From the President…
October 15, 2013
Dear Habitat Supporter:
The extensive coverage by The News-Press in last Sunday’s paper is focused on a small percentage of Habitat homeowners – those who have lost their homes to foreclosure. I wish they had devoted as much ink to the fact that our affiliate has helped more families achieve the dream of homeownership here and abroad than any other affiliate in the U.S. I wish they had pointed out that 90% of our families have been successful homeowners, and are grateful that Habitat gave them a chance when no one else would. I wish they had mentioned that our Habitat affiliate has the highest rating possible from Charity Navigator, the primary evaluator of non-profits, and that only 7% of our funds are used for administrative or fundraising purposes.
Habitat exists to help families achieve homeownership, and taking a home back is the very last thing we want. The News-Press suggests that somehow we are taking advantage of poor people, when the truth is that we are taking a chance on them. We give families dignity by working in partnership with them – giving them a hand up, not a hand out – and foreclosure may be a difficult consequence of that partnership philosophy. If our partners no longer uphold their end of the partnership, which includes making their monthly payments, we are obligated to take the home back and prepare it for another partner family.
It would be easy to improve our foreclosure rate by only serving families with stellar credit and perfect employment histories. But that isn’t our mission. Our mission is to help those families teetering on the edge, to pull them up onto the path of self-sufficiency. And for 90% of those families, it works.
We should be celebrating the fact that the vast majority of families we have taken a chance on – families with no history or expectation of homeownership – have firmly grasped the hand up and have improved their lives as a consequence. A 90% success rate is a number that most programs would envy.
That is not to say that we are not concerned about the issue. In the last few years, we have improved our orientation, selection, education and financial processes to try to better help homeowners fully understand and prepare to meet the obligation they are taking on. Unfortunately, it will take time to see the benefit of these improvements. In the five-year strategic plan completed this summer, we have set an ambitious goal for reducing the number of mortgage delinquencies, the leading indicator of possible future foreclosures.
We understand that low income families are easily sidelined by issues such as the loss of a job, health problems and other life events, and we stand ready to help our families get through these events. When homeowners inform us of their changed circumstances as soon as they occur, and demonstrate their efforts to help themselves by finding another job or proving a permanent loss in income due to medical disability, etc., we will jointly agree on a plan to bring their back payments current. If the issue is permanent, we will modify their mortgage to help them stay in their homes. The reporter apparently did not talk with the dozens of Habitat homeowners who have run into problems, and with our help, have gotten back on the right track and are still in their homes.
The News-Press story conveys that selling the homes at market value and utilizing second mortgages is somehow a problem. The opposite is true. Selling homes for market value protects everyone’s real estate value, and reinforces Habitat’s philosophy of giving families dignity. The second and third mortgages are how we make the home affordable, since those mortgages are only payable if the homeowner sells the home before a specified period of time. We routinely forgive second mortgages, and to date have forgiven more than 100 second mortgages. The way we price and sell our homes is exactly what is required by Habitat International of every affiliate, and reduces the likelihood of homeowners “flipping” homes that have been provided with volunteer labor and donations. Interestingly, the reporter hardly mentions the fact that our first mortgages are interest-free, which saves homeowners in excess of $50,000, depending on the interest rate and term used to compare.
The story also suggests that mortgage payments have increased for some homeowners, and that is what drove them to foreclosure. The fact is that the mortgage payment never changes over the life of the mortgage, even if the homeowner’s income increases. What changes is the amount that is escrowed for taxes and insurance. Save Our Homes limits tax increases, but as everyone with insurance knows, those numbers have gone up for all of us. While we don’t know of a single instance where the escrow amount has gone up so much that it puts the total payment above 30% of a homeowner’s income, if it ever did, we have a process in place to modify the mortgage amount downward to compensate.
Finally, it is true that our affiliate has a higher rate of foreclosures than other affiliates. It is also true that Lee County led the nation in foreclosures, and percentage-wise, our rate of foreclosure is far less than the County’s overall. Our annual default rate is less than 1/3 the rate reported by RealtyTrac for Lee County overall, a fact that was provided but not printed. As most of us know, Lee County had a huge proportion of its workforce tied to construction, and those jobs disappeared. Real estate in our County lost 60% of its value in the downturn. Our homeowners and their home values suffered right along with the rest of the County. It was an awful time for everyone, and thankfully we are gradually recovering.
I welcome your further questions about the information in the article or anything else about how and why Habitat operates the way we do. I believe that, like me, the more you learn, the more convinced you will become that Habitat is a wonderful, proven program to help families lift themselves out of poverty.
Thank you for your continued support of Habitat’s mission.
Katherine C. (Kitty) Green