Published in the March 14, 2017, edition of the Redstone Review.
What’s happening with Habitat for Humanity homes in Lyons?
COMMENTARY: AFFORDABLE HOUSING IN LYONS
By Amy Reinholds
Affordable Housing Columnist
LYONS – The Lyons community can see the rapid construction progress of Habitat for Humanity duplexes on Park Street, east of 2nd Ave. The 6 homes in 3 duplexes will be the first new affordable housing in town since the 2013 flood. David Emerson, Executive Director of Habitat for Humanity of the St. Vrain Valley, expressed gratitude this past week for all the volunteers.
“We are thrilled to see the houses progress so quickly since volunteers began working on them in January,” Emerson said. On March 9, the construction crew rolled roof trusses on the first duplex and have completely framed a second duplex. The third duplex, in the middle of the other two buildings, is still going through a final permit process, because the homes in that building have a slightly different design (larger, 4-bedroom homes, which will also be accessible for people with disabilities.)
Emerson said that more than 400 volunteers, as many as 35 a day, have worked on the site since the project started with volunteers in late January. He said there are many repeat volunteers, including some retired individuals who return weekly or twice a week. Habitat construction crews with volunteers are currently working 4 days a week: Wednesdays through Saturdays. Volunteers include local Lyons residents and other volunteers from Boulder, an AmeriCorps National Civilian Community Corps group, and a Habitat for Humanity Collegiate Challenge team of college students, most recently from Widener University near Philadelphia.
The first three applicants for Lyons homes were selected in a previous round in summer 2017, and all are currently working on their volunteering “sweat equity” and educational requirements as they prepare to become homeowners, Emerson said. It’s likely they will be celebrating the 2018 end-of-year holidays in their new homes. In January Habitat for Humanity started the next round of applications with the hope of filling the other three openings.
Emerson highlighted three features that are important to understanding how Habitat for Humanity homeownership works. First, Habitat homes are built at a cost that is the lowest in the area by far. “Our price point is conservatively one third to a half of what it would cost to purchase a home of similar size in the Lyons area,” he said.
Secondly, Emerson said that Habitat for Humanity’s basic mortgage terms are unmatched in their ability to provide an affordable payment: a 30-year mortgage at 0% interest, with little or no down payment. Habitat for Humanity of the St. Vrain Valley mortgages are usually about $150,000, with no interest, and monthly mortgage payments, including escrow, are set at 27% of the household gross monthly income at the mortgage origination.
Household incomes of applicants eligible to apply to purchase Habitat for Humanity homes range from about $22,200 up to about $61,000 (for a household of 5 that earns 60 percent of the area median income). Based on the 27% of the household gross monthly income formula, a monthly mortgage for the bottom of the eligible income range is about $500, and a monthly mortgage for a household of 5 that earns 60 percent of the area median income is about $1,382.
Also, Habitat for Humanity of the St. Vrain Valley got approval from the Lyons Board of Trustees last year to raise the upper threshold to 80 percent of the area median income, which is as much as $81,912 for a household of 5 – if the applicants meet all the other criteria. Based on the 27% of the household gross monthly income formula, a monthly mortgage for a household of 5 that earns 80 percent of the area median income is about $1,800.
Of the three applicants already selected, no household earns more than 60 percent of the area median income, Emerson said. As previously described, that means their mortgages, based on family size and specific income, will be lower than $1,300 a month.
Finally, Habitat for Humanity has underwriting criteria (requirements of an applicant to qualify) that are more forgiving than any other mortgage program that they are aware of. However, they are still subject to federal law. The Consumer Financial Protection Bureau has protections that have strengthened over the years to protect homeowners from predatory lenders. Applicants for mortgages are required to demonstrate they have a required level of income to pay the mortgage and provide documentation to prove it.
“As we get ready to select the last several applicants, there will undoubtedly be good families and individuals in need who are left without one of these homes,” Emerson said. “Some of that has to do with the number of those in need versus the number of houses we are building. The other reason may be that an applicant does not meet our lending qualifications.”
Emerson said that when it comes to requirements, those mortgage underwriting obligations are in place to ensure an appropriate degree of projected success in a homeownership program, and to prevent foreclosures. “This is a requirement of federal law and is not flexible, and this is also a core value of Habitat for Humanity,” he said. “Homeowners assume an affordable mortgage and are held accountable to the obligations of that mortgage so that they can stay in their home and also so their payments can be paid forward to help others in need.”
Documented income and debt are two areas of the requirements that often require the most work for applicants.
The Habitat project is subsidized by a wide variety of sources, and Emerson said that income of homeowners is required to be very accurately accounted for. “There are a variety of ways we do that and that often means a great deal of documentation,” he said. “We do not do this to create a barrier but to be appropriately thorough and good stewards of the community’s resources. Often it takes several different pieces of documentation to create a full and accurate picture. This is an area where Habitat is consistent with what other lenders ask for.”
Emerson said that lending additional credit for a mortgage to applicants with existing loans requires a debt formula for lenders that is very rigid. “Federal housing officials – in particular the Consumer Financial Protection Bureau – take a very hard line,” he said “Lenders need to make sure that the amount being paid in a monthly mortgage when combined with the amount of other debt payments is an affordable percentage of an applicant’s income. We use the most liberal of those formulas.” Habitat for Humanity takes what the mortgage payment would be (which is much lower than other mortgages) and adds all other debt. Then they divide those payments by the applicant’s income. If the percentage of these obligations are too high, then it is not appropriate to extend a mortgage.
Emerson described the Habitat for Humanity selection process, which involves dozens of people who are trained and have experience with successful lending practices. Habitat staff work with a selection committee, and then a final decision is made by the Board of Directors of Habitat for Humanity of the St. Vrain Valley. The selection committee includes mortgage originators and bankers, and the Board of Directors has a banker, a tax attorney, and realtors to name a few. “Decisions are not made in a vacuum, and we routinely take feedback with the goal of making our program better,” he said.
He encouraged anyone to has questions about the program or requirements to reach out to the Habitat for Humanity of the St. Vrain Valley office. More information is available at http://www.stvrainhabitat.org.
This column is a monthly commentary (opinion column) in the Redstone Review about affordable housing after the 2013 flood disaster in Lyons. If you have any questions, comments, or complaints, contact me directly at areinholds @ hotmail.com. For history of post-flood efforts for affordable housing in Lyons, see previous columns at lyonscoloradonews.wordpress.com.