I also sat in disbelief when the NRP Policy Board approved the two million for the guaranteed loan program. I could not believe that the Board would be so wise that it would take such an action. Especially in the face of elected City officials who might have made commitments to political supporters. Commissioners Peter McLaughlin and Mark Stenglein are to be commended for their thoughtfulness, their wisdom, and for their resolute behavior to get the best for Minneapolis. These two political representatives put the interests of poor people in Minneapolis above politics as usual.
In a nut shell the guaranteed loan program would do the following: 1) Two million dollars would be set-aside in a fund, which would be matched by other sources, (Fannie Mae, HUD, Federal Reserve, Banks and Mortgage Lenders, Foundations, and etc,) 2) This fund would guarantee the first 20% of a mortgage on an affordable homeowner situation. Guarantee first 30 thousand on a 150 thousand dollar house for someone who qualifies for affordable housing but does not presently qualify for a standard mortgage. Banks and Mortgage Lenders who have already indicated some interest are some of the foremost lenders in this area US Bank, Wells Fargo, and I believe City County Credit Union. 3) Such a guarantee would reduce the exposure of the lending institution so that they could make loans at 1/2 to 3/4 % below existing rates on a thirty-year mortgage and accept more marginal borrowers. Such a guarantee would also allow for little or no down payment. 4) Since it is not necessary to escrow the entire guarantee amount, 10% could be set aside for such a reserve. This means such a guaranteed loan program with 10 million dollars could guarantee up to 100 million dollars for mortgages and up to a total of 500 million dollars in affordable housing. Potentially such a guarantee program might produce up to 4000 affordable homeownership possibilities. 5) Such a program would start producing affordable housing immediately 6) There is a gain of two affordable units with each guaranteed loan made. (One for the affordable homeownership, and one for the rental unit freed when the buyer moves to their new home) Rationale: 1) In these tough economic times it is important to maximize the potential of the few resources we have. 2) It is important to give under represented poor people and people of color the opportunity to own their own home. 3) Such a program is sustainable because it does not expend resources it builds them. As the loans reached 20% of equity the funds could be dedicated to a new owner. 4) Such ownership stabilizes not only Impacted Areas, but stabilizes families and people's lives. 5) The average subsidy per unit of new affordable rental housing is now $60,000 dollars. Once it is spent it is gone forever. This program would cost 30,000 if every buyer defaulted. (The percentage of defaults for such programs has proven to be very low.) 6) Neighborhoods with large numbers of empty lots could immediately start filling those lots with new homeowners, and immediately start providing affordable housing to a population that has previously had no chance to compete for those homes. Comparison of cost to a person actually using the program for housing: 1) Two-bedroom rental apartment at affordable rates is $861.00 per month (30% of 50% of area median income, which the Mayor and Council defined as "affordable" housing). One bedroom apartment rental (under affordable housing guidelines) is $719.00 2) Three bedroom, $136,000 GMHCC built, new house payment on 30-year loan under program with no down payment is $730.00 plus insurance and taxes that would add approximately $100 per month. Payment on $125,000 home would be $671.00 per month $861.00 to rent a small two bedroom apartment - or - less to own your own new three or four bedroom house. Gee I wonder which choice most people would make. Where would our tax dollars be better spent? Spent on a fund that perpetually renews itself, (and needs no follow up funding), while affording poor people with homeownership opportunities? Or spent on a $60,000 subsidy per unit to keep a poor family at status quo - Poor? Poor people pay more for the rent on an apartment than many middle class people pay to own a home. A great deal of the net worth of a working family is tied up in their home. Yet our answers to housing problems have heretofore been to only allow them to rent rather than to own. I was not surprised that those who make their living off of poor people, and supposed CDC's, would not like the program. It was to be expected from those who have advocated keeping people in poverty. I am, however, surprised by Anne and Fred who have always been advocates for poor people. I must assume it is only because they have not been able to fully study the potential of such a program. Fred's suggestions about the use of the funds, I think, are right on the money. They should be included in such program. Neighborhood NRP should also get into the act by supplying "Support" services and training, where necessary, to make these new homeowners successful. With interest rates at an all time low there is a limited opportunity to optimally utilize such a program for very poor people. Sure it will later be possible for those at the 50% or 60% income levels, but right now even some below 50% would be able to make use of it. Lets face it, Fred is also absolutely correct about those at 80% not needing assistance to get a loan; they just have to apply for a more modest house. The 80% rule for affordable homeownership is an attempt to attract middle class working people back into the City. Lets do it for 50% people and make our own "middle class" from our own poor and minority populations. We don't need to import any, just give the opportunity to our own working poor. Just a note about the possibility of neighborhood people opposing this resolution: All the neighborhood reps, but one, voted for the proposal. I feel very confident that the only neighborhoods that might oppose the resolution would be the lower middle class neighborhoods whose residents might fear minorities who may suddenly be able to buy houses in their area. I cannot imagine any other neighborhood doing anything but supporting the resolution. Most inner city neighborhoods have been asking for such a program for several years. This was not a raid upon NRP Neighborhoods, this was a raid BY NRP Neighborhoods upon large developer interests. Perhaps Gretchen should get a little more in touch with real neighborhoods at the center. Talk to the folks in Jordan, Hawthorne, Phillips, Ventura Village, and the other truly "Impacted Neighborhoods". Some not so impacted neighborhoods might also agree. Paul should ask those North East and Beltrami voters of his. Ask them what they think of affordable homeownership opportunities. Another question might be, "What is it about private finance, personal opportunity, and individual empowerment that scares "non-profiteers" so much? Jim Graham, Ventura Village >"We must not let our rulers load us with perpetual debt." - Thomas Jefferson >Why is it the Mongols of this world always tell us they're defending us against the Mongols? TEMPORARY REMINDER: 1. Send all posts in plain-text format. 2. Cut as much of the post you're responding to as possible. ________________________________ Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Unsubscribe, Digest, and more: http://e-democracy.org/mpls
