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The Twin Cities Family Housing Fund knows it's going to take more than one remedy to close the wounds opened by a half-decade's worth of reckless mortgage peddling.
So FHF's newest enterprise, its $16 million Home Prosperity fund, is designed to deliver low-cost money with enough flexibility to support a wide range of post-mortgage mess cleanups, everything from rehabbing neglected, foreclosed homes to helping working-poor and modest-income homebuyers get back into the housing market.
The new fund comprises investments by TCF Foundation, Thrivent Financial, U.S. Bancorp, Wells Fargo & Co., and Housing Minnesota.
Each of those veterans of Twin Cities affordable housing efforts recognized the need for broad responses to the foreclosure crisis, said Carol Kelleher, program manager for the new fund.
"Their priority was to recognize the various ways that the mortgage foreclosure crisis is affecting communities and get help to the groups that are addressing those," Kelleher said.
Part of that strategy was to deliver money with few encumbrances for the borrowers to worry about.
"Since these aren't public funds they aren't bound so much by requirements," that mandate everything from environmental goals to targets for job creation and wages, Kelleher said.
Such mandated goals haven't disappeared - virtually all affordable housing efforts include many funding sources, each with their own list of requirements. But loans from the Prosperity fund, because they have fewer mandates, don't add much to the time or legal costs needed to conform to those other requirements.
For the Twin Cities branch of Habitat for Humanity that freedom enabled them to designate much of their $1.3 million award to early-stage development costs like land acquisition that few other funders provide, according to Susan Haigh, Habitat's executive director.
"We can't use the public funds that go into our project until families move into their homes. But we need cash in order to buy land and to finance construction, and this gives us the capital to get those balls rolling," Haigh said. "That's a wonderful new resource."
It also fits into Habitat's effort to build its suburban portfolio, bringing low-cost housing into communities with little affordable housing.
In this depressed housing market, Habitat can hasten that effort by picking up land at considerably lower costs than a few years ago.
"There are very few good things that you can find coming out of this foreclosure mess, but [lower land costs] is one," Haigh said.
Another recipient in Home Prosperity's first round was the Greater Metropolitan Housing Corp., which will use a $2 million loan to expand its acquisition of foreclosed homes in north Minneapolis. The agency rehabs those homes and then markets them at various levels of affordability.
"This [Prosperity Fund] is a major addition" to affordable housing efforts, said GMHC executive director Carolyn Hanson. "It's larger than most funding sources, it's flexible, and it's a longer-term investment than many other funders, which gives us something to rely on."
The term of the investments in this new fund is generally 15 years, and borrowers' terms have ranged from five to 15 years.
That longer period means the nonprofits can stretch their dollars, using them as revolving funds that can be loaned again as they're repaid.
Dayton's Bluff Neighborhood Housing Services plans to use its $1.75 million allocation that way - to create a revolving fund to provide low-interest second mortgages to low- and moderate-income buyers. The goal is to keep the housing stock on the East Side of St. Paul affordable to its residents, and also to minimize the threat of disinvestment in foreclosure-heavy neighborhoods.
The specter of spiraling disinvestment - along with the importance of coming to the aid of homeowners who got caught up in the foreclosure mess - is a key motivation for the new fund's investors, all of whom have deep knowledge of the region's affordable housing needs based on years of participation, Kelleher said.
And that knowledge is driving them to up the ante this time.
"This is all new money they've provided, additional to the amounts they've given before," Kelleher said. "Our goal was to add to the total and try to make sure this didn't take support away from some other community effort."
But in the face of the current level of foreclosures and the waves of additional foreclosures that appear to be teed up in the next several years, FHF is keeping its fundraising campaign on the front burner. Its goal is to bring the Home Prosperity Fund up to $50 million by 2012.
And to reach that they'll have to go beyond old friends.
"We'll be reaching out with this story to other groups in the Twin Cities who haven't been involved in housing efforts in the past," Kelleher said. "It sounds like an optimistic number we're trying to reach, but it's what we think we have to do."
By Mark Anderson
Finance and Commerce
January 23, 2008
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