Minneapolis City Council Member
City Hall
350 S 5th St Rm 307
Minneapolis, MN 55415
RE: Neighborhood Revitalization Program (NRP) Renters to Owners Initiative
Dear Council Member;
On behalf of the Home Ownership Center (Center) I would like to express our support for the City Council Community Development Committee�s decision to not recommend the NRP Policy Board �Renters to Owners� proposal to the City Council as a whole.
The Center is a recognized statewide leader in home ownership training, support and advocacy. The Center has, since it�s establishment in 1993, worked throughout the City of Minneapolis with our non-profit, community based partners to �promote sustainable home ownership for low and moderate income Minnesotans through the development and delivery of quality, standardized education, counseling and related support services.� We do not believe that the NRP Policy Board proposal contributes to this goal in Minneapolis.
First, the proposal asserts that the major hurdle facing families trying to access homeownership is the difficulty in obtaining private mortgage insurance (PMI). This just is not the case. There are many mortgage programs targeted to low and moderate income families in Minneapolis that do not require PMI including but not limited to those offered by the City itself, by Wells Fargo, US Bank, TCF, Bremer and the HUD sponsored Federal Housing Administration loan program. We believe that it would be at best redundant to establish a lender insurance fund of the type proposed by the NRP Policy Board.
The proposal also alludes to �risky� borrowers and borrowers with �uneven credit histories� being unable to obtain mortgage financing either from lenders or PMI companies. Again, this is not an accurate portrayal of the current mortgage market in Minneapolis. Legitimate lenders, including those listed above, have many different loan programs available to address the needs of families with low and moderate incomes. There are currently products available for families with no credit and legitimate sub-prime lending products that utilize fair, risk-based pricing models for families with damaged credit.
Unfortunately, there are also many lenders active in Minneapolis today that are making loans with abusive terms and using abusive practices. These predatory lenders and predatory loan products are flooding the city with mortgage finance dollars. In fact, there is nothing in the current proposal that would exclude predatory lending from benefiting from the proposed mortgage insurance program. While this would certainly not be the aim of the proposal, it could be an unintended consequence.
The City has supported the homebuyer education and mortgage loan counseling services administered by the Center in Minneapolis since their inception. It is the purpose of these programs to help families access good loan programs such as those listed above and help provide access to down payment and closing cost assistance when appropriate. The education and counseling programs also help families by working one on one on any barriers to home ownership such as credit repair, budgeting and planning. Finally, these programs and professionals help potential homebuyers understand the mortgage market and thereby steer clear of predatory loans and predatory practices. All of these services are geared towards the final goal of helping families achieve long term, successful homeownership.
Finally, and perhaps most disturbing, we are beginning to experience a foreclosure crisis in Minneapolis. The Center also administers the Mortgage Foreclosure Prevention Program in Minneapolis and this program, which is funded in part by the City, is seeing record numbers of families seeking foreclosure prevention counseling and assistance. This crisis is due in part to many families who entered homeownership on the very edges of affordability. The current economic crisis is pushing many of these families over the edge and with the great shortage of affordable rental into homelessness. The devastation of foreclosure on the family that experiences it, the neighborhood in which they live and the City as a whole is incalculable.
The City has shown its commitment to an infrastructure of products and services to help Minneapolis families achieve and sustain affordable home ownership and the Center is proud to be part of this system. We believe that providing scarce City resources to a project like the �Renters to Owners Initiative,� especially at the expense of low-income targeted rental, is ill advised. We encourage you to follow the recommendation of the Council�s Community Development Committee and reject this proposal.
Thank you for your attention.
Sincerely,
Suzanne Snyder
Executive Director
Tom Welling wrote:
Does anyone else question the nature of Peter McLaughlin's support for this mortgage insurance proposal? I look at it this way: it's yet another subsidy for Wells Fargo Mortgage! There are many private and federal programs for mortgage insurance. It is odd that just as the I-35 W Access Project is making dozens of properties ineligible for FHA financing (proximity to freeways, noise levels, etc), McLaughlin comes out with a program that makes them eligible for Wells Fargo financing, on the taxpayers' dime.
Tom Welling
Uptown
--- On Fri 03/14, < [EMAIL PROTECTED] > wrote:
From: [mailto: [EMAIL PROTECTED]
To: [EMAIL PROTECTED]
Date: Fri, 14 Mar 2003 16: 17:06 -0600
Subject: [Mpls] NRP Housing IssueGreetings,
I have been involved in the production of low-income housing for over 25
years. As much as anyone, I understand the need for low-income housing and
share the passion for production of new units. The recent proposal before
the NRP Policy Board to create a mortgage insurance program caused quite a
furor. Concerns centered on two issues: is this a wise use of scarce
low-income housing resources; and was the process by which this proposal
was considered legitimate. Let me try to put this proposal in context and
address some of the issues and questions.The concept of creating affordable home ownership opportunities is, in my
mind, a complement to the production of new affordable rental units. Among
the potential benefits of a home ownership component are: it is often less
expensive per unit/family than rental property; it has the potential to
help stabilize ne ighborhoods with low ownership rates; it often opens up
affordable rental units as families move into home ownership; it offers
families a way to break out of poverty by owning real estate that
appreciates over time; it may elicit significant private sector
involvement; and because it is a revolving fund, the initial investment is
self-perpetuating.The actual benefits of a program depend upon the details. During the Policy
Board discussion, I made several specific requests regarding the program
design, including solicitation of bank participation to eliminate the need
for NRP or MCDA to administer the program; estimated costs per unit; steps
required to create a revolving fund to allow these funds to be reused for
mortgages for other low income people once the need for mortgage insurance
is gone for the initial participants.I viewed this as a preliminary vote of approval by the Policy Board. The
resolution specifies that th e funds will only be distributed after approval
of guidelines for the program. Thus, the understanding, based on the
debate, was that those guidelines would come back and would include
targeting of the funds by both income and neighborhood. Again, based on
the discussion, it is my expectation that the funds would be tightly
targeted to low-income people and neighborhoods with low rates of home
ownership.The second question relates to the process by which this decision was
reached. This was an action of the Policy Board, the very same Policy Board
that originally set aside the $4 million and established the basis for its
use. Proposing changes in the intended use of those funds is clearly
within the province of the Policy Board. The City must approve or modify
any such change, a rare occurrence in the history of NRP, but that
authority resides with the Council and the Mayor. The fact that
Neighborhood Reps offered the amendment s eems very much in keeping with the
role of neighborhoods in the NRP process and is precisely why it is so
important to have Neighborhood Reps on the Board.The mortgage insurance proposal was meant to change the programmatic use of
a portion of the housing funds, clearly the province of the Board. As
discussed at the meeting, it used a portion of the money set aside on an
alternative approach to dealing with the housing needs of low-income
individuals and families. Because of this difference, it didn't fit within
the existing process and criteria of the fund. Thus, the Board exercised
its authority to change the strategy for use of some of the funds. This
isn't a violation of any process; it was the Board (and the Neighborhood
Reps) exercising their rightful authority.Finally, if the guidelines mandated in the February resolution are not
satisfactory, the decision can be reversed. If less than $2 million is
needed, the sum c an be reduced. The resolution was a way to focus people's
attention on an alternative way of addressing the housing needs of
low-income people in Minneapolis and potentially strengthening
neighborhoods with low rates of home ownership. The proposal obviously did
not contain sufficient details to implement immediately. The resolution
provided for that by calling for guidelines to come back to the Policy
Board.I've been active in affordable housing for over 25 years. Low-income
ownership, with the enhanced control and stability it provides, has been a
goal since my days at PRG helping produce limited equity coops. I voted
for this proposal because it offered the hope, through a modest investment,
of providing another means of addressing the housing needs of low-income
people in Minneapolis. It is surely worth a serious look. That's what the
resolution did. And the Neighborhood Reps are to be applauded for taking
their responsibili ties seriously.Peter McLaughlin
NRP Policy Board Member
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