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Immigrant Policy Project

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Serving Low-Income and Immigrant Populations

By David Lawson, NCSL

Moving into a new century, America's home ownership rate is higher than ever--67.1 percent. However, the country's low-income and immigrant populations have significantly lower home ownership rates (about 48 percent) and tend to spend much more on their housing than recommended. To address this problem in Minnesota, a collaboration of city and state governments, non-profits, banks, and realtors founded the Home Ownership Center. It serves as: 1) the keystone of a network of community organizations that provide home ownership education and counseling and 2) a forum for communication between non-profits, mutual assistance associations, lending and mortgage groups, realtors, and state and local government.

The Center's network has trained over 11,000 households and helped about 4,000 purchase homes, most for the first time. It has also successfully reached out to the Twin Cities' growing Cambodian, Hmong, and Latino populations by offering workshops in their native languages. Due to its achievements, the Center was recently asked by the state to expand its services to reach all of Minnesota.

As a forum for information exchange, the Center has helped non-profits better organize their efforts and lenders improve their service to low-income and immigrant consumers.

This case study outlines the origins of the Center, highlighting the initiative and the unique partnership of state and local government with non-profits and the lending industry. It discusses critical policy and organizational decisions that enabled the Center to function smoothly, including the focus on home ownership education, outreach to immigrant communities, and how it accomplished those goals. Finally, this report posits specific ways in which state and local policymakers can facilitate such projects.

HISTORY

The housing debate sprouted in the Minneapolis/St. Paul area in the late 1970s, in different sectors simultaneously, but for varying reasons. The cities promoted the affordable housing issue and private and public lenders, both state and local, began trying to serve lower-income consumers.

In 1977, the City of St. Paul made affordable housing a priority by forming its Housing Information Center. Created to be the central contact point for housing information, education, counseling and advocacy, the St. Paul Housing Information Center aimed to be more responsive to neighborhoods and remains the city's housing support agency.

As the issue gained steam, the mayors of both Twin Cities began to analyze their role in the creation of low-cost housing. Having already designed programs to finance rehabilitation programs, the cities began a program offering low-interest mortgage and home improvement loans, tailored for lower-income people.

Simultaneously, lenders in the Twin Cities area began feeling pressure, primarily from the Community Reinvestment Act of 1977 (CRA), to expand their reach beyond the upper and middle classes. They began offering loan products for lower-income consumers.

However, the process was disjointed. In the early 1980s, state regulators suggested that the lending industry in the region had colluded in their creation of certain loan products. To avoid further accusations, the lenders informally chose to act independently from one another.

The lenders also struggled to find a foothold in low-income communities. They turned to non-profits to advertise and provide homeownership education. But, because each lender had a different product and contracted with a different non-profit to provide training, the loan products consumers received depended on which course they took.

Individually, the lenders saw problems with the system and looked for help. Many of them turned to a non-profit housing intermediary, the Family Housing Fund (FHF), for assistance, hoping they could pull all the lenders together to streamline the process. They felt that FHF's experience funding both housing providers and home owners, convening meetings of multiple sectors in the housing arena, and sharing information with community leaders made it the perfect organization to bring all the separate lenders to the table. In 1991, FHF convened meetings with all the lenders to begin to work out the problem.

The Minnesota Housing Finance Agency (MHFA), the state's home ownership lender, was going through a similar planning process. In early 1991, they convened a statewide meeting of people involved in the home mortgage lending industry. The MHFA wanted standard, quality education materials and training efforts. Involved with the FHF through the Twin Cities lending efforts, the agency asked for advice. The FHF told the MHFA that they were working on a similar effort locally and asked to be given a chance to get it off the ground in Minneapolis and St. Paul as a test case. The MHFA agreed and offered its support to the Twin Cities endeavor.

Meanwhile, the mayors of St. Paul and Minneapolis went to work on public opinion. In press conferences and public meetings, the mayors worked to reverse negative perceptions about affordable housing. According to then St. Paul mayor Jim Scheibel they, "politicized it in a positive way."

With the lenders, non-profits, and state and local governments united and enjoying a positive environment, FHF led the effort to find solutions. On behalf of the group, and with funding from the McKnight Foundation, FHF hired a contractor to interview all the parties and develop a plan to better coordinate the loan products and education. Conducted in early 1992, the study concluded that the best approach would be to create an independent entity to unify the various housing efforts in the Twin Cities area. Based on this recommendation, FHF raised money from MHFA, major banks, realtors, and non-profits the following year to form the Home Ownership Center (the Center).

THE HOME OWNERSHIP CENTER

The Center, with the support of FHF, MHFA, the cities' governments, and the major lenders, serves as the switchboard of a network of community organizations that provide home ownership education and counseling and a forum for communication between non-profits, mutual assistance associations, lending and mortgage groups, realtors, and state and local government, with each party represented on its board.

The Center created standards for educational information. They also contracted with five local non-profits to provide the home ownership education and counseling. The Center offered significant financial support to their community partners and also helped to centralize their marketing efforts. With significant input from the lending community and their network of non-profits, they serve as the best way to bring all the parties together and to foster communication.

In the area of home ownership education, the Center has standardized curricula and unified a team of five non-profits to conduct training workshops and one-on-one counseling sessions. The Center contracts with its community partners to fund the training, coordinates their marketing efforts, provides "train-the-trainer" materials, and offers training courses to its partners' counselors.

This training network has become the preferred system of the Twin Cities' governments. The cities work together to offer favorable closing cost loans and first-time buyer loans to lower-income customers through their "CityLiving" program, which is jointly administered by the Minneapolis Community Development Agency (MCDA) and the St. Paul Department of Planning and Economic Development (PED). To qualify for the program, borrowers must obtain a certificate from a pre-ownership course. Both MCDA and PED refer borrowers to the Center for this course. The cities' housing information services, the Minneapolis Housing Services and St. Paul Housing Information Center, also regularly refer prospective homebuyers to the Center for training.

Initially, the Center served only the cities of Minneapolis and St. Paul. However, they expanded their services to the entire metropolitan area at the request and with the support of the McKnight Foundation.

Alongside the creation and growth of the Center, MHFA initiated a statewide home ownership education program with similar standards, Homestretch. Noting the Center's success, MHFA asked it to take over Homestretch. Thus, the Center now serves the entire state of Minnesota.

In the late 1990s, the Center decided to augment its training services with foreclosure prevention workshops and counseling. They teamed up with the Minneapolis Housing Services and the St. Paul Housing Information Center, the cities' housing information departments, to provide foreclosure prevention training on behalf of both cities' governments.

As a forum for information sharing, the Center brings state and local government agencies, lenders, and non-profits together to trade ideas. Before the Center's creation, the major lenders in the Twin Cities area had not actually met for a decade, for fear of collusion allegations. Now the region's lenders meet frequently. The Center also brings community-based organizations together enabling them to share information and comfortably refer clients to one another.

According to a case study produced by Georgetown University's Andrew Schoenholtz and Kristin Stanton for the Fannie Mae Foundation, the Center's budget is $1.1 million. Funding to its community-based partners ranges from $21,000 to $76,000 each per year. Currently, the Center spends $570,000 on foreclosure prevention and homebuyer training, which homebuyers receive without charge.

The Center receives support from local private and public lenders, state and local agencies, realtors, community organizations, and national mortgage associations. The Fannie Mae Foundation, the McKnight Foundation and the National Association of Housing Partnerships also provide support. State funding comes through the MHFA, which as a state agency, receives appropriations from the legislature. MHFA passes money to the Center through its Foreclosure Prevention and Full Cycle Homeownership programs. In Governor Jesse Ventura's FY 2002-2003 Biennial Operating Budget, he proposed consolidating these two programs into the Full Cycle Homeownership Services Program and appropriating $858,000 for it.

KEY NON-PROFIT FUNDERS Family Housing Fund (FHF) Housing intermediary that: 1) provides grants and loans to housing providers and home owners, with money raised from philanthropic organizations, 2) convenes meetings of multiple sectors to discuss housing problems and solutions, and 3) provides information to community leaders and individuals on housing issues. Created by the Cities of Minneapolis and St. Paul and the McKnight Foundation in 1980.

McKnight Foundation

Grantmaker that funds grassroots organizations and long-term planning projects in the areas of social services, the arts, environmental protection, and scientific research.

THE CENTER'S ACCOMPLISHMENTS

According to the Georgetown study, the Center and its community partners achieved the following results between January 1, 1994 and December 31, 2000:

• Conducted workshops for 11,249 households

• Provided mortgage counseling to 4,799 households

• Helped 3,967 households, with an average income of $33,584, purchase homes of an average price of $107,668

During this period, the Georgetown study reports, almost 86 percent of the program beneficiaries were first-time homebuyers, and in 2000, 33 percent were first-generation homebuyers. 18 percent of those served were either Asian or Hispanic (available data did not indicate citizenship or immigration information). The Center has been able to break through cultural and linguistic barriers and help thousands of households buy their own home.

The Center got involved in the anti-predatory lending fight through its foreclosure prevention services. In the late 1990s, the Center joined a foreclosure prevention coalition, which included the Twin Cities Habitat for Humanity, the Northside Neighborhood Housing Services, and the St. Paul Housing Information Center. The coalition discovered predatory lending when home owners began coming to the group with problems that they had never encountered and that they could not fix: property flipping.

When the coalition investigated their clients conditions, they found an intricate web of fraudulent parties, including realtors, appraisers, mortgage brokers, and a lender. The realtors would buy properties, which the fraudulent appraisers would value at twice their worth. Mortgage brokers brought in willing buyers, often the same day. For financing, the realtors mainly used a lending company in California. The lender and the broker would arrange two loans: one that would cover a high percentage of the cost (usually around 70 percent) and a second to cover the difference. The second loan would contain numerous predatory terms. The broker would downplay the second loan, often telling buyers that they would not even file it, but would do so anyway, hoping that the borrowers would forget about it until their bills began to arrive.

Once in the home, the new owners would discover that the home needed extensive repairs, for which they would have to borrow more money. Then, their bills would start arriving, with interest rates that would ratchet up every few months. Borrowers found themselves trapped in an inescapable cycle of debt.

With the support of FHF, the foreclosure prevention group started a hotline and quickly learned of 150 cases. Further research of local government property and utility records indicated that there had been at least 350 property flips and perhaps as many as 850.

The group formed a property flipping task force that began working with the beleaguered borrowers. To date, they have been able to help 38 of the 150 applicants work through some of their financial troubles and acquire more favorable loans. They also passed their information along to the Minneapolis city government, which subsequently cracked down on many of the fraudulent lenders.

Today, three of the Center's community partners, the Powderhorn Residents Group (PRG), the Neighborhood Development Alliance (NeDA), and Community Neighborhood Housing Services (CNHS), offer education in Khmer, Spanish, and Hmong respectively. They began to do so because of the rapid growth of the Twin Cities' Latino and Southeast Asian communities in the 1980s and 1990s. In 2000, 8 percent of the Minneapolis/St. Paul metropolitan area's population was foreign-born, with 56 percent of them having arrived in the previous 9 to 10 years.

Each of these organizations recognized the need to offer home ownership education in foreign languages to serve these new communities. However, conducting successful outreach and gaining the immigrants' trust took much more effort and persistence. For example, PRG began working with Minneapolis's Cambodian population through a housing rehabilitation project. A large percentage of the Cambodian refugees arriving in Minneapolis moved into one dilapidated apartment building. In 1993, PRG was called in to help them redevelop the building to keep the city from condemning it. PRG worked closely with the residents to understand their wants and needs, and to implement their suggestions. While completing the renovations, PRG relocated the Cambodians, keeping them together and keeping them involved in their building's redesign with a newsletter printed in Khmer.

While involved in this project, PRG recognized that Minneapolis's Cambodians had little experience with the mortgage process. Stepping up its homebuyer education efforts, PRG began to offer workshops and counseling in Khmer. They hired a Cambodian counselor, who had been working with the community in job placement, to conduct the training. As PRG gained the Cambodians' trust and word spread among the community, they became overwhelmed by demand. They then teamed with the United Cambodian Association of Minnesota to conduct the workshops, at the same location used to offer other services. Now PRG focuses on oversight of the education and only conducts one-on-one counseling for their Cambodian clients.

NeDA began by advertising its classes in Spanish-language newspapers. At first, this attracted a few borrowers required by lenders to take pre-ownership education. Eventually, word spread, with the help of a thirty-minute, Spanish radio program made possible by MHFA, and NeDA began to receive more students. Now well established, NeDA attracts many students looking for education before initiating the loan process.

The Center facilitates these efforts not only through funding, but also through communication. Brought together by the Center, the community partners share information to bolster their programs. For example, when PRG wanted to offer education in Hmong in Minneapolis, they met with CNHS, which was providing Hmong-language workshops in St. Paul. Not only did this help PRG get started, it also now allows both organizations to refer students to a trusted educator when their classes fill up.

The FHF study revealed the existent foundation upon which the Center could be built: numerous community-based organizations that were already providing home ownership training in low-income communities in the Twin Cities. The creators of the Center decided that rather than forming a redundant agency they should harness these resources. Thus, they designed the Center to join the existing non-profits into a network of service providers.

Not only did this decision keep the Center from merely duplicating the work already being done, it allowed the organization to adapt to key demographic changes. Presented with the challenge of serving Minnesota's newcomers, the Center's community partners looked to mutual assistance associations to help serve the growing Cambodian, Hmong, and Latino populations. They now offer workshops and counseling in Khmer, Hmong, and Spanish. In the future, they hope to reach out to the Twin Cities growing Somali community.

When deciding what sort of organization to create, the Center's founders most wanted to make it a strong entity that could gain the most possible support. They decided to make it a private organization and to model it after the FHF, which had been very successful in bringing the public and private worlds together. They felt that a private Center would be able to include a broader range of participants (such as bankers, mortgage industry, realtors, government, and community residents). The stakeholders agreed that a private entity would have more flexibility with fundraising, because rather than depending solely on appropriations, it could draw on different resources. The Center's creators also believed that a private organization could expand across geographic borders without worrying about jurisdiction.

WHAT CAN POLICYMAKERS DO TO ASSIST/CREATE SIMILAR INITIATIVES IN THEIR COMMUNITIES?

State and local policymakers have contributed significantly to the success of the Center. Its case illustrates a few ways that policymakers in other states can help organize their localities' housing efforts. Some tools that may be useful to policymakers in other communities: financial support; leadership and public education; coalition building; and partnerships.

Naturally, state and local governments can offer significant financial support to home ownership education and to coalitions working to alleviate housing problems. Both of the Twin Cities offer direct funding to the Center. They also determine the budgets for their housing information and community development departments. Additionally, the Center receives state appropriations from MHFA, whose budget is determined by the state legislature.

Despite the significance of appropriations, policymakers can use their most powerful tool to aid home ownership education: the bully pulpit. The mayors of Minneapolis and St. Paul were driving forces behind the creation of the Center because they heavily promoted the issue of housing in the late 1970s and early 1980s. This added to the pressure that lenders felt to reach new communities and to provide them with pre-ownership training. State legislators can address the issue of home ownership education in their chambers and in the press. They can influence their districts to look into solutions and to create model programs.

Once the process is moving, policymakers can further use their influence to get all of the relevant parties involved. For the Center to succeed, it needed the input of state and local government, lenders, and community-based organizations. If any sector had been missing or had been underrepresented, the process could have collapsed. Policymakers have the unique power to bring all involved parties to the table and to encourage dialogue. They can set the tone and provide leadership to the entire process.

The Center works in a close partnership with the state of Minnesota and the cities of Minneapolis and St. Paul. The MHFA played a large role in the planning, development, and funding of the Center. It also works closely with the Center to provide home ownership training to consumers across the state. As mentioned above, the Center has recently assumed control of the MHFA's statewide training program, Home Stretch.

Similarly, the Center and the governments of the Twin Cities successfully work together. The cities work together to offer loans to low-income borrowers, through their "CityLiving" program. The city agencies that administer the program, the Minneapolis Community Development Agency and the St. Paul Department of Planning and Economic Development, refer borrowers to the Center for the training courses they must complete to receive the loans.

Family Housing Fund: http://www.fhfund.org/

Home Ownership Center: http://www.hocmn.org/

McKnight Foundation: http://www.mcknight.org/

Minneapolis Community Development Agency: http://mbbnet.umn.edu/agencies/mcda.html

Minnesota Housing Finance Agency: http://www.mhfa.state.mn.us/

St. Paul Government Housing Information: http://www.stpaul.gov/housing

St. Paul Dept. of Planning and Economic Development: http://www.stpaul.gov/depts/ped

Schoenholtz, Andrew and Kristin Stanton, Reaching the Immigrant Market: Creating Homeownership Opportunities for New Americans, the Fannie Mae Foundation, 2001.
Schoenholtz, Andrew and Kristin Stanton Jones. Reaching Emerging and Underserved Home Ownership Markets: Minnesota Home Ownership Case Study, Local Initiatives Support Corp (LISC), forthcoming.
Slide presentation entitled "Reaching Emerging and Underserved Markets" available at: http://www.liscnet.org/whatwedo/programs/homeownership/shtmls/pubreslink4.shtml   

August 2002

This report was produced with the generous support of the Fannie Mae Foundation. For additional information, please contact Ann Morse, Program Director of NCSL's Immigrant Policy Project.