Vanita Kalra

www.self-help.org

Vanita Kalra

Self-Help Foreclosure Lease-Purchase Program

Foreclosure – Nonprofit Response & OpportunitiesHAND LuncheonOctober 23, 2008

www.self-help.org

22www.self-help.org

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)

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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 borrower’s Area

Median Income (AMI)• 40% minority• 42% female heads of household

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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

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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

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Lease-Purchase Pilot Structure

Local Bank Self-HelpFannie

Mae

Sell mortgage

w/ credit

enhancement

SECM

Purchase

Lease -Purchase

Mortgage

Purch

ase

Mor

tgag

e

Acquisition

Rehab

Capital

Local

Non-profit

Developer

Lease-Purchase

Long-term

affordable

rentals

Resale

Loan

Servicers

Bulk

PurchaseREOs

Open Marke

t

Purchase

s

Demolition

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Lease-Purchase Critical Issues

Vacant REOWealth-Building Asset

• Find location where economics work (or subsidy is there) and capacity exists

• Price/market stability• Volume/efficiency• Selectivity

• Acquisition strategy (bulk vs. retail)

• Capacity• Financing• Costs

• Broad skill set (counseling, asset & prop mgmt.)

• Value proposition for nonprofit

• Counterparty risk

• Value proposition for tenant

• Qualifying tenants• Turnover capacity of

nonprofit• Lacking L-P loan

performance

Neighborhood &

Property SelectionAcquisition/Rehab Program/Asset

ManagementTenant Assumption & Beyond

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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

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Charlotte – Foreclosure Distribution


Peachtree Hills – Foreclosure Distribution


Peachtree Hills – Ownership

Red – Investor-owned

Black – Owner-occupied

Blue – HOA-owned common space

Green – vacant lots

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


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.


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


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.

Vanita Kalra

Documents

Vanita Kalra