There may be some misunderstanding about the proposed "Affordable Homeownership Program" coming out of the NRP Policy Board this week. Cathy, the program would make it so that a down payment would not be necessary or would be small. Since the program would guarantee a certain portion of the loan, the down payment would not be necessary, mortgage insurance would not be necessary, and the interest would be lower.
Here is the best part - the City NRP dollars would not be spent to do this. It would be a guarantee NOT a grant or subsidy! Approximately 20% of the loan would be guaranteed if it were to go into default. This reduces the Lenders exposure to loss and as such people who would not normally qualify for a loan would now be able to buy a home. The City does not spend the 20%; it merely guarantees it in case of loan default. Only about 10% of that guarantee would be necessary in escrow. That amount would be freed to guarantee the loan for another poor family as the loan was paid down. The City is able to recycle that money over and over without using it up, that is why it is "sustainable" affordable housing. Even if every one of these loans were foreclosed on it would be cheaper than the 50,000 to 100,000 dollar subsidies taxpayers presently pay for "affordable" rental housing. (Of course this raises the issue of "affordable to who"?) It is a matter of priorities. Is it a higher priority to put money in a developers pocket for each unit built or is the priority to use 10% of that amount to put three times as many families in houses of their own. Is it a priority to sustain large developers or a priority to sustain and give economic opportunity to poor people? Is it priority to improve the quality of profit for the developer or the quality of life for poor people? My answer of course is that the highest priority is to assist poor people to help themselves to be self-sustaining for their future housing. Craig Miller says, >"(CM) This better be a pilot program. What happens if everyone with who gets turned down for a loan elsewhere moves into your city? Do it by lottery by >those who have been pre-qualified. Impacted neighborhoods first. >This is > substantially less expensive than the per unit costs of rehab or new > construction under the name of affordable housing." Jim Graham: Gosh Craig, you got it right of the bat. Those are some of the elements of such a NRP program. Craig does have a point about people moving into the City to take advantage of the program. Though the program is for those who qualify for "Affordable Housing", perhaps we should make an exception for Police Officers who wish to move into the City. Or perhaps we, (Minneapolis), should just set up a similar program for employees who we wish to have living inside the City where they work. >"(CM) AMEN! The city is spending something over 100k per affordable unit. The city could even put > a lien against the property for the amount of the down payment. At any > point that the title is transferred; refinancing, sale, gift, whatever, the > money would be returned to the city and used again to help someone else. >(CM) >Make sure the house is worth something before purchase. Over the years the >various government agencies have held mortgages worth in excess of the >house." Jim Graham: The beauty of this program is that other than the guarantee, the rest of the transaction is between the Mortgage Lender and the "Individual Homeowner". Just like in other transactions. The City would not hold the Mortgage; it would merely guarantee the first 20% of the mortgage. We probably should keep the City out of the housing business, given the history of housing controlled by the City through MCDA! For those concerned with taxes here are some things to think of: 1) Setting money aside in an account as a guarantee on many housing units, rather than spending it all on a few. 2) Each guaranteed loan creates two affordable units - (the one the mortgage is on and the rental apartment freed up when the family moves to their new home) 3) Increased tax base on Real Estate, (also stability means a greater potential for the person to earn and pay other taxes.) 4) Stability of family means greatly reduced social service and infrastructure costs during the entire life of the individual family members. Including less cost to educate each individual child, and lower police and criminal justice system costs. (Do any of the readers have any idea what the social service and criminal justice costs can be for just one person from an unstable family?) 5) One time guarantee rather than a lifetime of subsidy The very best thing is that it gives poor people a chance to enjoy the same quality of life as most more-affluent people take for granted. Poor people' s dreams are not that much different. Quality housing, quality education, and QUALITY OF LIFE! Sort of what I want for my children, how about you? Jim Graham, Ventura Village >There is no finer investment for any community than putting milk into babies, >revolution into minds, or poor people into homes" - Toe TEMPORARY REMINDER: 1. Send all posts in plain-text format. 2. 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