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PARTY'S OVER, THE WORK CONTINUES UNHP's 15th Anniversary Reception was held in May, but the follow-up will continue for a long time.
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APPLE BANK LOAN TO UNHP CLOSED At the reception, UNHP President Joe Muriana announced new commitments of loan money. We are pleased to report that Apple Savings funded a green loan with UNHP in August. UNHP has already used the five-year loan to fund three green loan projects.
Apple is the latest participant in UNHP's green loan fund which has been providing small loans to community controlled buildings in need of improvements that can reduce operating costs; the savings in turn allows the repayment of the subordinate green loan debt in a maximum of 5 years.
Apple has worked with UNHP for a number of years providing acquisition loans several years ago and ongoing grant support. Danny Ouk represented UNHP at Apple's recent awards reception.
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FANNIE MAE FOUNDATION LOAN SIGNED UNHP put the finishing touches on a very low interest loan with the Fannie Mae Foundation to support five community-controlled buildings. The loans will allow these buildings which have turned the financial corner to pay off open city charges that were accruing penalties at 18%. UNHP is hoping to line up other funders to support the STIRR (Short Term Interest Rate Reduction) loan program that it is initiating with this loan.
UNHP has been providing assistance to these buildings for several years. During that time the HDFC's corrected some internal problems and have begun operating the buildings with a positive cash flow on a day to day basis. However, the buildings are not generating enough money to catch up with the old city charges.
The STIRR program will not be able to assist all buildings in financial trouble. If the amount of open charges with the City has gotten too large, then the building would not be able to pay off short term (4 or 5 years) money; however, this type of loan may be very useful to a number of buildings with significant financial problems.
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FALL FORUM TO BE SCHEDULED The next newsletter will announce the date of UNHP's fall seminar on affordable housing. UNHP has been grappling with the inconsistencies of the real estate market and the scarcity of affordable housing dollars. Building real estate values continue to rise while affordable housing funds and rental subsidy dollars continue to be scarce. This hard-to-understand fact raises serious concerns about future financial problems in buildings that may be obtaining financing based on values that may drop quickly in the future. The recent unpredictability in the world stock markets raises additional concern about real estate trends.
This issue will be the central target of the discussion at the forum to be announced. Keep track of our scheduling by checking our web site at www.unhp.org.
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FEDERAL DECISION ON NEW DOLLARS FOR HOUSING DUE IMMINENTLY While press attention stays focused in the House Judiciary Committee, a couple of critical battles are being fought in the Congressional Conference Committee on housing appropriations. According to the Low Income Housing Coalition (www.nlihc.org) they are meeting now. They are expected to make a decision shortly on the creation of new Section 8 units and the elimination of the 90-day waiting period before re-issuing a recaptured certificate. People interested in this issue should speak up now.
Additionally, the decision on the expansion of the Low Income Housing Tax Credit is being made at the Finance Committee. While a majority of both houses are co-sponsoring the bill to increase the credit, it still may not become a reality if it falls victim to negotiations around new tax cut legislation.
Making Post-Secondary Education a Permissible Work Activity Under Temporary Aid to Needy Families (TANF)
Another Congressional conference committee is deciding on whether to support a Senate amendment (the Wellstone Amendment) to make up to 24 months of post secondary education a permissible work activity. The Center for Community Change reports that the conference committee is deciding this now. They also report that Senator D'Amato has agreed to sign on to a letter of support for the change. They recommend that people contact their Senators and Congressmen to urge them to make their position clear to the conference committee members by signing on to a Dear Conferee letter; in the House the letter is being circulated by Rep. Connie Morella of Maryland.
Contacts:
Senator D'Amato (202) 224-6542;Senator Moynihan (202) 224-4451, US Senate, Washington D.C. 20510.
Congressperson __________, House of Representatives, Washington, D.C. 20515.
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THE FINANCIAL MODERNIZATION BILL The House version of this bill passed the House by one vote; the Senate Banking Committee reported its version to the floor on September 11th. City Limits Fax Weekly reports that the bill may run into trouble due to the lack of time to work out a Congress-White House compromise to avoid the veto that has been promised by President Clinton at this time.
The Neighborhood Economic Development Advocacy Project (NEDAP 212-633-8585) and the Center for Community Change have been urging people to oppose the legislation unless there are greater Community Reinvestment safeguards.
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UPDATE ON THE FANNIE MAE MINI-LOAN PROGRAM UNHP sponsored a workshop for people who called regarding the mini-loan program on August 18th. The program is targeted to buildings in need of between $100,000 and $750,000. The program provides funds for acquisition, rehabilitation or refinancing.
Owners interested in more information about the program can contact Danny Ouk at (718) 933-3101. A complete description of the program can also be found on UNHP's web site.
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THE MYSTERIOUS WINDFALL Back in August of 1997, Governor Pataki signed the Welfare Reform Act of 1997, which represents the state's response to Federal Welfare Reform and a substantial reshaping of New York's public assistance programs. In the 1998 February issue of NOTES, UNHP reported on the welfare windfall that NYS (and other states) started receiving in federal dollars last year as a result of the replacement of AFDC with the new welfare block grant. The state budget, even before the Governor's line item vetoes (which the Assembly Speaker has challenged in court), allocated the vast majority of the windfall to state fiscal relief and not programs that could be established to make welfare to work more viable.
The windfall should continue to come to the state over the next couple of years; as reported in our February issue, some other states have developed programs with the windfall money to assist welfare-to-work efforts through training and education. Particularly with the state elections coming up, it would make sense to comment to elected officials on the issue.
What is the windfall?
Prior to welfare reform, the federal government reimbursed New York State half of the cost of aid that it provided to the Aid for Dependent Children program. The so called welfare windfall is the difference between the amount of federal aid that New York receives under the new TANF (Temporary Aid to Needy Families) block grant (2.4 billion per year) and what it would have received under the AFDC program if that program had continued at the same financial levels. Under the AFDC program, New York's federal reimbursements had reached an all time high during FY95; since then the number of New York families receiving aid has decreased more than 10 percent. Therefore, for New York, the TANF grant is far greater than the amount it would have received under the old law. This difference constitutes the windfall.
How much is the windfall worth this year and how is it being used?
SENSES, a state budget watchdog group, reports that for the 1998-1999 fiscal year, New York State will receive $593 million more from the federal government through TANF than it would have under the pre-welfare reform funding formula. Similar to last year, the governor is using two thirds of this money, approximately $409 million, for state and local fiscal relief. SENSES reports that the governor's proposal designates only 10% of this surplus for childcare and 8% for education and training. In order for families to leave welfare for work, there needs to be an investment in higher quality daycare, training and education programs, and a creation of wage paying jobs in the private, non-profit, and public sectors for those who cannot otherwise find work. Federal dollars for welfare are time-limited and the 5-year time clock keeps ticking. Now is the time for NYS to make a substantial investment in its welfare program before it is too late.
What to do?
The people who make these decisions are running for election this year. Additionally, no one knows how the lawsuit between the Assembly and the Governor will be resolved. Comment on this issue would be timely.
Governor Pataki, Capitol Building, Albany, NY 12224
(518) 474.8390Speaker Silver, NYS Assembly, Albany, NY 12248
State Senator _____, NYS Senate, Albany, NY 12247
State Assemblyperson _____, NYS Assembly, Albany, NY 12248
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HOMEBUYER'S WORKSHOP…FOR THE FIXER UPPER HOME More than one hundred prospective homebuyers crowded the Concourse House Chapel on August 13, 1998 to learn about the process of buying a house in need of repair or substantial rehabilitation and using the Purchase-Renovation Mortgage product. The program flexibility allows for the purchase and rehabilitation of 1-4 family homes. The product consists of a loan to do the work and an acquisition loan, which at the end of construction will convert into a permanent mortgage. The workshop was a response to the increasing demand for this type of housing and the financial programs needed to rehab them. The workshop was also a response to the effect that the 1-4 family boarded up and dilapidated homes were having on neighboring properties.
The workshop was brought to the residents of the Northwest Bronx in collaboration with a cadre of experienced representatives from Fannie Mae, Bank of New York, and Neighborhood Housing Services of the South Bronx. Presenters of the various institutions spoke about the importance of making an educated decision and financial readiness when buying a home. These were some of the most important and relevant points:
- Education - The importance of making an informed decision to avoid future financial problems in keeping and maintaining the property was evident. A Homebuyer counseling certificate is a requirement of many low down payment mortgages. The Purchase-Renovation Mortgage product presented to the audience requires the prospective homebuyer to attend training on understanding the mortgage process, budget and credit, managing personal finances.
- Financial readiness - This is about having sufficient money on hand to handle the closing cost, down payment. It is also about having sufficient assets and very little debt to meet the ratio requirements of the program. Credit quality standards are also ways to measure a prospective homebuyers readiness to buy a property. A clean credit report will ensure not only securing the mortgage but also securing the mortgage at a lower interest rate.
- Physical inspection - The purchase rehab mortgage product requires the prospective homebuyer to obtain pre-qualification to know maximum house price he/she can afford. Once a property has been selected, the product requires having a professional inspector complete work scope and itemized cost estimate.
- Scams - If a deal is too good to be true, it probably isn't. Many buyers are victims of schemes in which sellers persuade them to borrow more than what he/she can handle to pay. This activity is called predatory lending. It was emphasized at the seminar, that it might be a lengthier process with more paperwork to work with a bank or an institution that is honestly underwriting a mortgage but in the long term it will be in the best interest of the homeowner.
- Disparity/Fannie Mae Study - A study conducted by Fannie Mae stated that the rate of homeownership is comparatively low among Hispanic and African American households. UNHP is encouraging, through these types of workshop, this segment of the population to look into homeownership as a viable source of financial stability.
- Benefits of the Program - Two major benefits of buying a property in need of significant rehab were mentioned. One, substantial savings on the price could be obtained which translates into immediate equity in the property. Two, the owner will have sufficient flexibility to change the layout of the property to fit her needs.
The Neighborhood Housing Services has a loan program CASH Program or Closing Assistance Support to Homebuyers to assist prospective buyers with money to cover closing costs. These are the requirements:
Eligibility Requirements
- Income up to 82,170
- Minimum 3% down payment must come from borrower's own savings
- Maximum loan of $15,000 and up to 8 years to repay at interest rate of 8%
- Maximum loan to value is 95%
- Maximum ratios of 38/40
The NeighborWorks Program: The Numbers
1. Owner Occupied, 1-4 Family Unit Properties
Maximum Loans Limts:
1 family $ 227,150
2 family 290,650
3 family 351,300
4 family $ 436,600
2. Down Payment Requirements
1-2 family 5%
3-4 family 10%
Down Payment Requirements from borrowers own funds:
- If purchase price is greater than $80,000; at least 2% must come from borrower's own funds
- If purchase price is less than $80,000; a minimum of $1,000 or 2% of the sales price (whichever is less) must come from the borrowers own funds.
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