New Orleans Soft Second Mortgage Funding

8/9/2019 New Orleans Soft Second Mortgage Funding

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GNOHA recommendations to

the City of New Orleans on

Soft Second Mortgage Funding

The Greater New Orleans Housing Alliance (GNOHA) was formed in the spring of 2007. It is a

collaborative of non-profit housing builders and community development corporations who are

working diligently to rebuild the housing stocks destroyed by Hurricane Katrinas floodwaters in

2005--specifically its housing stock.

Since its inception, GNOHA has advocated on behalf of its members, mission-driven

organizations that believe in the need for affordable housing within the Metropolitan New

Orleans area. When the floodwaters receded, many New Orleanians struggled to return to

their homes. Many vital members of the citys workforce could not return because they did notown their homes. Policymakers and advocates realized that in order to recreate New Orleans,

they would need to increase the citys homeownership rate.

For-sale developers heeded this call. Over the next 18 months, for-sale developers in the City of

New Orleans will construct an estimated 732 homes, many of which will need Down Payment

and Closing Cost Assistance in order to make homeownership attainable and sustainable for

low-to-moderate income families in New Orleans. (See Appendix Afor details regarding

developer pipelines.) Of the 732 homes in the current pipeline, 70 homes (representing an

estimated $9,600,000 of investment) will be finished and ready for closing within the next 90

days. The buyers of these homes are prequalified for 1st

mortgage loans; however, in many

cases they cannot afford a mortgage for the full amount and will require Down Payment

Assistance in order to purchase their homes. Several of these families had been approved for

Down Payment Assistance by the Finance Authority of New Orleans (FANO) before the City

removed funding from the program and the State of Louisiana canceled its contract.

The City of New Orleans needs to identify an entity that can facilitate the compliant delivery of

$52,000,000 to $62,000,000 in Disaster Community Development Block Grant (D-CDBG) funds

to eligible families. GNOHA, New Orleans Metropolitan Association of Realtors, (NOMAR) the

Jeremiah Group, and representatives from local lending community, propose a plan as follows:

1. Recommendations for Use of Funds2. Recommendations for Program Design

3. Allocation of Funds to Recommended Programs

High construction costs, skyrocketing insurance rates and the national economic crisis have

prevented families at various income levels from becoming homeowners. Thus, in 2008 the

Jeremiah Group and other advocates lobbied the Louisiana Recovery Authority to redirect $75


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GNOHA recommendations on the City of New Orleans Soft Second Funding

page 2

million from the stuttering Small Rental Property Program (SRPP) to help renters, a group that

had been woefully underserved in previous recovery efforts, become homeowners. An initial

pool of $27-million had already begun to stimulate the affordable homeownership market.

That first pool allowed 379 families to buy homes for the first time, adding to the citys taxrolls

and reducing blight. In addition, the program referred over 1,000 interested, but not yet

qualified, families to homebuyer counseling. The funding for the first program has now beenexhausted, and without continued funding for the program, these families will not be able to

realize their dream of homeownership.

RECOMMENDATION FOR USE OF FUNDS

GNOHA has combined its understanding of the issues and needs with those expressed by its

partners and recommends that the $62,000,000 originally designated for FANO administration

be used to develop a comprehensive program that includes:

1. Down Payment and Closing Cost Assistance to cover the gap between what the family canafford and the sales price of the home (average estimated at $150,000). This would include up

to $65,000 in Down Payment Assistance, up to $10,000 in Closing Cost Assistance, and a 10-year

Soft Second Mortgage forgivable over time.

2. Alternative Mortgage Poolto provide loan products designed to meet the unique needs of

families in underserved communities. These loan products include both interim construction

financing and permanent first mortgage loans. A loan loss reserve fund to mitigate risk for local

lenders is established. See model referenced in Appendix Bsubmitted by the Southeast

Louisiana Alliance for Economic Inclusion Housing Committee. The recommended funding level

would allow for a $25 million loan, originating over 400 loans.

3. Developer Subsidy & Homebuyer Counseling. Market conditions in underserved

neighborhoods often mean that total development costs often exceed the sales prices. Though

new housing units and infrastructure can be a catalyst for neighborhood growth and

sustainability, the initial investment required by developers to reach a tipping point

(normalized appraisal values) in sustainable revitalization cannot be reached without investment

from other stakeholders. Developers should be qualified and certified to access funds in the

subsidy pool. This certification should insure a fair distribution of funding that ties into other

city priorities: focusing on place-based initiatives and eradicating blight. Certification should

also provide guarantees that facilitate construction and completion of homes.

Funding for Housing Counseling Agencies: Developers should contract with counseling agencies

approved by the Louisiana Homebuyers Education Collaborative to provide first time

homebuyers training, credit counseling and financial literacy to educate and empower families

about the homeownership process. These agencies provide resources that promote affordable

housing and foster economic well being and ensure that families connect with qualified


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page 3

professionals like realtors to aid them in the home buying process.

RECOMMENDATIONS FOR PROGRAM DESIGN

A Down Payment and Closing Cost Assistance Program is absolutely integral to the financial packages of

prospective homebuyers in the City of New Orleans. We recommend the following changes in programdesign as it was defined and administered in the past few years:

1. Do Not Restrict Program Funding to Louisiana Land Trust (LLT) Properties Only: In targeted

areas where development of in-fill lots would have an exponential impact on economic growth

and community outcomes, allow the funding to be used even if they are not deemed LLT

properties.

2. Eligible Buyers: The program should fund eligible buyers who are at or below 120% AMI and

who contribute a minimum of $1,500 cash towards the down payment.

3. Do Not Penalize Families who Chose to Stay and Rebuild: Now more than 5 years after Katrina,

most all buyers are deemed first time homebuyers percurrent 3-year rule. Buyers who have

some cash proceeds from insurance claims or other resources (retirement fund) should be

considered as reserves which help ensure default-resistant or sustainable homeowners.

4. Eliminate Master Servicer Agreement: Local and regional banks offer portfolio products that

are often more suitable for prospective participants because of their more flexible underwriting

criteria. Also, this arrangement comes at significant cost to the tax payer; fees collected by the

master servicer could be better leveraged and invested in additional families. The FHA only

and Master Servicer Agreement unfairly penalizes families who can qualify for a legitimate,affordable first mortgage that is not an FHA loan. If loan products of participating lenders are

evaluated and approved and if the bank can show satisfactory performance history for the

same, the product line should be diversified in an effort to meet the needs of the families the

money is intended to target.

5. Allow Lenders to Perform Pre-qualification:Banks are doing pre-qualification for 1stmortgage

anyway and often for these transactions, providing a commitment for the 1 stmortgage is

conditional on eligibility for soft second. Reduce wasted time and money by having lenders

conduct the initial pre-qualification for full financing package according to established rules and

guidelines. A buyer shops for a home with a clear understanding of how much they qualify for inboth 1stand 2ndmortgage.

6. Refine the Reservation System: Only buyers who have met the required prerequisites

(counseling, education, mortgageready) and who have been deemed mortgage ready by a

participating lender and have an executed purchase agreement on a completed homes should

have funds reserved through the revised program design.


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page 4

7. Eliminate 50% First Mortgage Loan Rule: As designed, first mortgage loan amount must be at

least 50% of sales price; should include cash down; should consider total contribution; if a client

has large down payment from recovery funds, they should not be penalized for using it to buy

down the first mortgage. Also, if the client cannot qualify for a first mortgage equal to 50% of

purchase price when housing ratio is maxed out at 30%, they are simply out of luck. This moneyis intended to fill the gap by making homeownership affordable; this program design flow

drastically prohibits usability and accessibility to those who need it most. Many of the families

who need this money to fill the gap between purchase price and affordability are on fixed

incomes. Most mortgage lenders gross up fixed income (social security, and other federal

funds) to account for the standard deductions from the gross amount in an effort to be

consistent with the way income is calculated for wage earners. These families simply can not

meet the 50% rule because 30% of income isnt enough to get to 50% of purchase price. This

program should be consistent with other industry standard rules regarding calculation of

income.

8. Lower front-end ratio: With the vagaries of insurance rates and property taxes, many low-

moderate buyers find themselves straining with mortgage payments calculated with at 30%

front-end ratio. Allowing lenders to adjust the ratio between 25-30%, based upon the families

income level will allow for a first mortgage that is truly affordable.

9. Integrate the Own the Crescent Campaign into the Service Delivery System:GNOHA has

launched a campaign to promote homeownership in the city called Own the Crescent to

stimulate more interest in homeownership and educate families about their options.

Prospective buyers will call into a centralized hot line and be referred to local resources

according to their neighborhood and lifestyle preferences. Use this existing campaign as the

outreach mechanism rather than directing the traffic directly to the City or entity selected to

administer funds. NeighborWorks America, Capital One, AARP and a dozen developers are

providing funding to finance this campaign. See overview in Appendix C.

10.Require Curative Counseling as Integral Step in the Process: Clients referred, via the Own the

Crescentwebsite or hotline, to partner developer must be connected to HUD-certified

counseling agency. Financial obstacles are cured; prospective buyer demonstrates responsible

financial behavior. Once clients are deemed mortgage ready by assigned Housing Counselor,

they are referred to participating lender.

11. Implement a Developer Subsidy: The program design should acknowledge the gaps between

development costs and appraised values and/or sales price. The program should fund

reasonable gaps in an effort to facilitate development in targeted under-served areas of the city.

Developers who access these funds must also contract with a counseling agency to assess clients


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and funding will be provided to facilitate this relationship and insure that the counseling

agencies are compensated and monitored.

12.Develop a Set-Aside for Facilitating the Development of Innovative Loan Products:

Prospective homebuyers and builders need interim/construction financing and permanent

mortgages. Assist local and regional lenders in creating loan products that address the need by

mitigating their risk via a Loan Loss Reserve Fund.

13.Create a Streamlined Service Delivery System: Once a Program Description is defined, create a

comprehensive list of Frequently Asked Questions for specific audiences (lenders, realtors,

developers, homebuyers) so the local stakeholders and industry players can execute their roles

and responsibilities for transparent and efficient service delivery. Define the process flow from

outreach through closing (including every decision point and compliance function) and develop

standard operating procedures for each function on the map. Train the team (both internal staff

and external partners) and implement a quality control program based on performance. Define

measures that will be used to monitor quality and performance at each functional point in the

service delivery system; use this data to make adjustments to improve outcomes as needed and

to measure and document success.

14.Streamline the Required Documentation: It has been reported that it is very burdensome for

some families (especially the elderly) to complete/obtain all of the required affidavits and get

them notarized. Verification is necessary to maintain compliance with regulations but systems

can be implemented that meet compliance requirements and that reduce redundancy without

overly burdening the customers.

15.Execute Effective Protocols to Ensure CDBG Program Compliance: Income verification and

eligibility should be checked at various intervals throughout the service delivery system.

Ultimate responsibility for income eligibility should rest with the administrator of the program

funds though housing counselors and lenders should be trained accordingly.

ALLOCATION OF FUNDS TO RECOMMENDED PROGRAMS

1. Down Payment and Closing Cost Assistance: $44,500,000.00

2. Alternative Mortgage Pool: $2,500,000.00

3. Developer Subsidy: $15,000,000.00

Developer Subsidy to Credit Counseling Agencies:$2,250,000.000


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APPENDIX A

Current Pipeline Summary (As reported by the Greater New Orleans Housing Alliance)

Organization Low High Area

Make It Right 30 75 Lower 9th Ward

Jericho Road 10 15 Central City - St. Charles

Neighborhood Housing Services 10 20 Central City, Seventh Ward

New Orleans NeighborhoodDevelopment Collaborative 12 20 Central City - MLK

Neighborhood DevelopmentFoundation 25 40 Central City - Hoffman Triangle

Community of Faith for EconomicEmpowerment 15 15 St. Roch

Preservation Resource Center 12 12 Holy Cross

Builders of Hope 20 20 Mid City, Central City

Providence 94 235 Trem, Seventh Ward, Mid-CitySt. Bernard 60 100 Ninth Ward

Jerusalem Economic DevelopmentCorp. 10 20

St. Roch, New Orleans East, Lower9th Ward

Tulane Canal NeighborhoodDevelopment Corporation 2 5 Tulane-Gravier

Habitat New Orleans 34 55 City wide

EnviRenew (Salvation Army) 100 100Broadmoor, Algiers, St. Bernard,Ponchatrain Park

TOTAL FOR SALE HOMES 424 732


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Appendix B

(For Discussion Purposes Only)

NEW ORLEANS

NEIGHBORHOOD RECOVERY LENDING PROGRAM

ALTERNATIVE MORTGAGE PROGRAM PROPOSAL

A Hurricane Katrina & Rita Recovery Initiative

Presented by:The Southeast LA Alliance for Economic Inclusion (AEI) Affordable

Housing Committee

Revised March 2011

OVERVIEW

The return of pre-Katrina homeowners to their homes and neighborhoods, and thecreation of new homeowners are essential to the growth and redevelopment of NewOrleans- a city still reeling from the ravages of Hurricane Katrina. Having access toadequate rehab and new purchase financing and technical assistance with constructionmanagement services are two key components to help in the rehab and revitalization of

New Orleans neighborhoods. The purpose of providing this proposed non-traditionalalternative mortgage financing program, contractor selection support and constructionmanagement oversight services is to help bridge the financing gapand contractorselection anxiety that exists for many worthy pre-Katrina homeowners and new potentialhomeowners.

With the escalation of centralized credit underwriting over the past decade and rapidcredit decision procedures being implemented, more emphasis has been placed on creditscore and speed rather than on true repayment and cash flow ability in the consumer andmortgage loans industries. As a result, a significant number of potential homeowners fallthrough this financing gap and are unable to experience their dream of becoming a

homeowner.

Thus, in an effort to combat this problem, many cities across the U.S. have decided toaddress this financing gap by creating their own alternative mortgage products pool thatplaces more emphasis on character, current credit situation, existing debt to income,underlying factors affecting ones credit score, rent/utilities payment history, andpotential rather than strictly credit scores.


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Appendix B

Presently, the City of New Orleans and neighboring LA Gulf Coast communities do nothave an alternative mortgage program that encompasses the no minimum credit scorefeature. Implementing an alternative mortgage products program in New Orleans and theGulf Coast Region is especially needed in view of the impact Hurricanes Katrina andRita have had on the credit scores of its residents- many of whom were unemployed or

underemployed for several months after the storms. Additionally, the current nationwideforeclosure crisis has led to a greater tightening of credit underwriting standards and inmany cases a higher minimum credit score requirement for mortgage loans.

These market trends have made it very difficult for many potentially qualifiedhomeowners to obtain affordable mortgages to rehab their hurricane damaged homes orpurchase new homes. The end result has been a drag on the rebound of the New Orleansand LA Gulf Coast housing recovery, although the City, overall, is now beginning toshow signs of economic life after five years of staggering from Katrina. In order for thecity of New Orleans and Gulf Coast to continue to move positively towards achieving afull and strong recovery, a special mortgage program such as proposed herein will be an

important tool to rebuilding the citys neighborhoods.

In an effort to address the affordable housing crisis and other recovery issues in the GulfCoast hurricane zone, in October 2007 the Southeast LA Alliance for Economic Inclusion(AEI) was formed by the FDIC. The AEI is a coalition of financial institutions, federalbank regulators, state and local government agencies, faith-based groups, community-based organizations, academia and other partners in the region who are working togetheron strategies to bring more of the unbanked and underbanked into the financialmainstream.

The AEI, which has over 150 members, formed an Affordable Housing Sub-committee,which began to research some of the housing issues affecting the New Orleans recovery.The issue of credit scores and the difficulty experienced by homeowners in obtainingmortgage rehab financing surfaced as major recovery issues. The AEI also learned thatthe local federal bank regulatory officials, City officials and Finance Authority of NewOrleans all had similar concerns about the issue of impaired credit scores as a hindranceto homeownership development and recovery. Thus, in November 2008 all of theseconcerned parties came together to form the AEI Alternative Mortgage PoolDevelopment Committee to research best practices in the alternative mortgage finance

industry and to work in partnership in resolving this issue.

After extension research was conducted on similar alternative mortgage models aroundthe U.S, the NHS Chicago Neighborhood Lending Program model was chosen as themost comprehensive model to replicate for the New Orleans and LA Gulf Coast area.The NHS Chicago Program has a wide variety of products to meet varioushomeownership needs, has a strong history of production and a low loan-default history.

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Appendix B

The NHS Chicago board chairman and banking executive, Mr. Tommy Fitzgibbons, hasbeen volunteering much of his time in advising the AEI committee on how to structure asimilar program for New Orleans. NeighborWorks America, a national nonprofit created

by Congress that works to revitalize communities through affordable housing initiatives,has been helpful in covering Mr. Fitzgibbons travel costs to assist us in New Orleans.

While the task forcesplan is to initially start the program in the New Orleans area, thelong-term plan is to implement the programs products throughout the entire HurricanesKatrina and Rita LA Gulf Coast disaster areas.

In an effort to commence the program to meet the current high demand for the proposedfinancial products more quickly, we are proposing to implement the program in twophases (i.e. the multi-bank investor pool takes 6 months to 1 year to develop vs. startingimmediately with one U.S. Treasury-certified Community Development Financial

Institution (CDFI) in the short-term and expanding to a multi-bank pool long-term).

In Phase I, ECD-Hope Credit Union, a CDFI, is proposing to provide $5 million inmortgage capital to start the program. ECD-Hope has been an active member of theplanning committee since the inception.

Once the City of New Orleans, or Louisiana Housing Finance Agency (LHFA) in theevent that a LHFA-supported Statewide program is developed, are pleased with theresults of the Phase I Pilot, the AEI Affordable Housing Development Committee andGNOHA will work, collectively, to develop the Phase II $20 million multi-bank pool andexpand the products to be offered.

THE NHS CHICAGO NEIGHBORHOOD LENDING PROGRAM

MODEL

One city that has been able to very successfully create more homeowners without astringent minimum credit score requirement is the city of Chicago via its NHSNeighborhood Lending Program (NHS NLP). Through a private-public partnershipconsisting of the City of Chicago, Neighborhood Housing Services of Chicago and 19financial institutions, NHS NLP has originated over $250 million mortgage loans from

2003 to 2009. Historically, total delinquency has been less than 3% (30 days or > pastdue) and total charge-offs has been approximately 0.1% of the total mortgage loanportfolio.

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Appendix B

The NHS NLP has a solid history of performance and a variety of special mortgageproducts with no min imum credit score requirementsto meet the affordable housingneeds of Chicagoans (see product matrix details- attachment C). Brief descriptions ofthese products are as follows:

Product #1: Purchase or Refinance Loan- No Rehab (first mortgages) Product #2: Purchase or Refinance with Rehab (first mortgages) Product #3: Gap Loan (Phase II only) Product #4: Home Improvement Loan (Phase II only) or Non-Purchase Rehab

(first mortgages)

Product #5: Foreclosure Intervention ( will be considered in Phase II)

FINANCING TOOLS

There will be two principal financial tools- interim construction financing and permanent

mortgage financing. Unlike the Chicago model wherein all loans (interim constructionand permanent) are originated by NHS-Chicago, which has a mortgage license, there willnot be a need to create a licensed mortgage division under NHS New Orleans since atleast three local lenders have expressed strong interest to underwrite the loans exclusiveof a minimum credit score requi rementas per the Chicago products matrix model.

This scenario will allow for the implementation of the New Orleans program much fastersince creating a new vehicle and applying for a mortgage license is time consuming.These lenders will use their own bank capital to make the construction loans thuseliminating the need to establish a Warehouse Line of Credit Purchase Sale and ServicingAgreements (PSSA) as was needed in Chicago. More lenders are invited to become

originators; however, the underwriting matrix criteria that have been established basedon the Chicago matrix must be followed.

Interim Construction Lines of Credit

a. ECD- Hope Credit Union during the Phase I Pilot and possibly others for thePhase II Multi-bank Pool will participate in the development of the loanorigination program

i. Loan origination1. Construction loan disbursements

a. Oversight of lien waiver process

ii. Loan Servicing and Collectionsiii. Investor Reportingiv. Investor Accounting

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Appendix B

v. Used to finance the acquisition and/or refinance with construction1. Construction loan administration fees either from government

resources or priced to cover construction loan oversight.2. ECD-Hope and the other lenders will either use their own

internal construction management and inspection services during the interim

construction period or utilize the excellent construction management services offeredby Neighborhood Housing Services (NHS) of New Orleans.

3. Construction supervision services may be provided by NHS ofNew Orleans or other appropriate intermediary approved by the investors for thoselenders interested in being underwriters but do not wish to use their internal construction

management and inspection services.

Permanent Mortgage Financing

A. Phase I Pilot with ECD-Hope Credit Union

During the Phase I Pilot Initiative, ECD-Hope will provide up to $5 million of affordable firstmortgage loans for the products offered during this phase (ECD Term Sheet available).

B. Phase II Multi-Bank Pool - Permanent Take-Out Financing ($20 million) via A

Purchase Sale and Servicing Agreement (PSSA)

The permanent mortgage loans will be made from the permanent mortgage participationpool provided by the investors.

a. Quarterly capital callsi. Managed by the originators

b. Three year fill-or-kill commitmenti. Priced as individual loans are locked in

ii. Pricing at FHLMC 60 day quoted rate plus 50basis points for servicing

iii. Normal and usual loan origination fees chargedto the borrower

COMMUNITY BENEFITS

Helps pre-Katrina homeowners having difficulty obtaining new rehab or newpurchase mortgage loans on affordable terms.

Develops new homeowners from a category of borrowers with below averagecredit scores but have the cash flow capacity, employment stability, debt toincome ratio and rent/utilities payment history to make timely mortgagepayments.

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Appendix B

Assists in combating predatory mortgage lending by serving as an alternativerefinance source for qualified homeowners with outstanding, high-costunaffordable mortgage loans while enhancing the homeownersdiscretionaryincome.

Stems the tide of home mortgage foreclosure in the market by serving as a source

of refinancing of maturing un-affordable adjustable rate mortgages. Helps in the creation of new construction jobs as a result of rehab loans being

made that would not have been made otherwise.

Results in an overall positive economic multiplier effect on the community(insurance, appliances, property & sales taxes, suppliers, utilities, realtors, titlecompanies, etc.) as a result of the added level of new homeowners created in thecommunity.

Provides an additional hurricane disaster recovery tool to facilitate in the NewOrleans and LA Gulf Coast Regions recovery.

Creates more low-to-moderate income homeowners who, historically, have hadlower average credit scores.

Provides added gap financing tool sometimes needed to assist homeowners inpurchasing a home.

FINANCIAL INSTITUTION PARTNER BENEFITSPHASE II

The subordinated gap financing product reduces the financial institutionsloanto value senior mortgage thus, allowing the financial institution to generate morefirst mortgage loans.

Lenders involved in the underwriting and interim construction loan phases cangenerate additional interest income and fee income.

Lenders participating in the proposed Phase II $20 million Permanent Take-OutPurchase Sale and Servicing Agreement (PSSA) Pool will generate additionalmarket-rate interest income on loans otherwise not available in the marketplace.

Loans and/or Investments made into the PSSA by banks can qualify for CRAcredit under the Lending Test, Investment Test or both depending on the structureof the loan to the PSSA Pool.

Bank officers who provide service on this programs development committee orthe Investor Oversight Committee can receive CRA credit under the Service Test.

New potential consumersloans and deposit relationships established withcustomers whom would have been declined initially for a conventional loan.

The originators are currently reviewing the RESPA regulations to determine the

potential for paying a referral fee arrangement to lenders who refer customers tothem. If RESPA regulations will allow for such an arrangement, there couldpotentially be fee income for lenders who refer borrowers to the originators.

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Appendix B

LOAN LOSS RESERVE

In an effort to protect the investors capital in the Phase I Pilot and the Phase IIPermanent Mortgage PSSA Pool, the City and/or the State will need to provide anadequate reserve for losses. The current average reserve of the NHS Chicago model

is 3% but the program has been seasoned for approximately 7 years. Thus, initiallythe reserve will be funded at a somewhat higher level than 3% (10% proposedinitially) but is expected to be reduced after year 3 based on the historicalperformance of the New Orleans/LA Gulf Coast portfolio. It is projected that theinitial reserve will be in the range of 5%-10%.

INVESTOR OVERSIGHT

An Investor Oversight Committee will be formed from the Phase II PSSA Poolinvestor group to monitor the pools performance and to provide policy direction.

Meets Quarterly & Oversees performance Modifies/changes underwriting criteria Directs concentration decisions Negotiates government support/program modifications Ensures coordinated legal review of investor documents Negotiates with secondary market for loan sales from the pool

FREQUENTLY ASKED QUESTIONS & ANSWERS

(See Attachment B)

SUMMARY AND RECOMMENDATION

The Southeast LA AEI Affordable Housing Development Committee, which includesprofessionals from the financial community, nonprofit affordable housing advocates,federal bank regulatory officials, academia and government officials (see attachment A)has been meeting for past couple of years to address the needs of affordable housing inthe New Orleans and the LA Gulf Coast community.

Committee members have discussed responsible ways to restore low-to-moderate income(LMI) mortgage lending and sustainable homeownership in the wake of hurricanesKatrina, Rita, and the national mortgage and housing crisis.

The coalition feels that multiple home mortgage financing gaps for low to middle income(up to 120% of median income) families in our community can be filled by implementingthe special mortgage financing products to be originated by the proposed NeighborhoodRecovery Lending Pr ogram(NRLP).

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Appendix B

The program replicates a proven model that has had a significant positive economic andhuman development impact for the city of Chicago, its citizens and neighborhoods.Homeownership promotes stable communities and contributes to the accumulation ofhousehold wealth. However, borrowers opportunities for homeownership have

diminished as the availability of mortgage credit has contracted. The market disruptionshave touched all economic demographics but have been particularly difficult for lower-to-moderate income borrowers, who have been disproportionately affected. Theimplementation of the NRLP for New Orleans will play a key role in the sustainablerebuilding of New Orleans, the LA Gulf Coast Hurricane Recovery Region and ourdevastated neighborhoods.

NEXT STEPS

Phase I: $5 Million Pilot Initiative

a. ECD-Hope and the AEI Affordable Housing Development Committee meets withCity officials (for New Orleans Program) and/or LHFA officials (for LA GulfRegion or Statewide Program) to agree on financial products to be offered.

b. Upon agreement with ECD-Hope the final underwriting Term Sheet is developedand Loan-Loss Reserve Agreement accepted by the respective legal departments.

c. Marketing materials and marketing strategies finalized.d. Program commences via a strong networking alliance with first-time homebuyer

training programs, financial institutions, realtors and community-basedorganizations.

Phase II: $20 Million Multi-Bank/Corporate Investor Pool

a. Letter of Interest from all partiesi. Commitment dollars

1.Investment in Construction Financing Origination and Lines of Credit2. Investment in Permanent PSSA3. Loan Origination and Servicing Commitment

ii. Organizational financial support1.Budget development needs to take place

iii. Document Delivery1.Construction Financing Lines of Credit Documentation2.PSSA Permanent (TF)

3.Loan Servicing/Sub Servicing Agreement (TF)4. Agreement by all parties to accept one legal opinion

iv. Enforceability of all documents:NeighborWorks America

1. Commitment for financial support (interim)2. Local Coordinator assistance

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Appendix B

v. City of New Orleans and/or LHFA1. Loan Loss Reserve Commitment2. Investment into PSSA Permanent

b. Deliver documentsc. Assemble Letters of Interest

d. Reconvene partiese. Close on Phase II Loan Loss Reserve commitmentf. Commence Program/Media Announcementg. Solicit nationwide investment into Permanent PSSA

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Appendix B

ATTACHMENT A

Southeast Louisiana AEI Affordable Housing Development Committee

Paul Pete, Co-Chair James RossFamily Resources of Greater New Orleans NeighborWorks America

Nancy Montoya Andrenecia Morris, Co-ChairFederal Reserve Bank of Atlanta Providence Housing Corporation/

Greater New OrleansHousing Alliance

Gary Williams

Enterprise Corp. of the Delta/Hope Community Patrick GuillionCredit Union Liberty Bank

Brenda Richard-Montgomery, Co-Chair Kevin WilliamsProvidence Housing Corporation/Greater New Orleans FDICHousing Alliance

Note: To avoid duplication, the Southeast LA AEI links its housing developmentstrategies with the Greater New Orleans Housing Alliance on urbanaffordable housing issues.


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Appendix B

ATTACHMENT B

FREQUENTLY ASKED QUESTIONS & ANSWERS (Phase II Primarily)

1. Is the investment into the pool in the form of a loan or quasi-equity or equity instrument?

This is an investment in a loan pool that qualifies either as a CRA-qualified investment in acertificate backed by loans or as a loan if the loans in the pool are identified on a loan by loanbasis.

2. What legal entity is the loan or investment made to?

There is no legal entity. It is a Purchase sale and Servicing Agreement (PSSA) instrumentsimilar to a private placement security, serviced by one entity.

3. What is the anticipated rate of return on the loan or investment?

Market rate (FNMA 60 day pricing at the time of origination of the individual loans)

4. What is the term of the loan or investment?

The anticipated term is driven by the underlying mortgages at 30 years. The Weighted AverageLife of the loans is expected to be 12 years or less.

5. Are all investors paid the same return?Yes

6. Is the agreed upon loan or investment amount by an investor made as a one-time lump suminvestment commitment or is it draw down as needed?

Draw down as loans are aggregated in minimum $2.5 million capital calls. The originators of theloans will warehouse them until the critical mass reaches the capital call requirements.

7. What is the loan loss reserve and is the loss reserve guarantee provided by the City/LHFAon a loan by loan basis or based on a certa in percentage of the pools outstanding loans?

Although this has not been agreed upon, the request is for a first loss coverage of up to 10% ofthe pool of loans, or the outstanding balance at the time that the loss occurs. This is still undernegotiation at this time.

8. What are the Citys or LHFAs designated targeted neighborhoods for this specialprogram?

To be determined by city officials and/or LHFA officials

9. Who is the contact person and phone number for the pool if my financial institution,corporation or foundation wants to consider an investment into the pool?

Call Tommy Fitzgibbon at 773-206-4433 or [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Appendix B

Frequently Asked Q & AsPage 2

10. Who would be the borrowers from the investor pool (i.e. the originator/underwritersor the homeowner borrowers)?

The borrowers would be the individual owner-occupied residential property ownersthrough a Purchase Sale and Servicing Agreement serviced by one of the participating lendersor servicing companies.

11.What are the loan to value risk standards?

The underwriting loans will meet FNMA/FHLBC standards for loan-to-value and other credit

criteria.

12.Is my companys investment into the pool limited to its percentage of participationin the pool?

Yes. If your companys initial investment represents 10% of the fund and an individual loan

defaults, then your potential loss is limited to your 10% participation in the pool. However, asnew investors enter the pool after your initial investment, then this will have the positiveimpact of diluting your potential loss downward since your % in the pool becomes less. Alsobear in mind that the Citys loan loss reserve will be used for loan losses.

13.Will all of the originators/underwriters be experienced and have constructionmanagement experience?

Yes. The loans will be originated by regulated banks or credit unions with solid financialhistories and which already have in place the underwriting processes necessary to meetcompetency requirements. Neighborhood Housing Services of New Orleans (NHS), a localnonprofit which has an excellent construction management division, will help superviseconstruction for some properties where major rehab is involved. The Investor OversightCommittee must approve all originators/underwriters.

14. Will the mortgages loans be held to maturity or sold in the secondary marketperiodically?

We anticipate that once a portfolio of the mortgage loans have been seasoned (2 to 3 years),they will be sold in the secondary market to either Freddie-Mac or Fannie-Mae. This is whathas occurred historically with the Chicago model we are following.


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Appendix B

Frequently Asked Q & AsPage 3

15.What are the alternative credit standards and how will the originators/underwritersevaluate borrower qualifications and mitigate risks to ensure their ability to sell themortgages on the secondary market?

The participating originators/underwriters are assuming the construction risk using their ownfunds. Only loans that have completed their construction will be in the pool. Each loan willmeet FNMA/FHLMC requirements at the time that they are sold into the pool.

16.Will any and all investors be able to be part of the Investor Oversight Committee evenif that investor does not originate loans?

Yes, all investors will have membership on the Investor Oversight Committee.

17.Who will be the Loan Servicer and in charge of Investor Reporting?

A final decision has not been reached at this time but a neutral, experienced non-investorservicer such as Standard Mortgage Corporation for example could be used.


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Appendix CA Shared Initiative, Inc. (ASII)

American Sunrise Communities/Le TriompheAssociated Neighborhood Development

Baptist Crossroads FoundationBeacon of Hope

Broadmoor Development CorporationBuild Now

Builders of HopeCatholic CharitiesOperation Helping Hands

Columbia ResidentialCommunity of Faith for Economic Empowerment

(COFFEE)CrossRoads Missions, New OrleansConsciously Rebuilding

Dillard University Community Development CorporationFamily Resource Center

Faubourg St. Roch ProjectJerusalem Economic Development Corporation (JEDC)

Global Green USAGulf Coast Housing Partnership

Hope Enterprise CorporationJericho Road, Episcopal Housing Initiative

Lower 9th Ward Neighborhood EmpowermentNetwork Association (NENA)

Make It Right

McCormack Baron SalazarMichaels Development Company

MQVN Community Development CorporationNeighborhood Development Foundation (NDF)

Neighborhood Housing Services ofNew Orleans, Inc. (NHS)

New Orleans Area Habitat for HumanityNew Orleans Neighborhood

Development Collaborative (NONDC)Operation Comeback

Providence Community Housing

Project Home AgainProject HomecomingPuentes New OrleansRebuilding Together

Reconcile New OrleansRenaissance Neighborhood Development Corporation

St. Bernard ProjectSisters of the Holy Family

Tulane Canal Neighborhood Development CorporationTulane City Center

Ujamaa Community Development CorporationUNITY of Greater New Orleans

Urban Impact MinistriesUrban League of New OrleansVolunteers of America (VOA)

GNOHA Homeownership Initiative -Own th e Crescent

Own the Crescentis a GNOHA campaign to promote homeownership at all income levels throughoutNew Orleans. Beginning in early 2011 and lasting for at least 12 months, GNOHA member organizationswill have the opportunity to join an expansive marketing and recruitment efforts that will:

1. Advance the belief that homeownership is an accessible, beneficial and desirable opportunity;

2. Increase the overall applicant pool by reaching untapped target populations; and

3. Create a process that ensures that every interested and qualified applicant becomes a homeowner.

All GNOHA member organizations are encouraged to join the campaign and each participatingorganization will be asked to make a one-time donation of at least $1000 to cover marketing costs andmembers will also be able to access various marketing materials through packages.The Own the CrescentCampaign will consist of the following initiatives:

Communication and Follow-through: Own the Crescentsguiding principles are to be

proactive in identifying potential homeowners and to maintain constant and clear communication

with applicants throughout the homebuying process. By being proactive and maintaining

communication, homebuyers are far less likely to fall by the wayside and member organizations

will be more likely to fill more units faster as they come online.

Consistent Marketing: Depending on funds, Own the Crescentwill invest in a mixture of

billboards, pamphlets, radio, TV and bus/ street car ads, a website and a centralized hotline to

reach a wide range of potential homeowners throughout New Orleans. Rather than promote a

single organization or project, Own the Crescentwill promote the overall idea of homeownership

as an accessible and desirable goal and will direct responders to a centralized hotline for more

information.

Mayoral Support and a Rotating Spokesperson: Own the Crescentwill collaborate with the

Mayors office to not only be a public face for homeownership in the city, but to create policiesthat align with the goals of GNOHA member groups as well. These policy initiatives will address

the systemic hurdles preventing buyers from accessing the citys soft -second product, among

other issues. The Mayor will serve as spokesperson for several months and then work with Own

the Crescentmembers to identify a series of rotating spokespeople to finish out the year.

Centralized Hotline: Own the Crescentwill establish and maintain a homeownership hotlinewhere interested homebuyers can identify where they hope to live and be directed to member

groups working in that area. The hotline will increase each member organizations applicant pool

while also increasing homebuyer choice and the chances that they will be matched to an end

product.


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Appendix D

C:\Documents and Settings\amorris\Local Settings\Temporary Internet Files\Content.Outlook\XRCDMZL5\2011 La Collab Certified Training Agencie

2011 Louisiana Homebuyer Education Collaborative

Certified Homebuyer Training Organizations

ASII

3401 St. Claude Ave.New Orleans, La 70117

(504) 733-1733 Ext 79206 Phone(504) 733-8418 Fax

Director: Sarah Taylor [email protected]: Ashley Aubrey: [email protected]

(504) 940-5553 PH (504) 940-1714 Fax

Website: www.asifcu.com

Money Management, Inc1215 Prytania St., Suite 424

New Orleans, Louisiana 70130(504) 864-9266 Phone

(504) 598-6366 Fax

Director: Billie Jo Peart:[email protected]: Phoebe Brown:[email protected]

Website: www.moneymanagement.org

Desire Community Housing Corporation4298 Elysian Fields Avenue, Ste. BNew Orleans, Louisiana 70122

(504) 284-3844 Phone

(504) 945-0484 Fax

Director: Wilbert Thomas, Sr.Contact: Paulette Lanaux: [email protected]

Family Resources of New Orleans817 N. Claiborne Avenue

New Orleans, Louisiana 70116(504) 822-8519 Phone

(504) 821-5260 Fax

Director: Paula Pete:[email protected]: Loretta McCraney: [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Appendix D

C:\Documents and Settings\amorris\Local Settings\Temporary Internet Files\Content.Outlook\XRCDMZL5\2011 La Collab Certified Training Agencie

Integrity Homebuyers Association, Inc.PO Box 518Gonzales, La 70707(225) 644-5873 Phone(225) 612-6783 FaxDirector: Patrena Ester:[email protected]

Jefferson Community Action Program1221 Elmwood Park Blvd., Ste. 402Jefferson, Louisiana 70123

(504) 736-6900 Phone

(504) 736-7093 FaxDirector: Jedidiah Jackson:[email protected]

Contact: Bianka Cornish: [email protected]

Neighborhood Housing Services of New Orleans, Inc.4700 Freret StreetNew Orleans, Louisiana 70115

(504) 899-5900 Phone

(504) 899-6190 Fax

Director: Lauren Anderson:[email protected]: Donna Darensbourg:[email protected]

Website:www.nhsnola.org

New Orleans Neighborhood Development Foundation1429 S. Rampart St.New Orleans, Louisiana 70113

(504) 488-0155 Phone

(504) 483-6764 FaxDirector: Fred Johnson [email protected]

Contact: Fred Johnson

Website: ndf-neworleans.com

Lower 9thWard Neighborhood Empowerment Network Association1120 Lamanche St.

PO Box 771039New Orleans, La 70177-1039

(504) 373-6483 Phone

(866) 450-6681Director: Patricia Jones
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.nhsnola.org/http://www.nhsnola.org/http://www.nhsnola.org/http://www.nhsnola.org/mailto:[email protected]:[email protected]:[email protected]


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Appendix D

C:\Documents and Settings\amorris\Local Settings\Temporary Internet Files\Content Outlook\XRCDMZL5\2011 La Collab Certified Training Agencie

Contact: Cynthia Ketchens: [email protected]

Website: www.9thwardnena.org

Preservation Resource Center923 Tchoupitoulas St.

New Orleans, La 70130(504) 581-7032 Phone

(504) 636-3074 Fax

Director: Patricia Gay: [email protected]

Contact: David Fields: [email protected]

Puentes New Orleans (Spanish only)

1050 South Jefferson Davis Pkwy.New Orleans, La 70125

(504) 821-7228 Phone(504) 821-7213 Fax

Director: Lucas Diaz:[email protected]

Contact: Rena Croft (504) 310-6922

Sulli Educational Services, Inc. (Spanish and English)4224 Florida Avenue, Suite 7

Kenner, Louisiana 70065(504) 464-6224 Phone

(504) 305-2227 Fax

Director: Conchitia L. Sulli: [email protected]

Contact: Stephanie Brouillette:[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]