Neighborhood Finance Corp. spurs revitalization
Though it’s been three years since the city of West Des Moines has offered home loans in targeted neighborhoods through Neighborhood Finance Corp., city officials still receive inquiries about the popular program.
Through the program, 12 home buyers and 10 homeowners in three of West Des Moines’ not-so-affluent neighborhoods received loans to assist them in making repairs to their houses. Under the terms of the neighborhood revitalization program, $10,000 of each borrower’s loan is forgivable, provided he she completes repairs and remains in the house for at least five years.
Des Moines-based Neighborhood Finance Corp., a non-profit corporation formed 15 years ago to address falling property values in some of the Des Moines’ poorest neighborhoods, has originated more than $127 million in loans and grants that have allowed owners to renovate more than 2,500 housing units in 18 designated neighborhoods, including three in West Des Moines.
Des Moines officials have used proceeds from general obligation bonds to provide the program with approximately $1.1 million annually, matched by $1.1 million from Polk County. Those funds allow NFC to make about 100 home purchase loans and 50 home improvement loans each year. The loans are available to any new or existing resident of the designated neighborhoods, regardless of income level or assets.
Though about 70 percent of NFC’s funds are used to finance home purchases, about 20 percent goes toward home improvement loans to existing homeowners. In recent years, the remainder has gone into loans to downtown projects such as the Vine Street Lofts, the Woodland Avenue Brickstones and the East Village Square through the Neighborhood Development Corp.
In addition to providing loans to homebuyers, Neighborhood Finance Corp. also lends up to $2,000 toward their closing costs, which in addition to the $10,000 in renovation funds, is also forgiven after they’ve spent five years in the home.
“This has brought a lot of interest to people looking for houses in our neighborhood,” said Kimberly Hansen, president of the North of Grand Neighborhood Association, where 138 homeowners have received loans totaling $10.5 million. “Where else can you have someone forgive a portion of your loans? And because of the variety of packages available, it serves a variety of people coming into our neighborhood.”
Now, through a creative fund-raising arrangement, West Des Moines officials plan to jump-start a fund that will enable the city to bring the revitalization program back to three of its neighborhoods.
“It’s been a good program for us,” said Clyde Evans, the city’s community development director, who said West Des Moines had discontinued it due to lack of funding after putting in $75,000 in 2001 and 2002. Now, working with Rottlund Homes, the city hopes to raise enough money from the sale of a house the contractor will build in the Commerce neighborhood to fund the program for two years. The city will provide the land for the house.
“The amount raised will depend on contributions (made by the subcontractors on the project),” Evans said. “We’re hoping on between $100,000 and $150,000. It would be up to (Polk County) to decide if they want to match that.” In addition to the Commerce neighborhood, the program will again be extended to residents in the Valley Junction and Fairmeadows neighborhoods.
NFC pools the loans and sells them to Greater Des Moines banks, which have purchased more than $66 million of the loans over the past 15 years. The Federal National Mortgage Association, or Fannie Mae, has also purchased $32.75 million of the loans.
The standard 1 percent origination fee that NFC charges on the market-rate loans covers about 80 percent of the 12-person organization’s annual operating budget, which is approximately $1.1 million.
The program has proved popular among financial institutions, which have snapped up all the available subscriptions in each of the past three rounds of financing, said Gary Dodge, NFC’s executive director.
“They’re not making a lot of money on this, but they’re not losing money, either,” he said. “They’ve been really strong partners with us. And it’s a way for them to be involved in a way that they couldn’t otherwise have done by originating these kinds of loans themselves, because of the amount of staff time that would be involved.”
Neighborhood Finance Corp. serves neighborhoods that are selected by the Des Moines City Council and the Polk County Board of Supervisors, with input from the city’s Community Development Department and the Neighborhood Revitalization Board.
The initial designated neighborhoods included Capitol East, Columbus Park, Beaverdale, and North Park. The Neighborhood Advisory Board added River Bend and Woodland Heights in 1990.
The NFC currently serves the following neighborhoods through its lending programs: Capitol East, Carpenter/Drake Park, Fairground, Gray’s Woods, Highland Park, King-Irving Park, North of Grand, River Bend, Sherman Hill and Waveland Park.
After 15 years of operation, the non-profit organization is being evaluated by the consulting firms that made the recommendations that led to its formation. Results of the report are expected in June.