Partners (Spring 2000)
Partners (Spring 2000)
New Homeowners in the Heart of French LouisianaIn Lafayette, Louisiana, the key elements for successful affordable housing programs came together as a result of a shared vision and a willingness to work together in a collaborative way. At the same time, all parties never lost sight of the need for decisions to also make solid business sense. When parties are willing to work together under this framework and reach agreement, the benefits in community development can be positive for everyone involved in the process. In Community Affairs, we take great pleasure in our work from seeing families realize their homeownership dream. But what’s nearly as satisfying is seeing exceptional examples of cooperative efforts that help make those dreams come true. One such example is in Lafayette, Louisiana. We are pleased to present this story below to capture some of the better elements of this public/private partnership.
By Wayne Smith
Community Development is all about expanding the opportunity for homeownership to low- and moderate-income individuals and families. Of course, the task is not always easy when dealing with multiple parties. In Lafayette, Louisiana, a number of elements had to come together.
First, you had to have a good developer who could build affordable housing profitably. Next, you had to have a willing financial institution to offer an affordable mortgage product. Then, you had to have a capable city government to support the proposal and facilitate gap financing. And of course, you had to have eligible and educated buyers along with dedicated realtors who would work to bring the parties together.
In Lafayette, the results shine.
Developer Linda Supple worked to design and build affordable housing that is as attractive as it is well built. The brick homes featured on the cover and in this article have three bedrooms, two baths, custom kitchen cabinets, central heat and air, patio, and quality finishes throughout. They sell in the upper-$70,000 price range.
The pivotal factor for a developer to be able to build such housing profitably is to keep costs down. In this case, the developer acquired the Bayberry Point subdivision from a bank that foreclosed on the property and had carried it as a non-earning asset in “other real estate.” With the infrastructure already in place — such as paved streets, curbing, sewers, and underground utilities — great savings could be realized.
Of course, as most developers know, there is more to it than the bricks and mortar. Working closely with the homebuyer is critical. “I spend so much time with the client to build their confidence and earn their trust,” said Ms. Supple. “I’ll even help make the appointment for them to meet the lender. The customer is always more comfortable if they know the lender is expecting to see them.”
Like other financial institutions in Lafayette, Whitney National Bank is actively involved in community lending. Pattie Charpentier, Community Lending and Outreach Specialist, worked aggressively to promote mortgage products that would serve the needs of low- and moderate-income borrowers when coupled with gap financing provided through the Lafayette Consolidated Government.
The Whitney products include FHA and VA loans, and an in-house market interest rate product with no origination fees, no points, no mortgage insurance, a 3% downpayment, and debt ratios of 33% for the housing payment, and 42% for the total debt payment.
“This partnership works,” says Ms. Charpentier, “because so many people are not out for individual financial gain. And with this developer, we know the client comes first.”
The Lafayette Consolidated Government has a substantial commitment to the partnership as well. Joseph Bourg, Governmental and Business Relations Manager, says “getting people into homes is a sound economic policy.”
The local government has a substantial number of housing programs and services to offer. Some of the programs include rehabilitation grants, demolition grants, home maintenance courses, homebuyer education training programs, emergency shelter grants, and soft second mortgages for first time homebuyers to bridge the gap for many homebuyers.
Community Development Practitioners - standing from left to right are Anthony Branham, Business Development Officer, Lafayette Consolidated Government; Barbara Kinchen, Realtor, Belle Terre Properties; Shawn Moore, Business Development Specialist, and Joe Bourg, Government and Business Relations Manager, both with the Lafayette Consolidated Government; and Faye Nunn, Counselor with Neighborhood Services. Seated is Sylvia Mouton, Broker, Belle Terre Properties; Linda Supple, Developer, Bayberry Point Subdivision; and Pattie Charpentier, Community Lending and Outreach Specialist, Whitney National Bank.
The Lafayette Consolidated Government and the Lafayette Public Trust Financing Authority provide the gap financing for applicants whose income does not exceed 115% of the area median income. The program provides a 5% interest loan of up to $5,000 for downpayment or closing costs assistance.
A 15-year loan, the second mortgage will “buy down” the interest rate for the homebuyer. And while the $39.54 monthly payment can be an administrative burden as the volume of loans grow, the Consolidated Government recognizes the benefit of homeownership far outweigh the administrative costs.
As with all new products, “it’s like sculpting a program,” says Mr. Bourg. “You try to improve upon it every year.”
Other restrictions apply, and for good reasons. For example, the first mortgage interest rate can not exceed 9%.
As local Realtor Barbara Kinchen with Belle Terre Properties explains, “you should not provide false hope. High interest rates and high debt levels are setting people up for ultimate failure of losing a home.”
In addition, applicants must meet the credit standards of local lenders. “Sometimes it’s necessary to focus on customer’s credit repair issues first,” said Ms. Kinchen.
And applicants must have completed a First Time Home Buyer training program within the last 12 months. The training is critical. “We can definitely tell the difference,” says local Realtor and sales manager, Sylvia Mouton, of Belle Terre Properties. The client knows what they want and they ask specific questions."
Best of all, according to Ms. Supple, “when the client comes to closing, they know what to expect.”
The development of affordable housing generally and Bayberry Point in particular have made a tremendous difference in the community. The development created construction jobs and stabilized the neighborhood.
The lender receives profitable returns on its loans, and in the case of Whitney National Bank, past-due rates are more favorable than many other mortgage pools.
The Lafayette Consolidated Government benefits from real estate taxes and the indirect economic benefits from the additional jobs that have been created. And most important, more families have places to call home.
For more information, please call the housing department of the Lafayette Consolidated Government at (337) 291-8404, or Wayne Smith at the Federal Reserve Bank, (404) 498-7265.
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