Lease-to-purchase program provides pathway to homeownership

By Pam Bailey, blogger for NeighborWorks America

Kalamazoo, MI, was hard hit by the housing crisis. Traditionally a first-mortgage lender, with 600 loans in its portfolio, Kalamazoo Neighborhood Housing Services could no longer offer that assistance as banks pulled back. Meanwhile, as unemployment also soared, foreclosures swept the city and even now, four years later, home values are stagnating and lack of investment is destabilizing the neighborhoods.

“We needed a strategy to provide a bridge to homeownership, while also stabilizing the community by avoiding the abandoned buildings and absentee landlords experienced elsewhere,” says Matt Lager, executive director of NHS, which recently celebrated 20 years of membership in the NeighborWorks network. “So we developed a lease-to-purchase program.  The formula is simple: We acquire and rehab a vacant or foreclosed property on a target block, lease to clients who are just shy of mortgage-ready and prepare them to become homeowners. The result: We now have a pipeline of families who will transition to homeowners within 12 to 18 months.”

One of the families now leasing a home, with plans
to purchase. 

In the first two years of the program, Lager’s organization acquired 11 houses outright, thanks to a combination of land donations, grants and capital from NeighborWorks America. Five more acquisitions are planned for the coming year. Demand has been high, with 20 “bidders” for every home available. In return for the affordable lease and down payment assistance when the time comes, renters agree to participate in monthly financial-management coaching sessions. If they don’t follow through, or decide not to purchase within two years, they lose their “option fee,” equivalent of one month’s rent. (If participants comply with the action plan they develop with their coach, the purchase deadline can be extended.)

To date, the program has a high success rate: Four of the participants will become homeowners in the first half of 2014; only two have opted out due to what Lager calls the programs initial “learning curve.”

Lessons learned

“One of the lessons we learned in implementing this program is to select and then rehab houses that would attract future homeowners,” explains Lager. “People need to fall in love with a house to stay motivated.”

The other lesson Lager’s team would pass on to others who might want to offer a similar program is that it requires deep relationships with leasers.

“Although the financial-management sessions are focused on budgets, repairing their credit, etc., you can’t help but get involved in all of the other issues that dictate whether these families can be successful at homeownership,” says Lager, adding that the NHS financial-capability coaches have backgrounds in social work. “That means dealing with unemployment, for instance, and similar challenges.”

Foreclosures may have gone down, but the financial struggles of the approximately 21,000 people living in the six neighborhoods served by NHS continue, and the “lease-purchase” program will help provide a pathway to homeownership.

West Virginia group demonstrates big impact despite small staff, few resources

Imagine you lead a four-person organization that serves a city with a population of just more 7,000 people, 20 percent of whom are below the poverty line, and a lack of traditional funders like big banks. That’s the challenge John Elza, executive director of the HomeOwnership Center (HOC) of Elkins, WV, faces daily.

And then there is the additional dearth of communications channels. “Reaching customers is challenging. There’s not a lot of media and only one daily newspaper. Getting information out is hard,” Elza says. “A lot of folks don’t have a computer.”

However, the smallness in size and resources haven’t stopped HOC from working to achieve a big impact in the 15 years since its founding, despite the lingering impact of the Great Recession.

“Getting to 15 years after the recession was challenging,” Elza admits. “Production numbers were down, but are starting to come back.  We just ended Fiscal Year ‘13 with a 26 percent increase in production over the prior year.”

HOC grew out of the Randolph County Housing Authority, which Elza describes as the incubation unit for the group. “It decided to spin off a private nonprofit that could do different things.”

The organization became a licensed state mortgage broker and then a NeighborWorks charter organization in 2001. This transition was important for HOC.

“The Housing Authority couldn't go after private funding or foundations because it wasn't a 501c3,” Elza explains. “We wanted to become a licensed broker to be more effective. Initially, the focus was on pre-purchase counseling, since there were certain types of mortgages that didn't require a broker's license. When we received our broker's license, it opened the doors to assisting others.”

HOC assists a mostly rural population, providing education and counseling, financing and development primarily to low- and moderate-income households. “We serve an eight-county service area of 130,000 people,” Elza elaborates. “Randolph County is 146 square miles. We’re up in the mountains. Tourism is a big economic factor here. There’s not a lot of actual industry, and only one regional lender in the area. From a fundraising standpoint, that’s a challenge. We don’t have a big banking presence.”

HOC’s mission is to provide safe, affordable housing, focusing on sustainable homeownership, self-sufficiency, sound environments, healthy quality of life and communities that can sustain these values. To fulfill these goals, HOC provides homeownership education and counseling to more than 200 families each year, with more than 50 becoming home buyers. The organization has been so successful in stretching its resources to achieve its mission that its staff often works with individuals elsewhere in the state who want to offer similar services.

Elza recalls one particular family’s story that illustrates the impact that can be achieved, even on a small scale.

Heather Sackett-Scott, William Scott and their two
children in front of their new home.

Heather Sackett-Scott and William Scott have four children, including one with disabilities. They needed to find a home that was both affordable and accessible to a disabled child. HOC provided counseling and education for the family, helping them to become mortgage-ready. The organization then engaged several partners to provide affordable financing. Highland Community Builders provided a lot, CommunityWorks provided the first mortgage at a below-market rate and Woodlands Development Group constructed the accessible home and also provided partial subsidized financing. HOC processed the blended mortgage loan.

Sackett-Scott said afterward, "I’m just grateful that there are programs like this. And I’m pleased to know that there are people doing these things for other people. If it weren't for this program, my family wouldn't be able to get a house like this, a nice home. It just wouldn't happen."

Written by Lindsay Moore, senior media relations specialist for NeighborWorks America.

‘Families and friends’ good for social support, not housing advice

By Pam Bailey, communications writer for NeighborWorks America

It’s been five years since the full force of the Great Recession hit the United States, with a combination of risky mortgages and declining housing prices forcing approximately 4.6 million families into foreclosure. While more than 13 million households are still underwater, saddled with homes worth less than their mortgage loans, the crisis is losing steam. Foreclosures fell 3 percent in 2012, according to RealtyTrac, and this year is looking even better. In October, foreclosure filings were 28 percent lower than the same month in 2012.

Still, many families are still struggling, and making smart choices will continue to be critical for both the next wave of new house buyers and existing owners working to hold on to their homes. In the aftermath of the crisis, are people now equipped with the information they need to negotiate the right mortgage, as well as to make other pivotal choices? If not, do they know where to go to get help that can be trusted?

To learn the answers to those and related questions, NeighborWorks America commissioned a nationally representative survey of 1,000 adults, which was conducted by Widmeyer Communications, a Finn Partners company, Sept. 23-26.  Among the many findings: Seventy-five percent of adults describe the the home-buying process as "complicated," and a quarter (24 percent) admitted to not being knowledgeable about the different kinds of mortgages.

So where, then, do they turn for advice when buying a house or avoiding foreclosure – a decision that is usually among the biggest financial choices they will make in their lifetimes? More than any other source, “family and friends” are relied upon most often.

When respondents who said they are considering buying a house were asked where they go to first for advice, more than a third (39 percent) cited family and friends who had already purchased a home. Distant runners-up were the Internet (17 percent) and real estate agents (16 percent). Far behind were housing counselors and (more specifically) non-profit homeownership advisers (3 and 5 percent, respectively).

The patterns for seeking information on foreclosure prevention are similar.  Individuals are most likely to turn to family, friends and co-workers (30 percent), followed by the Internet (27 percent), real estate agents (26 percent) or mortgage lenders (23 percent). Just 17 percent of respondents reported they are “very likely” to consult with a housing counselor. The reliance on friends, family and co-workers is especially seen among adults under 55 (37 percent) – particularly women.

Advantages of nonprofit housing counselors

There is nothing wrong, of course, with calling upon your social network. In fact, much research has documented the importance of family and friends in helping individuals cope with all sorts of stress. However, rarely are they professionals in the field of housing or banking, and even when they have gone through the process of home buying or loan modification themselves, each family’s financial situation is unique, not to mention the fact that rules vary depending on the lender and the timing.

“Having a supportive family is wonderful, and the Internet offers a wealth of information,” says Rose Marie Roberts, an advisor with the NeighborWorks Homeownership Center in Utica, NY. “But I wouldn’t go from there to action.” For example, when trying to prevent foreclosure, she notes, “rules and available programs, plus the related legal aspects, change almost daily. It’s a challenge to stay on top of them. But that’s the job of a housing counselor.” (Roberts talks about foreclosure counseling in a NeighborWorks America video.)

With the Government Accountability Office reporting that complaints about fraudulent “foreclosure rescue” schemes jumped from 9,000 in 2009 to more than 18,000 in 2012, it’s critical to have a professional advocate on your side. (Since 2007, NeighborWorks America has managed, at the request of Congress, the National Foreclosure Mitigation Counseling program. It funds more than 1,700 agencies that have assisted nearly 1.6 million homeowners struggling to stay in their houses – without charging a fee. In fact, one sure sign of a scam is an individual or program that attempts to charge for this service. Yet, the survey found that slightly more than a third – 33 percent – of people think that free help is not as good as counsel that you pay to receive.)

A nonprofit housing counselor can help head off
trouble during the complicated home-buying process.

While realtors and mortgage lenders are essential advisors as well, housing counselors with nonprofit organizations such as those that are supported by NeighborWorks America take a holistic approach to each client’s situation – helping them evaluate far more than how much a particular house is worth, which mortgage they can afford or whether they are eligible for re-financing.

“For example, some of the residents in our community are attracted to the less-expensive homes one county over,” recounts Letty Plasencia, a counselor with NeighborWorks Orange County (CA). “But you have to look at more than the sales price. How much time and money will it take to commute to your job, for instance?”

There is hard data showing that pre-purchase counseling by a trained counselor works. A study conducted of 75,000 loans originated between October 2007 and September 2009 showed that clients receiving pre-purchase counseling and education from NeighborWorks organizations were one-third less likely to fall behind on their payments during  the two years after receiving their mortgage.

It’s not surprising that most people don’t think first of turning to a nonprofit housing counselor. Most local organizations do not have the budget for extensive public education. (One of the most successful national campaigns was the “Nothing is worse than doing nothing” campaign launched by NeighborWorks America and the Ad Council, centered on a series of public service announcements for broadcast. Another is the Loan Modification Scam Alert website and hotline.) Instead, local organizations typically rely on referrals and word-of-mouth. The good news is that clients do spread the word to friends and family. And many states and organizations, such as unions, have institutionalized referrals to housing counselors for residents or employees who find themselves underwater.

“In New York, lenders are required to notify homeowners in trouble,” says Roberts. “The problem is that they often don’t trust the lender by that point, or they assume they are a lost cause and no one can help them. I’d say 75 percent of the time, we get these individuals late in the game, from a lawyer or Supreme Court judge who handles settlements.”

The challenge for housing organizations is to build and better leverage relationships with a diverse array of other community stakeholders, such as schools and health clinics, to spread the word about their services to people before they need it. (And of course, expanded demand would require increased staff.) It is clear, counselors agree, that the best time to see a housing adviser is early on, prior to any critical decision-making.

Kevin Washington, a counselor with Neighborhood Housing Services of New York City (NHS-NYC) who specializes in foreclosure intervention, gives this example: “By the time people get to me, they often have gotten advice from a neighbor down the block who has been through foreclosure before, and they end up getting further in trouble. For example, sometimes these clients close all of their accounts down to pay off their debts, but that’s very bad for their credit scores. Plus, you’ll need some money to cover down payment and closing costs (to buy a more affordable house). You don’t need to pay off your debts; you just need to make the required payments. If they get to us too late, and they’ve already made mistakes, they have to wait even longer (to buy) so they can build their assets back up again.”

But perhaps Ruth Pena, another counselor with NHS-NYC, sums up the value of a housing counselor the best: “We create an action plan, and then hold (our clients’) hands through the entire process. Who else will do that?”

Texas group profiled in local newspaper for protecting homeownership through tough times

NeighborWorks America is honoring our many creative member organizations this year by featuring in our blog those that are celebrating milestone anniversaries. We were pleased to discover that we didn't have to write a testimonial for NeighborWorks Waco, because the WacoTrib did it for us. Read for yourself...

Robert Jackson expected good things from NeighborWorks Waco.

Jackson was the treasurer of the newly formed Brooks Avenue Neighborhood Association in 1993, when the group decided to contribute $10,000 to help jump start the new housing organization, believing it could help more residents buy homes in the Greater Waco area.

But he didn’t expect that he would wind up being one of those residents who would need the nonprofit group’s help to buy his first home.

Read the full article. 

Vermont quarry closing brings economy down; NeighborWorks affiliate rallies residents

It’s a story that’s been repeated across America: What builds a town up is also what, eventually, brings it down. In Detroit, it was the auto industry. In West Rutland, Vermont, it was marble quarrying.

When high-quality marble deposits were discovered in the 1830s – followed by the extension of the railroad into town – Rutland was suddenly put on the map. The simultaneous decline of the famous quarries of Carrara in Tuscany, Italy, transformed it into one of the leading marble producers in the world. (The name of the main “drag”? “Marble Street,” of course.)

The double-whammy of a large strike in the 1930s and the Great Depression, however, took a toll from which the town never quite recovered. In 1986 the quarry was forced to close, plunging the outwardly idyllic enclave of “cows and jeans” into economic decline.

West Rutland today

“At its height, the quarry alone employed 2,400 people,” recalls Ludy Biddle, executive director of NeighborWorks of Western Vermont. “Now, there are only about 2,500 people living in the entire town and the county is the second-poorest in the state. For all social measures, it’s in the red – poverty, unemployment, teen pregnancies and, recently, foreclosures.”

Another recurring theme in America, however, is the recovery from adversity that’s possible when residents come together in response to crisis. The disastrous year of 1986 also is when the organization was founded by a group of local citizens to help the remaining residents stay in their homes by keeping them in good repair.  By the 1990s, the area serviced by NeighborWorks of Western Vermont had expanded from four neighborhoods to the entire county and a homeownership program was added to help both first-time buyers and a trickle of newcomers – primarily artists and families looking for a semi-rural lifestyle.

This year, the organization is celebrating its 10th anniversary as a chartered member of the NeighborWorks Rural Initiative, which strengthens communities with small populations by helping them integrate into their regional economies. It now serves three counties, not only with its original rehab assistance and homeownership counseling, but also with “financial fitness” coaching and foreclosure prevention. In 2012:

• Two foreclosed houses were purchased by the organization; rehab was begun on another five, with two completed and put on the market.
• 24 individuals graduated from the homebuyer education program and another 25 completed the organization’s financial-fitness training.
• Thirty-seven families successfully negotiated foreclosure alternatives with their mortgage lenders. Another 12 received coaching as they made the decision to opt for a reverse mortgage.
• Nearly $800,000 in loans was dispensed to pay for 40 home repairs.

Joan Jackson

Biddle is particularly proud of her organization's participation in the NeighborWorks Green Organization. In fact, in 2010, it was awarded a $4.5 million grant from the Department of Energy for its H.E.A.T. squad (Home Efficiency Assistance Team) – which now boasts the highest penetration rate in the country among similar programs.

Joan Jackson, a retired librarian who has lived in her Wallingford home since 1959, is just one example of the 577 households that received an “energy check-up” in 2012, thanks to the program. Her roof had been damaged by winter ice, the house was so cold she was constantly bundling up to stay warm and the increasing cost of fuel was a persistent worry due to her fixed income. But with the installation of insulation in her basement and upstairs walls, along with air sealing around her doors, ceiling and attic hatch, she is warmer and her fuel bills are 34 percent lower. (Watch a video interview with Biddle, as she explains just how the program works.)

“Twenty-five percent of the people we’ve been able to help with our H.E.A.T. squad are below 80 percent of the area’s median income – individuals who usually aren’t able to participate in programs like this, even though they need it the most,” says Biddle, adding that the organization is now looking for additional funds as the DOE grant sunsets. “The average household we serve spends 3-8 percent of their already-low income on energy. With H.E.A.T, they save an average of 386 gallons of fuel a year – about $1,500 a year. It’s central to our mission to make homeownership affordable.”

Will the Foreclosure Crisis be With Us Another Two Years?

By Marietta Rodriguez
Director, National
Homeownership
Programs & Lending

With signs of a turnaround in housing appearing in various industry reports such as those from the National Association of Realtors for pending home sales, and from the National Association of Home Builders via its new home sales index, it’s not difficult to think that the foreclosure crisis is behind us. But it isn’t.

Recently I was on a panel at the National Association of Real Estate Editors spring meeting discussing the housing market alongside representatives from Bank of America and FNC, Inc., and we agreed that the foreclosure crisis won’t end for another two years – according to the most positive forecasts.

Mortgage rates are likely to remain very low for the foreseeable future and that’s good for housing and for ending the foreclosure crisis. However, what we really need to do in order to find the end more quickly is make it easier for qualified buyers to purchase homes and for homeowners in distress to find solutions that don’t end in foreclosure.

Neighborhood Housing Service of
South Florida educates a potential homebuyer

On the purchase side, NeighborWorks America supports efforts to make homeownership as accessible as possible without creating undue risk in the system. We support the availability of low down payment mortgages which enable homebuyers who are already saving to purchase a home more quickly. Additionally, we support underwriting that keep loans within the reach of deserving buyers. Finally, we think that homebuyer education is a critical piece of the process. Education is what prepares people for the true costs of homeownership, and helps them make sustainable choices.

Family outside their home
in Great Falls, Montana

On the foreclosure front, we’ve established partnerships that connect homeowners to the help that they need to find an alternative to foreclosure. For example, by partnering with local governments we are able to direct our efforts into neighborhoods that are at the greatest risk of foreclosures, and making those resident aware of options for assistance. We are also facilitating better homeowner communication with servicers through the HOPE Loan Port, which tracks individual requests for loan modifications. Servicer outreach centers are another key tool for stemming foreclosure, because they allow homebuyers to receive in-person advice on how they might keep their home. However, as I told the audience at the National Association of Real Estate Editors conference, all servicers could do more.

The housing market won’t rebound until the foreclosure crisis is behind us. However, by improving the availability of mortgage credit and homebuyer education, we can minimize the impacts of the crisis and make sure it ends within two years.

Homeownership Video Contest Winners

Last month $5,000 in prizes were awarded at the Reclaiming the Vision of Homeownership Symposium in Los Angeles to video contest winners.Three videos were selected out of the many submissions sent in to NeighborWorks America. The winners are all so different and were chosen because of their originality and creativity showing the meaning of homeownership.

The video contest was designed to provide an opportunity for nonprofit housing counseling agencies to creatively portray, through the use of video, what homeownership has meant to the customers they have served in the past, or the dream it represents to customers they are currently serving.

Congratulations to the Winners
First Place: Summit Combined Housing Authority in  Breckenridge,CO
Hope for a Home in the High Country.

 
Second Place: Native American Youth and Family Center in Portland,OR
Sharing Our Stories of Home. 



Third Place: Tabor Community Services in Lancaster, PA
Homeownership 2012.

25th Anniversary of Homebuyers Clubs

NeighborWorks America is joining Manna, Inc. and Network Members across the country to celebrate the 25th anniversary of Homebuyers Clubs this week.

Manna, Inc. was the first organization to create a Homebuyer Club in 1986, a peer support group and a homeownership counseling program. Manna offers low to moderate-income residents of Metropolitan D.C. education and guidance to prepare them for purchasing a home and to sustain the investment of time and money.

Recently two members of Manna's Homebuyers Club shared their story. Meet Willamena Samuels and her daughter Tia Norde; two generations of Homebuyers Club members, in the video below. They show us that being part of a Homebuyers Club makes homeownership possible even for those who thought it wasn’t.



Since the founding of the Homebuyers Clubs numerous organizations have started their own successful clubs. These include PathStone's First Home Club a partnership with Federal Home Loan Bank of New York, Hudson River Housing, Inc. and a club at Community Development Corporation of Tampa.

Thursday, February 23, the founder of Manna, Inc., Reverend Jim Dickerson;NeighborWorks America Board Member and National Credit Union Administration Board Member, the Honorable Christiane Gigi Hyland; NeighborWorks America CEO Eileen Fitzgerald and NeighborWorks American Northeast Regional Director Deborah Boatright will join Homebuyers Club members at the National Press Club to celebrate 25 years of successful first time homebuyers.

Check out stories of Manna's Homebuyers Club members, and be sure to join the conversation on Twitter at #HBC25.

NeighborWorks America Assists New Orleans in Launching a $52 Million First Time Homebuyer Initiative



New Orleans’s Mayor Mitch Landrieu announces
the $52 Million First Time Homebuyer Initiative
at a press conference on October 27. NeighborWorks
Southern District Senior Program Coordinator Donna Tally
and City of New Orleans’ Director of Housing Policy
Brian Lawlor are on the Mayor’s left.


NeighborWorks America’s Southern District is providing technical assistance to the City of New Orleans’ Office of Community Development to execute a $52.3 million soft second mortgage homebuyer assistance initiative that will provide hundreds of New Orleans families an opportunity to become homeowners. The initiative is designed to strategically promote homeownership opportunities for low and moderate income residents and families who are buying their first homes.

“We know that promoting and incentivizing homeownership is key in revitalizing our neighborhoods across the city,” said Mayor Landrieu at a press conference announcing the program on October 27. “This program will put Hurricane Katrina recovery dollars to use for their intended purpose – helping the citizens of New Orleans rebuild their lives and neighborhoods post-Katrina. It will also reduce blight and stimulate the local economy.”

Mayor Landrieu said that this has truly been a partnership between the public, private, faith-based and nonprofit sectors. He thanked all partners, including NeighborWorks America, for their role in getting the program up and running.

Southern District Senior Program Coordinator Donna Tally, under the leadership of District Director Donald Phoenix, created a partnership with City of New Orleans’s Director of Housing Policy Brian Lawlor to provide technical assistance for this initiative. NeighborWorks worked with the city’s staff to design, develop, and deliver the program, providing technical assistance to develop the underwriting criteria, the mechanics required to run the program, and the training for local lender partners.

“This is a great example of the power of partnership,” said Tally. “Mayor Mitch Landrieu put the right people together and things started happening. NeighborWorks America is proud to be part of the team that designed and delivered this program because our investment will pay exponential dividends for families and communities across the Crescent City.”

“The investment of these funds will help neighborhoods in New Orleans reach a tipping point in sustainability as the recovery continues,” said Phoenix. “NeighborWorks America’s Southern District is honored to play an instrumental role in the delivery of this program, the largest of its kind in the City of New Orleans. We look forward to an ongoing partnership with Mayor Landrieu and the City of New Orleans.”

The press conference announcing the soft second homebuyer initiative is available for viewing on YouTube.