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Unexpected Lender Helping Families with Low Income

June 27, 2011

In 2010, Habitat for Humanity ranked as the one of the nation’s largest builders, constructing nearly 4,600 new homes nationwide. The group also fixed up and resold more than 1,400 homes. They have been building homes for low income families for some time now, and many people did not know they also have been originating loans for the houses.

The loans are often for families with incomes below the local median, putting them at high risk for foreclosures. However, foreclosures are minimal for the non-profit. This bodes well for low-income families who want to own their homes despite the flack that banks have caught for reaching out to this population. H4H provides them an opportunity and with less than 2% of foreclosures in the last year, families are not taking it for granted.

Habitat for Humanity is providing a different approach to mortgages for families on tight budgets by specifially giving them an opportunity to explain why they have gotten behind, what the problem is, working with them to come up with a solution and most of all, providing lieniency should there be an emergency or special occasion. “We don’t have a problem with our families getting behind, as long as they’re talking with us,” says Bill Hall, the Dallas Habitat’s chief executive.

So how do homeowners get to participate in such a great program? To qualify for the 30 yr no interest loan, prospective homeowners have to have solid work history, have good credit and go through home ownership education. This lets homeowners really know what they are getting themselves into. On top of that, Habitat for Humanity typically requires 300 hours worth of work to be put into building their house, making them already invested into the home they are going to own.

Habitat also follows it’s homeowners closely. Once chapter noticed that payments are often late in September as the new school year rolls around. To aid families, they have set up drop offs for free supplies. There are a number of other ways in which Habitat helps families get to live their dream of home ownership, but the general idea is that they are there to help, not hurt.

Large lenders, and servicers including Bank of America and JPMorgan Chase, don’t have the time or manpower to field calls every time an owner misses a monthly payment. But they could learn from Habitat’s business model: Screen buyers, educate in advance, make homeowners work for their down payment and get them to pay what they can, when they can.

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