Making Homeownership More Accessible for People Excluded From Opportunity

About This Investment 

Homeownership provides more than just a place to live. It creates financial security and is a primary path to building intergenerational wealth, which can be used for retirement, to pay for kids’ college, to start a business, or to be passed down to children who can continue to pass it down for generations to come. But a variety of factors, including downpayment requirements and discrimination in lending, have prevented many potential buyers from becoming homeowners. It is critical to correct the misperception that providing mortgages to households with lower incomes is risky.   

In many communities across the nation, local community development financial institutions (CDFIs) have made significant headway in creating access to more equitable mortgage lending. Yet despite their success, these organizations still struggle to secure the funding needed to complete their mission.  

That's why the Robert Wood Johnson Foundation (RWJF) has made a $15,000,000 loan to the Housing Partnership Fund (HPF), the lending arm of the Housing Partnership Network (HPN), to support its efforts to advance homeownership in communities with low incomes. This investment will provide capital to four CDFIs in the HPN network with the mission of stimulating affordable home development in communities that have been structurally excluded from opportunity, such as those in rural places or small and midsized cities with large populations of people of color.  

Why It Was Needed

Regional and local CDFIs are in the best position to understand the unique landscape of available affordable housing and the needs of homebuyers in their respective communities. But these lenders and their efforts to provide low-cost, long-term loans at the local level historically have been passed over by investors due to the smaller size of their loans and use of unique qualifying measures. The prospective buyers that these CDFIs serve typically have lower annual incomes, funds for down payment, and credit scores than what the traditional home financing system deems necessary, creating the inaccurate perception that they are “riskier” borrowers.   

However, evidence shows that these buyers are reliable: many nonprofits and CDFIs have provided mortgages to buyers with low incomes based on nontraditional evaluation principles and reported that CDFI mortgage loans perform better than traditional banks as financing is more sustainable and less likely to lead to loss of home.   

How It Works

The CDFIs in the HPN network are equipped to explore different ways to assess risk that meet communities where they are and stimulate more equitable mortgage lending practices and, subsequently, homeownership. For instance, looking into factors like someone’s track record of paying their rent on time can tell a much stronger story than income alone. 

HPF will act as an intermediary entity, allowing RWJF’s investment to flow through them to more quickly reach recipient CDFIs in their network and provide them with the capital they need to advance affordable homeownership. These funds will work to make mortgages more affordable in communities across the nation, implement equitable programs and lending products, and support efforts to increase opportunity and economic mobility for more families.  

About the Borrower

Housing Partnership Network (HPN) is a national 501(c)(3) non-profit membership organization of 100 high-capacity housing and community development nonprofits, including affordable housing developers, homeownership counselors, and lenders. HPN works to achieve its mission by convening members and addressing the community development and housing sector’s most pressing needs through investment and innovation.  

The Housing Partnership Fund (HPF), a 501(c)(3) nonprofit organization, was created in 2001 as the lending arm for HPN in an effort to meet its members’ growing needs for flexible, early-stage financing for affordable housing development. HPF provides capital to HPN’s high-capacity, mission-driven membership, all of which are focused on housing to advance better health, school, and economic outcomes for populations with low to moderate incomes. Since its inception, HPF has provided more than $200 million in loan capital.  

What This Looks Like:

Four initial lenders have been selected to receive financing through HPF, including Affordable Homes of South Texas, cdcb, CHN Housing Capital, and Homewise.