Homes for America 3 Homeownership Case Studies

1
Homes for America 3 Homeownership Case Studies

• Homes on the Glen
• Crisfield
• Annapolis Acquisition Rehab

2
Homes on the Glen
3
Homes on the Glen

• Located in Annapolis, Maryland
• 15 year Lease Purchase program
• 56 - 2 and 3 bedroom townhouses
• Serves low income families at or below 50 of AMI
• Completed in October 2002

4
Financing

• Debt Service Financing
• SunTrust 1,853,000
• ACDS 60,000
• DHCD 100,000
• Cash Flow Financing
• DHCD 1,201,036
• ACDS 627,700
• Equity
• LIHTC 3,911,521
• Deferred Fee 156,493
• Total Development 7,909,750

5
A Lease with Promise

• Homes on the Glen is a 15 years rental project
  that in year 16 converts to for sale community
• How the program works
• Lease purchase guidelines are amendment to the
  lease that must be signed by the tenant
• Residents participate in homeownership readiness
  classes
• Residents must perform routine maintenance on
  their unit
• Residents must perform 12 hours community service
  a year
• 15 of rent is put in homeownership escrow
  account, if lease addendum conditions are met

6
What We Learned

• Lease purchase using tax credits is an effective
  long tern strategy for homeownership development
• There is a tension between management of rental
  community and desires of future homeowners
• Encouraging residents, not focused on
  homeownership, to participate in required
  programing can be challenging

7
Crisfield
8
Crisfield Homeownership

• Joint Venture with Town of Crisfield
• HFA Developer on behalf of Town
• 6 homeownership units built on infill site in
  residential neighborhood, land owned by the Town
• Completed May 2006
• Three under contract, two using lease purchase
  agreement

9
Financing

• HOME 210,000
• CDBG 189,000
• SunTrust 500,000
• Total Development 899,000
• Buyers Cost 80,000 closing costs
• HOME Funds convert to soft second
• CDBG was a direct grant from the Town and used
  for land development
• SunTrust repaid as each home is sold

10
What We Learned

• Finding qualified buyers can be challenging
• Do small homeownership projects as close to home
  as possible
• Start marketing asap

11
Annapolis Homeownership Program
12
Annapolis Homeownership Program

• Acquire, rehab and re-sell homes to first-time
  home buyers in neighborhoods at risk or defined
  as Hot Spot communities
• Provide down payment assistance and mortgage
  reductions to buyers

13
Program Statistics

• 47 homes have been acquired and rehabbed
• Average sale price 125,158
• Typical first 1st Mortgage 102,620
• Average Household Income 33,379
• Program is 7 years old

14
What We Learned

• The re-sale of rehabbed houses is not always easy
  in the neighborhoods we have adopted
• We can not generate a large volume of homes,
  capital is limited
• Manage the risk
• lease purchase agreement
• limit number of house in inventory
• Pre-qualify early and often, buyers often have
  serious credit issues
• Typical turn around time about 9 months

15
A Typical Deal

• Purchase Price 80,000
• Rehab costs 35,000
• HFA closing costs 2,980
• Construction Interest 3,000
• Taxes and Insurance 2,760
• HFA Development Fee 7,500
• HFA Closing cost at resale 2,100
• Carrying Costs 7,000
• Rent Received (11,550)
• TOTAL 128,790

16
Program sources

• Community Capital 800,000 revolving loan fund
  for acquisition and rehab
• State of Maryland HOME funds 300,000 used for
  closing costs and mortgage write-downs
• City of Annapolis CDBG funds 30,000