Partners (Number 1, 2006)

Alabama Lending Coalition Boosts Housing

Michele Jenkins-Utomi is a CEO on a mission: Her goal is to produce a pipeline of new and renovated homes and apartments for low- and moderate-income families through a unique joint venture she heads, the Housing Enterprise of Central Alabama, LLC, or HECA.

HECA provided $1.2 million in permanent financing for the Avondale Gardens affordable housing development in Birmingham, Ala (above). The photo below shows the Oak Park Villas, a 40-unit apartment complex for seniors in Lipscomb, Ala. HECA provieded construction and first mortgage financing for the project.

HECA, a community development lender, was founded in 2003 by four Alabama banks: AmSouth Bank, Regions Bank, Compass Bank and New South Federal Savings Bank. First American Bank in Birmingham has now joined as a fifth investor bank. Through HECA these banks maintain a $54 million loan fund for qualified private and nonprofit developers to build and renovate workforce housing. The loan fund is one of the best- capitalized of its kind in the United States.

But the founders of HECA didn’t stop there: they also established a nonprofit affiliate, the Housing Fund of Central Alabama Inc. (the Fund). HECA and the Fund work together to provide gap financing and more accessible construction and acquisition loans or investments on qualified projects.

The Fund also awards grants to nonprofits and community development corporations whose mission is to develop housing for people of modest means. These grants underwrite core-operating support, technical assistance, and programs related to capacity-building. One of the major projects of the Fund is a two-year incubator program for community development organizations. The Fund’s $1.5 million grant pool is maintained by HECA member banks and area community foundations.

A unique structure
Paul Compton Jr., HECA’s legal counsel and a partner at Bradley Arant Rose & White, LLP, pointed out that the twin structure which combines a for-profit and a nonprofit affiliate “reinforced the nature of HECA as an ongoing part of the members’ businesses, helped to tailor investments in HECA to meet financial and regulatory goals, and matched funding sources with intended uses.”

HECA has already made a positive difference in the availability of housing. As of April 1, 2006, the organization had provided approximately $9 million in loans for single-family and multifamily housing. Another $10 million in loans is slated for consideration in the next three months.

The company began offering construction and permanent loan products in 2004. Last year HECA added a subordinated debt product designed to make 4 percent bond deals more feasible.

“We do not offer concessionary financing, but we do offer niche products that are unique in the market,” Ms. Utomi said. “For instance, HECA does not require that its developers pledge their balance sheets. Also, we underwrite rigorously. But ultimately, if the project doesn’t sell, we own it. So we wind up serving as a financial partner with the developer. Our private developer customers tell us that is a major incentive for them to consider building a product at HECA’s price point—generally in the $99,000 to $170,000 range.”

Other attractive terms include loans that can be structured to provide up to 100 percent financing with limited personal recourse. Typically, the recourse consists of a completion guarantee that makes the developer responsible for cost overruns and marketing. In return, HECA negotiates a “participating share” of the project’s profit.

W. Neill Fox, executive vice president of real estate banking at Compass Bank and chair of HECA’s loan and investment committee, said HECA doesn’t compete with conventional lenders for loans, and its member banks aren’t competitors. Rather, HECA seeks to fill needs that are unmet in the regular market, acting in many cases as a complement to other conventional financing.

“Providing 100 percent financing and offering financing terms with limited “completion-only” guarantees are the fundamental differences between HECA’s financing program and those typically offered by commercial banks, including HECA’s owner banks,” Mr. Fox said.

Doug Jackson, director of community affairs at AmSouth Bank and a HECA executive committee and board member, said HECA is the perfect complement to AmSouth’s existing community development programs. “This fit like a glove with what we already have,” Mr. Jackson noted.

Joining forces to make a difference
The partners formed this innovative joint venture to address the lack of quality housing for working families in the 12-county area comprising greater Birmingham.

“The tremendous needs of the communities in the region required a coalition of banks to provide the funding and investment dollars to make a real impact,” said Jerry W. Powell, Compass Bank’s general counsel and secretary, and HECA’s acting board chair.

“The partnership allows the region to have a clearinghouse of ideas and a central resource to evaluate the capabilities of community development organizations so that available funding can make a difference. Without the benefit of a cooperative effort, the identification of opportunities to make wise investments would be diluted, and support for individual projects would be more difficult to obtain.”

According to a 2003 statewide housing report titled “Sweet Home Alabama,” affordable housing remains an “elusive target for significant sectors of the population.” The report indicates that more than a third of all Alabama households had incomes less than $25,000, “making it hard—if not impossible—for many individuals to buy their own homes.” It notes that “younger persons, renters, and some segments of the minority population are more prone to substandard housing and lack of affordability.”

HECA and the Fund grew out of a 2002 regional housing initiative that involved community and corporate leaders and citizens. To assess need and determine how best to tackle the problem, the group conducted 10 days of hearings with representatives of the affordable housing development community; studied loan funds and CDFIs; visited initiatives in other U.S. cities to learn best practices; and set up a pilot project in Woodlawn, an under-served neighborhood near downtown Birmingham.

Determined to succeed
The funders agree that strong leadership at the board and staff levels has contributed to HECA’s success. HECA and the Fund are overseen by the same board, and the majority of the board’s members are not affiliated with HECA’s financing sources. HECA and the Fund also share a three-person staff. Other services such as underwriting and communications are handled by consultants.

Ms. Jenkins-Utomi, a Huntsville native, came to HECA from Local Initiatives Support Corporation, the nation’s largest community building organization.

“We’re fortunate to have someone with Michele’s national credentials leading HECA,” Mr. Jackson said. “As an Alabama native, she understands the challenges unique to the state. But she also has brought a willingness to take a fresh look at the affordable housing need.”

Ms. Jenkins-Utomi is determined to produce that pipeline of housing. But she says there is something much more fundamental about HECA’s mission: “We want to transform distressed neighborhoods into healthy communities–that is really what we’re striving to accomplish everyday.”

Why Banks Participate in HECA

For financial institutions in the region, the benefits of joining the Housing Enterprise of Central Alabama and its nonprofit affiliate, the Housing Fund of Central Alabama, are many:

  • Resources necessary to meet the task: HECA is an affordable housing lender committed to working in 12 Alabama counties, and it has resources commensurate with the task. Investor institutions have committed $54 million in loan dollars to HECA. The Housing Fund of Central Alabama (the Fund) has secured nearly $3.6 million from foundations and HECA’s investor institutions.

  • High-impact, results-oriented strategy: HECA and the Fund have a results-oriented strategy focused on identifying market-savvy loan products that fill niches in the affordable housing lending industry and thus have the capacity to substantially increase the supply of quality housing choices for people of moderate means in Central Alabama.

  • More effective use of resources: The opening of HECA and the Fund in 2003 enables financial institutions in the region to work collectively, bringing to bear greater, more focused resources without fragmentation or duplication. This ability to leverage funds enables HECA to address more fully the affordable housing needs of low- and moderate-income residents in Alabama.

  • Expertise to access governmental programs: By supporting HECA, financial institutions are fostering an organization with tremendous expertise and the ability to take advantage ofÑand help others take advantage ofÑgovernmental programs that have long been under-utilized in the region.

  • Focus on economic development: HECA’s focus is to serve as a powerful advocate and voice for affordable housing. HECA believes accessible housing can become an economic development driver for the region.

  • Support of the Community Reinvestment Act: HECA provides financial institutions with an innovative and effective tool to improve the region while also addressing Community Reinvestment Act issues.

  • Risk mitigation: HECA allows opportunities for institutions to improve their communities by strategically collaborating with other prominent financial institutions, community foundations and civic leaders to move the region forward in a way that minimizes the overall risk.

  • Independence: Since HECA is an independent body with flexibility to adapt to the market, it can more effectively insist on accountability for the use of funds.

  • Expansion of private capital sources: HECA and the Fund also help to leverage conventional lending opportunities by spurring and increasing local capacity for development.


This article was written by Tabitha J. Lacy, communications consultant for HECA and the Fund.

To learn more about HECA, please contact Ms. Jenkins-Utomi at 205-323-9888 or Visit HECA’s website at


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