A collaboration between the country's largest home mortgage provider and a local nonprofit housing agency has resulted in an innovative program to provide up to $25 million in loans to Bronx apartment building owners.
Fannie Mae, the mortgage provider, and University Neighborhood Housing Program, the nonprofit, announced June 26 that the project would provide loans of $100,000 to $750,000, coordinated by UNHP, to owners of small buildings to improve and maintain their properties.
"The door is open right now," said Jim Buckley, UNHP's executive director, adding that his office has already been flooded with inquiries.
The program is designed for buildings with five to 25 apartments and landlords of for-profit and not-for-profit apartment buildings are eligible to apply for the loans.
"This program will respond to the needs of a segment of the housing market in the Bronx which has been underserved or not served at all," said Joe Muriana, president of UNHP, and the director of government and urban affairs at Fordham University.
Three types of loans -- for rehabilitation, for refinancing and for acquisitions -- will be available to building owners, who will have to decide which loan to apply for. After the loan has been approved, Fannie Mae will then purchase the mortgage from the bank. This provides security to the lender, and returns the capital so the lender can make more loans. In turn, the City Pension Plan will buy mortgage-backed securities from Fannie Mae, which gives Fannie Mae the funds to purchase more mortgages from the bank. Seventy-five percent of each mortgage will be insured by Residential Mortgage Insurance Corporation (RMIC), which limits the risk for the City Pension Plan.
"There's a limited risk, but not so much that people aren't willing to get involved," said Muriana. "It's not total insurance, so everyone will look carefully at each deal."
The fixed rate -- between 7.5 and 7.75 percent -- is slightly better than what a building owner might get going to a bank independently, but the 30-year term is the real benefit. "Usually banks offer 5-7 year renewable mortgages," Buckley said. "A bank might not renew the mortgage, or the interest rate might be substantially higher when the term is up." This project helps to address the "lack of available funding for smaller buildings and the uncertainty of the rates," he continued.
"We're hoping it will encourage smaller owners to come in for more conventional financing -- that this will open the door for smaller building owners to refinance existing debt and get some amount of money to refurbish," Buckley said, adding that the ultimate goal of the project is to promote "stability in management, better living conditions, and better apartment conditions."
The project is Fannie Mae's first foray into small multi-family loans of this type. If successful, the program could be used as a prototype for similar financing to small apartment buildings throughout New York City.
The loan program adds yet another feather to UNHP's cap of accomplishments. In May, the group, which is based at Concourse House on the Grand Concourse at the corner of East 196th Street, celebrated 15 years of providing and preserving affordable housing in the Bronx.
UNHP's roots date back to the 1970s, when community groups, particularly the Northwest Bronx Community and Clergy Coalition (NWBCCC), pressured banks to invest in Bronx neighborhood housing. Fordham University and NWBCCC joined forces to form UNHP as a way to "focus bank lending into appropriate projects that would redevelop and preserve both the physical integrity and affordability of the area's multi-family housing stock," Muriana said in a statement.
Since 1983, the agency has made 57 loans to multifamily buildings, affecting more than 2,200 apartment units. UNHP has also funded and leveraged more than $15 million in housing loans and has lent $1.5 million of its own funds.
"Our track record was so good in the early years we got banks to start making the loans we were making," Buckley said. "We've been able to encourage financial institutions to meet needs that 10 years ago weren't being met at all."
UNHP also runs workshops on housing issues and provides technical assistance to tenants and landlords on a wide range of issues affecting housing, including lead abatement, water and sewer rates, and Section 8 rent subsidies.
The loss of some rent subsidies is a good example of "the external forces that affect housing" that UNHP works to find solutions to and educate the public about, Buckley said. The challenge, he added, is "How do we best clarify these issues in such a way that they are useful to tenants and understandable to policymakers?"
One way the group is trying to stir up greater attention to housing issues is through NOTES, its monthly newsletter, which reports on housing legislation, regulations and other related policy developments. The publication also reflects UNHP's interest in broader community issues that affect housing, such as changes in welfare rules.
This multi-faceted approach is one of the keys to UNHP's success, Buckley said. As the organization enters its 16th year, "the ideal would be for us to maintain the ability to be flexible," Buckley said. "The thing that would mean the most to me is the ability to do what we've been able to do."