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Vanita Kalra

Nov 01, 2014




  • 1. Vanita Kalra Self-Help Foreclosure Lease-Purchase Program Foreclosure Nonprofit Response & Opportunities HAND Luncheon October 23, 2008
  • 2. What is Self-Help? Self-Help is a nonprofit Community Development Financial Institution (CDFI) that was formed in 1980 Mission: to provide economic opportunity and wealth- building strategies for low income families Direct Services Assets of $1 billion Home lending (in NC and Washington DC MSA) Lending to small businesses and nonprofits Real estate development Nonpartisan policy research on abusive financial services (Center for Responsible Lending) Secondary Market (nationwide) 2 2
  • 3. Secondary Market Overview Loan Originations: Roughly $4.5 billion in purchased loans 48 states via partnership with major banks Over 49,600 loans Borrower Profile: Average Income is 64% of borrowers Area Median Income (AMI) 40% minority 42% female heads of household 3 3
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  • 5. Lease-Purchase Program Goals Neighborhood Goals Minimize cost of foreclosures and vacant homes Turn foreclosures into wealth building assets for low-income families and communities Household Goals Provide path to homeownership for first-time homebuyers and credit-impaired homeowners Program Path Test multiple pilots then pursue scalability 5 5
  • 6. Lease-Purchase Mortgage Product Variation on Self-Help/Fannie Program (30-yr fixed) Initial borrower is local nonprofit partner Self-Help recourse in place of individual qualification Target for tenant to purchase home and assume loan within 5 years Tenant lease payments cover mortgage and operating expense during rental period (and will not exceed FMR) Tenants screened for affordability at origination (38/41 DTI) Affordability and credit capacity evaluated at assumption 620 FICO Credit and homeownership counseling required 6 6
  • 7. Lease-Purchase Pilot Structure Demolition Lease-Purchase Acquisition Rehab Capital Bulk Loan Local Purchase SECM Sell mortgage Fannie Non-profit Local Bank Purchase Self-Help w/ credit Servicers REOs Mae Developer enhancement Long-term Resale affordable rentals 7 7
  • 8. Lease-Purchase Critical Issues Wealth- Vacant REO Building Asset Neighborhood & Acquisition/Rehab Program/Asset Tenant Property Selection Management Assumption & Beyond Find location where Acquisition Broad skill set Value proposition for economics work (or strategy (bulk (counseling, tenant subsidy is there) and vs. retail) asset & prop Qualifying tenants capacity exists Capacity mgmt.) Turnover capacity of Price/market stability Financing Value proposition nonprofit Volume/efficiency Costs for nonprofit Lacking L-P loan Selectivity Counterparty risk performance 8 8
  • 9. Pilot in Peachtree Hills, Charlotte Reverse recent neighborhood deterioration Occupy vacant foreclosed properties Acquisition and rehab of up to 25 vacated properties Begin sales & leasing by early fall 2008 Up to five-year lease-purchase period, though targeting three-year lease period Monthly one-on-one counseling and budgeting Financial literacy workshops throughout program 9 9
  • 10. Charlotte Foreclosure Distribution 10 10
  • 11. Peachtree Hills Foreclosure Distribution 11 11
  • 12. Peachtree Hills Ownership Red Investor- owned Black Owner- occupied Blue HOA- owned common space Green vacant lots 12 12
  • 13. Homes are still in decent shape Expected repairs are relatively minor with a few major upgrades and replacements Neighborhood completed approximately five years ago Needed improvements to landscaping and common areas Homeowners Association exists but is struggling
  • 14. Sales & Lease Price Ranges Home prices will average $80,000, previously sold for $150,000. Average mortgage payment will be approx. $650/mo Average lease payment will be around $850 a month for 3bd/2bth Homeownership fund will be available to participants who successfully complete the program If tenants do not assume mortgage, homeownership fund will be available to the nonprofit for unit turnover, etc. 14 14
  • 15. Supportive Services Homebuyer counseling services Neighborhood liaison/organizing and work with HOA Community policing Code enforcement Infrastructure improvements Landscaping upgrades Attention to solid waste and general clean up Funds to support rehab of homes and future homebuyer down payment assistance 15 15
  • 16. Conclusion 2 million foreclosures in the next year $350 billion of lost equity in surrounding homes One option is to match vacant properties with families that can lease-purchase, but are not qualified to purchase today. 16 16