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Vanita Kalra Self-Help Foreclosure Lease-Purchase Program February 18, 2009

Vanita Kalra Self-Help Foreclosure Lease-Purchase Program February 18, 2009. www.self-help.org. What is Self-Help?. Self-Help is a nonprofit Community Development Financial Institution (CDFI) that was formed in 1980

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Vanita Kalra Self-Help Foreclosure Lease-Purchase Program February 18, 2009

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  1. Vanita KalraSelf-Help Foreclosure Lease-Purchase ProgramFebruary 18, 2009 www.self-help.org

  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)

  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 borrower’s Area Median Income (AMI) • 40% minority • 42% female heads of household

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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

  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

  7. Lease-Purchase Pilot Structure Demolition Lease-Purchase Acquisition Rehab Capital Lease -Purchase Mortgage Local Non-profit Developer Local Bank Self-Help Fannie Mae Bulk Purchase REOs Loan Servicers SECM Purchase Sell mortgage w/ credit enhancement Open Market Purchases Purchase Mortgage Long-term affordable rentals Resale

  8. Lease-Purchase Critical Issues Wealth-Building Asset Vacant REO Neighborhood & Property Selection Program/Asset Management Tenant Assumption & Beyond Acquisition/Rehab 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

  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

  10. Charlotte – Foreclosure Distribution

  11. Peachtree Hills – Foreclosure Distribution

  12. Peachtree Hills – Ownership Red – Investor-owned Black – Owner-occupied Blue – HOA-owned common space Green – vacant lots

  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.

  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

  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.

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