCarthy has been an invaluable partner to NeighborWorks for over a decade, in our Homeownership Campaign, Success Measures initiative, community stabilization work and support for Manufactured housing and resident-owned communities.

The sixth annual reception, sponsored by TD Bank and held at the Westin New York at Times Square, was the first under the new regional model. The Northeast Region spans 11 states from Maine to Maryland, as well as Washington DC, Puerto Rico and the US Virgin Islands. “Our regional configuration allows us to have a broader conversation with our partners and funders, as we now mirror many of their footprints. And we have a new depth of experience to bring to the table with our state and local government partners as well,” noted Boatright.

“The incredible turnout for today’s event is a testimony to the value of our network, and the work of the Northeast Region,” noted Fitzgerald. TD Bank will also be the sponsor of a spring reception planned for Boston.

The reception’s theme, “A Community United” was evoked by both honorees in their remarks to characterize not only the cross-section of people in the audience, but the strength of their partnerships and collaborations to improve opportunities for a better life in communities throughout the area.

More photos can be seen on NeighborWorks’ Flickr site.