SOCIAL TOPICS (Archive): COMMUNITY DEVELOPMENT INVESTING

Published, Summer 2002

       By Ricardo Worl

       Christine's story reads like novel: a single mother of four children, earning $28,000 a year as a child care technician, and living in a 1960s vintage two bedroom trailer with rotted walls, and floors and a roof that were ready to fall apart. She regained hope when the local Indian tribe notified her that she qualified for a $15,000 grant toward a new home. The bad news was that her credit history would eventually prevent her from qualifying for a mortgage loan from a bank.

       Haa Yakaawu Financial Corporation (HYFC) came to Christine's rescue. HYFC's mission is "to increase homeownership for the under-served populations (Alaska Native, rural, and low-income) of Southeast Alaska." Based in Juneau, Alaska, HYFC serves 21 rural communities spread over a mountainous area roughly the size of Pennsylvania with a total regional population of 72,000. Fourteen of the communities have populations smaller than 1,000. Only boat or airplane can reach all but two of the communities, and only eight have commercial banks. Despite geographic and economic challenges, HYFC has closed 170 mortgage or home improvement loans totaling $8.3 million since inception (1997), with 90 percent serving low-income borrowers and 93 percent serving Alaska Native borrowers.

       In Christine's case, after ten months of credit and personal finance counseling, HYFC was able to qualify her for a small home loan to purchase a brand new three-bedroom home. Christine sold her trailer and used the proceeds to pay off all of her bad debt. An HYFC affiliate constructed a moderately priced modular home to fit her needs. HYFC provided a generous financing package to ensure that her payments were affordable.

       HYFC prides itself on providing subsidized loan programs, down payment assistance, credit counseling, and combining several low-income housing programs all under one roof. When HYFC started out in 1997, its loan officers were able to fit all the pieces together and qualify many families for home loans. But that was only half of the picture.

       The other half entailed finding affordable homes in an area that ranks in the top 15 percent of the nation's most expensive housing markets. The only homes in the price range for low-income borrowers are quite old or require repairs. Low-income borrowers living in these homes face the subsequent challenge to finance repairs. The dilemma is clear: Families face living in sub-standard or unsafe housing, and HYFC runs the risk of having insufficient collateral value to cover its mortgage loan.

       Partnering with other organizations to provide low-cost, high-quality modular homes is one answer as in Christine's case. However, land is scarce and often expensive to develop in many Southeast Alaska communities. HYFC's only other option is to work with the existing units. HYFC and the local tribe developed a program whereby the real estate arm of the tribe buys the homes and conducts all the necessary repairs (e.g. new furnace, new carpet, removal of wood rot, etc.). Then borrowers approved for one of HYFC's home loan programs select from this inventory of newly renovated homes. The process has proven to be popular and successful. Under this arrangement, HYFC has closed 20 loans since 1999, valued at $3.3 million. HYFC's delinquency ratios are on a par with the rest of Southeast Alaska's market. By finding ways to create a pool of livable homes through renovation and to make all homes affordable to clients like Christine, HYFC takes that extra step other housing and lending institutions often avoid. Doing so is a risk and a challenge. HYFC's reward is watching members of an under-served segment of the population receive their first real opportunity for affordable housing and financial independence.

For more information about HYFC, please contact Ricardo Worl, Loan Program Manager, at (907) 780-6868 or rworl@thrha.org.

Through our Community Development Investment Service, Walden clients have invested $7.1 million in community development banks, credit unions, and loan funds. We are pleased to have included the Haa Yakaawu Financial Corporation in this service.