CLEVELAND, Ohio – A Cleveland nonprofit that supplies and builds housing for low-income residents has formed a new wing to provide smaller mortgages to potential homebuyers who have historically been unable to obtain such loans from larger banks.
CHN Housing Partners founded the credit company CHN residential capital in 2019, but it is now marketing its first mortgages. There are no earnings restrictions on a program the nonprofit calls “The Believe Mortgage,” but it generally aims to lend $ 70,000 or less to those on low or moderate incomes.
The hope is that those who want to live in areas of Cuyahoga and Lorain counties with lower property values can buy good homes. Proponents have stated that the inability of many residents, who are often colored people or have problems in their credit history, to obtain lower dollar mortgages from lower banks is an obstacle to many neighborhoods that have not yet recovered from the 2008 housing crisis .
“What we wanted to do with CHN Housing Capital was really to help bring the American dream of home ownership to more people in our community,” said Kevin Nowak, Executive Director of CHN.
Nowak said the goal is to lend $ 12 million over a three-year period. This equates to a little less than 50 apartments in the first year and more annually in the following two. The program is privately funded, although Cuyahoga County and Cuyahoga Land Bank have jointly contributed $ 1.1 million in loan loss provisions.
CHN Housing Capital has also started filing applications for two separate but related programs. One is for home repair loans for somewhere in the county, paid off by $ 1.92 million from Cuyahoga County. Of this, $ 1 million originally came from the Department of Housing and Urban Development’s Community Development Block Grant program.
The other is to support the down payment through money provided by Cleveland and the county. Across the county, buyers in 51 communities can apply for nearly $ 680,000 in funding. Cleveland, which contributed $ 575,000 in local dollars, is launching the program for homes in the Circle North neighborhood of the Glenville neighborhood of Cleveland, one of several areas selected for investment through the mayor’s Neighborhood Transformation Initiative.
The announcement of the low dollar mortgage and credit wing comes at a time when home demand is peaking. The combination of the Federal Reserve’s cut in interest rates during the pandemic and the interest of potential homebuyers looking for more space led to this a hot housing market. Realtors have said it is not uncommon for homes to sell for tens of thousands of dollars above asking price within days of being placed on the market.
That wasn’t the story According to Frank Ford of the Western Reserve Land Conservancy’s Thriving Communities Institute, covering much of the suburbs of Cleveland’s East Side and Inner Ring, East Side. In Cleveland, median home sales on the West Side last year were close to an earlier high in 2005. On the East Side, median prices were only 44% of a previous high in 2005.
“We have an entire area of Cleveland that lost all of that value in 2008 and most of it never came back,” said Tania Menesse, president and CEO of Cleveland Neighborhood Progress and former community development director.
Menesse, who is also on an advisory board for CHN Housing Capital, said small mortgage loans were vital to redeveloping the Cleveland housing stock.
Plague, vacancy and crime have traditionally been cited as reasons why many parts of the East Side continue to lag behind other parts of the city. However, proponents have also pointed to a lack of funding available to residents looking to buy a good home in these areas as another point of contention.
Ford issued a report In November, three major banks with community benefit agreements aimed at investing in areas where they are most needed appeared unable or unwilling to issue mortgages for $ 50,000 or less. These three banks – KeyBank of Cleveland, Fifth Third Bank of Cincinnati, and Huntington Bank of Columbus – had a total of 21 mortgages for $ 50,000 and under in 2019, according to the report.
“What hurt Glenville is… we couldn’t get the loans. Gutters, roofs, porches and shops are falling apart, ”said Alderman Kevin Conwell, whose parish the Glenville neighborhood is a part of. He said the difficulty many black residents had in getting mortgages had prevented them from being more prosperous in the community.
Nowak, who worked for KeyBank subsidiary Key Community Development Corporation before joining CHN Housing Partners in 2016, said that taking out mortgages that are small is generally not profitable for banks due to federal regulations and fees. However, CHN Housing Capital’s ability to offer alternative credit options can fill that void, he said.
The money for the mortgage comes from several financial institutions and organizations, including Huntington Bank.
Nowak says CHN Housing Capital will look at other factors in an applicant’s creditworthiness than major banks, thereby providing more opportunities to take out a mortgage. The goal is to give residents opportunities they wouldn’t otherwise have, he said.
“My parents mortgaged our house so they could send me and my sister to college. And that’s exactly what got me on the path I’m on today, ”he said. “And so many people in our community cannot have the same experiences if they could and should be available to them.”
Conwell hadn’t heard of CHN’s new program when he spoke to cleveland.com and The Plain Dealer last week. But he said it was an exciting prospect for his constituents and that he was ready to spread information and hold briefing sessions.
Sean Richardson, President of the Greater Cleveland Region for Huntington Bank, said in a statement, “CHN Housing Partners is a great example of how innovative nonprofits can develop unique tools that help people in our community realize their dream of home ownership.”
Founded in 1981, CHN Housing Partners is best known as the developer and landlord of thousands of properties for people in need of low income housing. The nonprofit works with residents in need in northeast Ohio, Detroit, Pittsburgh, and west New York.
It also has contracts with the City of Cleveland and Cuyahoga County for the distribution of rental support funds from three federal conventions passed by Congress during the coronavirus pandemic.