Self-Help, Ford Foundation, Bank of America, Chevy Chase Bank and Fannie Mae Announce Successful Completion of $2 Billion Homeownership Initiative
Additional $2.5 Billion Pledged to Serve Another 35,000 Families
WASHINGTON, DC (October 28, 2003)— Representatives from a unique partnership of housing and philanthropic leaders announced today that they have exceeded a $2 billion initiative launched in 1998 to provide affordable mortgages to minorities and low-income home buyers nationwide. Building on the success of the initiative, Fannie Mae's Chairman and CEO Franklin D. Raines also announced that Fannie Mae has committed to purchase an additional $2.5 billion in loans acquired by Self-Help over the next five years to serve an additional 35,000 families. The groups also released new Ford Foundation/University of North Carolina (UNC) study data showing that minorities and low-income families have a strong track record of repaying mortgages.
Representatives from Self-Help, a nonprofit community development organization, joined eight new homeowners, the Ford Foundation, Bank of America, Chevy Chase Bank, and Fannie Mae (FNM/NYSE), the nation's largest source of financing for home mortgages, at a celebration in Washington, D.C. to mark the successful completion of the five-year, $2 billion Self-Help initiative. A total of 771 home buyers in the Washington, D.C. metro area have benefited from the initiative to date.
"For too long, many Americans were shut out of the economic mainstream," said Self-Help CEO Martin Eakes. "This initiative helps low-income and minority families build wealth and economic opportunity through owning their homes. I commend Fannie Mae and the Ford Foundation for their vision in helping make homeownership a reality for nearly 30,000 families across the nation through this initiative. Together we have helped prove that low-income families are creditworthy with low levels of losses and foreclosures, as documented in new research conducted by the initiative."
"We are very excited about the progress of the Self-Help initiative," said Susan V. Berresford, president of the Ford Foundation. "Through the creativity and hard work of Self-Help, Fannie Mae, and the 22 participating lenders, the program is enabling households previously under-served by the conventional mortgage market - minority households, rural resident, female-headed families, people with blemished credit histories - to become homeowners. And, just as we had hoped, purchase of a home by these households is leading to the creation of meaningful wealth. Even households with incomes below $20,000 have been able to grow a small down payment into an impressive nest egg."
The Ford Foundation commissioned a multi-year study by UNC to assess the ability of low-income and minority borrowers to repay their mortgages and to identify the financial and social impacts of homeownership on the borrowers' households. The UNC study found that participating lenders experienced a 0.7 percent foreclosure rate during the first five years of the initiative, below the national foreclosure rate of 1.1 percent at the end of the second quarter of 2003, as calculated by the Mortgage Bankers Association. More than 80 percent of the borrowers were never delinquent with a mortgage payment, and 12 percent were never more than 30 days late. The study results also indicate that the purchase of a home has been a successful investment for these families. The value of the homeowners' equity in their homes—the current value of the home minus the unpaid mortgage balance—increased by $20,619 on average during this same period.
"Fannie Mae's partnership with Self-Help, the Ford Foundation, and our lender partners has been one of the most innovative partnerships our company has engaged in to date," said Raines. "Due to the partnership so generously supported by the Ford Foundation, Fannie Mae has been able to do much more to help low-income families achieve homeownership. In recent years, we have greatly expanded our products to help more families become homeowners, such as down payments as low as $500 and the acceptance of nontraditional credit histories."
Self-Help's new initiative will focus on expanding homeownership opportunities for low-income rural families by targeting those areas of the country where these groups have migrated for job opportunities. In addition, it will assist lenders, particularly small and regional lenders, to meet their Community Reinvestment Act goals by continuing to purchase loans developed to expand homeownership for low-income and minority families.
Gwen Thomas, senior vice president; CRE multicultural executive with Bank of America said that she was proud of the fact that Bank of America had originated more than $500 million of the mortgages. "Because of this partnership, we have more capital to develop more affordable housing and we are able to make more mortgages to low- and moderate-income families," said Thomas. "This is what great community partnerships are all about. And we commend the Ford Foundation, Self-Help and Fannie Mae for their commitment to greater homeownership."
"We are proud to be partners of Self-Help and Fannie Mae in this innovative initiative to help so many people who would otherwise be shut out of homeownership," said Robert D. Broeksmit, president of B.F. Saul Mortgage Company, Chevy Chase Bank mortgage lending subsidiary. "We look forward to continuing this association and consider it to be a model for creatively serving low- to moderate-income borrowers."
Homeownership remains the largest builder of wealth in the U.S., but according to the 2000 U.S. Census, 49 percent of minorities own their home, compared with the overall homeownership rate of 68 percent.
Under the Self-Help initiative launched five-years ago:
- 85 percent of the families served were low-income, earning less than 100 percent of area median income;
- 15 percent of the families served lived in high-cost markets such as New York and California earning up to 115 percent of area median income; and
- nearly half of all participating borrowers, or 46 percent, were minorities.
Self-Help, a leading community development lender, started its initiative in 1994 to provide an alternative source of capital for banks and borrowers in North Carolina. The Ford Foundation provided a $50 million grant to Self-Help in 1998, which enabled Self-Help to expand its initiative nationally from its genesis in North Carolina.
"Being a homeowner has been a dream of mine, and thanks to the support and encouragement of my loan officer and the partners involved in the Self-Help initiative, I was able to make that dream a reality," said Ms. Sarah Bullock.
Self-Help expands homeownership opportunities for minorities and low- to moderate-income households by purchasing loans from lenders such as Bank of America and Chevy Chase Bank. In return, the lenders use their freed up cash to lend to an equivalent number of underserved borrowers in the future. Self-Help provides these lenders with flexible, targeted mortgage products designed for people who require lower down payments and more flexible underwriting standards, and have difficulty meeting conventional lending standards because of small savings or blemished credit.
Self-Help credit enhances the mortgages and sells them to Fannie Mae. Fannie Mae will build upon its original commitment and purchase $2.5 billion in eligible loans from Self-Help. The combined effort will help lenders such as Bank of America and Chevy Chase Bank expand their outreach and provide more innovative mortgage products to better serve minorities and low- to moderate-income borrowers.
For more information on the Self-Help initiative or a list of lenders, consumers may contact Fannie Mae's Consumer Resource Center at 1-800-7-FANNIE (1-800-732-6643) Monday through Friday, 9:00 a.m. to 5:00 p.m. EDT.
The Ford Foundation is an independent, nonprofit grant-making organization. For more than half a century it has been a resource for innovative people and institutions worldwide, guided by its goals of strengthening democratic values, reducing poverty and injustice, promoting international cooperation and advancing human achievement. With headquarters in New York, the foundation has offices in Africa, the Middle East, Asia, Latin America, and Russia.