DURHAM, N.C. - Quietly and little recognized by even the creditunion industry, an effort sponsored by the $115 million Self-HelpCredit Union, based in Durham, North Carolina, has helped makethousands of mortgages available to low-income people across thecountry in the last five years. In doing so, the effort alsomanaged to significantly improve the mortgage market for low-incomepeople and introduced dozens of financial institutions to servinglower income home borrowers. Known informally as the Self-Helpinitiative, the effort used money leveraged through the creditunion's Venture Fund to create what amounted to a secondary marketfor lower income mortgages, allowing the lenders to make moremortgage money at lower rates available to many more low-incomeborrowers. The Venture Fund is a financial arm of Self-Help andallows the credit union to reach out to help people who wouldotherwise not be eligible to be Self-Help members. The Venture Fundis also a non-profit institution in its own right that is able toapproach different Foundations and other sources of fundsindependently of the credit union, according to Malcolm White,Communications Director for Self-Help. White explained thatalthough the program which drew to a close in late October was fiveyears old, it actually had its roots further back in the 1990's. Inthat part of the decade, White explained, Self-Help began to runacross banks which had offered some mortgages to lower incomeborrowers as part of their responsibility under CommunityReinvestment Act regulations but which had decided they could notoffer any more. In response Self-Help offered to buy the low-incomemortgages from these lenders on the condition that the banks usedthe money from the sale to fund more low-income mortgages. Severalbanks accepted the arrangement, and a new process was born wherebySelf-Help's Venture Fund served as a secondary market of sorts forsome lower income mortgages. After doing this for several years,Self-Help's efforts drew the attention of some major institutionssuch as the Ford Foundation and Fannie Mae, which in 1998 committedto throwing some of their funding into the project over the nextfive years. The result was the program leveraged $2 billion to helpallow thousands of lower income borrowers to own their own homes.According to the Venture Fund, the program helped about 30,000borrowers get access to mortgages, 14,500 of them in the state ofNorth Carolina. According to Self-Help, 28% of the North Carolinaborrowers were African-American, 43% of the loans went towomen-headed households, 51% of the mortgages benefited ruralfamilies, and 69% of the borrowers were classified as verylow-income households (62% of their area median income). "For toolong, many Americans were shut out of the economic mainstream,"said Self-Help CEO Martin Eakes. "This initiative helps low-incomeand minority families build wealth and economic opportunity throughowning their homes. I commend Fannie Mae and the Ford Foundationfor their vision in helping make homeownership a reality for nearly30,000 families across the nation through this initiative." TheVenture Fund also used some of the money it leveraged from themajor supporters to research and establish a mechanism that willmake greater numbers of lower income mortgages acceptable to thesecondary mortgage markets. This has helped Fannie Mae stay withthe project even past its official end, White said. Fannie Mae hascommitted to purchase an additional $2.5 billion in loans acquiredby Self-Help over the next five years to serve an additional 35,000families. But as good as those results have been for low-incomeborrowers, White said Self-Help has been particularly proud of howthe program has managed to bring more data on the real risks oflower income mortgage borrowers. The Ford Foundation commissioned amulti-year study by the University of North Carolina to assess theability of low-income and minority borrowers to repay theirmortgages and to identify the financial and social impacts ofhomeownership on the borrower's households. The UNC study foundthat participating lenders experienced a 0.7% foreclosure rateduring the first five years of the initiative, below the nationalforeclosure rate of 1.1% at the end of the second quarter of 2003,as calculated by the Mortgage Bankers Association, Self-Help said.More than 80% of the borrowers were never delinquent with amortgage payment, and 12% were never more than 30 days late. Thestudy results also indicate that the purchase of a home has been asuccessful investment for these families. The value of thehomeowners' equity in their homes - the current value of the homeminus the unpaid mortgage balance - increased by $20,619 on averageduring this same period. White said the program has changed the waymany lenders interact with lower income borrowers, since one of theconditions of the program is that the lenders have to service theloans for a period of time. The lenders learn two things -overallthe lower income borrowers are good risks and they may need extraattention and help at certain times. "Part of working with thispopulation means recognizing their economic vulnerability," Whiteexplained. "A big medical bill might not send a prime borrower intotrouble with their mortgage, but it might with a lower incomeborrower," he said. [email protected]

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