Habitat for Humanity of Michigan Launches Innovative New Mortgage Program

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Michigan State Housing Development Authority, Great Lakes Capital Fund and Sustainable Communities Fund Provide Critical Innovation Capital to Support the Habitat Mortgage Program

Community Mortgage is a cost effective way to finance the homes built by Habitat affiliates, thus allowing them to substantially increase the number of families who will be able to experience the American dream of home ownership.

Habitat for Humanity of Michigan (HFHM) and Habitat for Humanity Michigan Fund (HFHMF) announced plans to launch the "Affordable Community Mortgage Program” (“Community Mortgage”). Community Mortgage is an innovative program resulting from collaboration with Michigan State Housing Development Authority (MSHDA), the Great Lakes Capital Fund (GLCF) and the Sustainable Communities Fund (SCF).

This first of a kind mortgage program allows Habitat Affiliates, which typically build the homes, to connect prospective homeowners to a Community Mortgage where they may be eligible for a no-profit mortgage with a locked-in, lower-than-market interest rate. The model was created to substantially increase new home construction, rehabilitation, repair and clean-up that otherwise would only be provided through donations from Habitat affiliates.

"Community Mortgage is a cost effective way to finance the homes built by Habitat affiliates, thus allowing them to substantially increase the number of families who will be able to experience the American dream of home ownership," said Sandy Pearson, Habitat for Humanity of Michigan president & CEO. "This new innovative financing program is an example of how public-private collaboration can help ‘ReBuild’ Michigan."

Creative partners have stepped in to provide the key pieces of capital necessary to make this cutting-edge financing program work. In particular, MSHDA has played a central role. “MSHDA sees the great potential of this model. The Authority has agreed to purchase up to $2 million of these mortgages, which must meet very specific and prudent underwriting guidelines. All involved expect Michigan’s communities and families to benefit,” said MSHDA Executive Director Scott Woosley.

Another critical capital component was the $200,000 Loan Loss Reserve provided by Great Lakes Capital Fund. Executive Director of GLCF, Mark McDaniels, explained their involvement as being core to his organization’s mission: “As long-time lenders to affordable housing, we want to be part of an initiative such as this that seeks to create a new model for expanding the capital base behind affordable housing – this model has the ability to provide tremendous impact for the residents of Michigan.”

In order to jumpstart the financing model, Sustainable Communities Fund provided $66,000 and HFHM $44,000 for the initial pool of mortgage capital that will be cycled through the model. The Chair of SCF, Deborah La Franchi, explained their interest in this new model: “SCF provides innovation capital to new and innovative financial vehicles that both benefit the poor and are still in their prototype phase – our core goal is using our capital to help prove this is not only viable, but scalable as well. Habitat Mortgage has the potential to be a game changer in for-sale housing serving low-income families.”

The paradigm change referenced by the various partners is due to how the model works, and changes how Habitat Affiliates in Michigan can think about funding the houses they build. A Habitat Community Mortgage provides the homeowner with a note, and the Habitat Affiliate that built the home receives the proceeds of the sale of the home. This capital provides the Affiliate with the financial means to construct a new home faster without relying on raising all the donations typically required to build the next home. Concurrently, MSHDA purchases the mortgage note from Community Mortgage, thus replenishing the pool of mortgage capital that allows Community Mortgage to finance the next Habitat homeowner.

HFHMF, which is responsible for the origination, underwriting and loan servicing, is currently reviewing the first initial transactions. This model has commitments from its current funding partners to finance up to $2 million in mortgages.

“This innovative model, and the partners that are providing the different pieces of capital, have created a new means for Habitat affiliates to dramatically increase the number of homes which can be provided to poor families,” explained Sandra Pearson. “Because MSDHA is purchasing these mortgages, and replenishing our capital available for the next mortgages, we are substantially less reliant on raising donations to cover the cost of each home – thus saving time and dramatically increasing our volume of homes to low-income families.”

Going forward, HFHM's ReBuild Michigan Campaign will continue to grow its partnerships and services to help families in need and revitalize neighborhoods. Habitat Michigan is excited to shift its focus from being a house building nonprofit to a neighborhood impact movement and community development partner. According to David Bird, President of Habitat for Humanity Michigan Fund, the organization is now offering the Habitat Mortgage program as an initial pilot program with selected affiliates, and will increase its pace of lending. As the program matures, it has a much larger vision. “The short-term vision is to show that this model works, such that we can add additional mortgage purchasers and mortgage pool lenders with the medium-term vision of providing this program broadly throughout Michigan, and the longer-term vision of expanding the program regionally and nationally where other housing agencies, authorities and partners may want to participate.”

About Habitat for Humanity Michigan Fund
The mission of Habitat for Humanity of Michigan (HFHMF) is to provide mortgage services to Habitat Affiliates and to increase their financial liquidity in order to provide more affordable homes to more families and individuals in Michigan. Habitat Affiliates may utilize the services of HFHMF to originate process and close mortgages as a solution for becoming compliant with licensing and registration requirements in the State of Michigan. These services allow Affiliate staff members to concentrate on home construction, remodeling and fund development. It also reduces the burden of staying current on constantly-changing regulatory requirements of mortgage lending. To learn more, visit: http://habitatmichigan.org/habitat-humanity-michigan-fund-hfhmf.

About Habitat for Humanity Michigan
Habitat for Humanity of Michigan (HFHM) is a statewide 501(c)(3) nonprofit organization that provides support to the 73 Michigan affiliates of Habitat for Humanity International through training, consulting and fundraising. HFHM’s mission is to increase the capacity of Michigan Habitat for Humanity affiliates to build simple decent homes in partnership with people in need. HFHM will develop resources; provide educational training and networking opportunities; and increase awareness of Habitat for Humanity for the benefit of affiliates throughout Michigan. Despite the down economy, in the 2012 fiscal year affiliates built, rehabbed, or repaired 361 Michigan homes in partnership with families in need. As of 2010, Michigan affiliates have built all homes using green and sustainable building techniques. Every home meets Energy Star energy efficiency ratings or above. http://habitatmichigan.org

About Michigan State Housing Development Authority
The Michigan State Housing Development Authority (MSHDA), established in 1966, provides financial and technical assistance through public and private partnerships to create and preserve safe and decent affordable housing, engage in community economic development activities, develop vibrant cities, towns and villages and address homeless issues. MSHDA's loans and operating expenses are financed through the sale of tax-exempt and taxable bonds and notes to private investors, not from state tax revenues. Proceeds of the bonds and notes are loaned at below-market interest rates to developers of rental housing, and also fund home mortgages and home improvement loans. MSHDA also administers various federal housing programs. http://www.michigan.gov/mshda

About Great Lakes Capital Fund
Great Lakes Capital Fund (GLCF) helps socially responsible corporations invest in affordable housing and community economic development activities. GLCF raises capital from corporations and financial institutions, and invests these resources into real estate development partnerships. The investors receive a competitive internal rate of return on their investment through tax benefits; and the community receives high quality, affordably-priced housing and/or commercial developments that generate social and economic benefits for area residents. To learn more, visit http://capfund.net.

About Sustainable Communities Fund
Sustainable Communities Fund (SCF) is a 501(c)(3) nonprofit organization with a mission of providing ‘innovation capital’ to new, often prototype stage, financial models that improve the lives of impoverished people and communities. SCF was founded by Deborah J. La Franchi and Belden Hull Daniels. To learn more about SCF’s mission, visit http://www.tscfund.org.


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