THE HABITAT MINNESOTA LOAN FUND
About the Fund
Partner families in Minnesota have purchased
over 1,900 Habitat for Humanity homes
since the late 1980’s. Like all Habitat
for Humanity homes, these homes are sold
with a 0% interest mortgages. The Habitat
Minnesota Fund allows HFH-MN to act as
a secondary lender for Minnesota’s HFH
mortgages. Affiliates pledge their homeowners’
mortgages and monthly mortgage payments
to the Fund. In return, affiliates get
the cash value of the mortgage right
away, rather than having to wait 20 to
30 years for the payments to come in.
Affiliates then use this cash to accelerate
home building, acquire land for large-scale
projects, and leverage support from others.
Any Habitat for Humanity affiliate building
homes in the State of Minnesota is eligible
to apply for Loan funds.
Does the program work? Yes. Read the analysis of the first five years of the program. (PDF)
Related to the Habitat Minnesota Loan Fund is the Community
Revitalization Program (CRV). Find out
more about the CRV program and how your affilate may be able to benefit.
Fiscal Year 2013 Loan Capital Available
The FY’13 Habitat Minnesota Fund is anticipated to
consist of three separate funding pools
– the 21st Century Fund at $1.2 million,
Next 1,000 Homes Fund at $2 million,
and the Green Mortgage Fund at up to
$280,000 for a total FY13 funding of
up to $3,480,000.
The 21st Century Fund was established in 2000 with a $21
million, zero-interest loan from the
Minnesota Housing Finance Agency (MHFA).
Because HFH-MN holds this money interest
free, we are able to loan 21st Century
Funds to affiliates at 0% interest.
The 21st Century Fund carries an 8%
loan origination fee to help cover
program costs. The loan term matches
the term of the mortgage pledged to
HFH-MN, on average 25 – 30 years. Repayments
to HFH-MN from affiliates generate
approximately $1.2 million annually,
which is then available for re-lending
to affiliates. As of June 30, 2012,
approximately $31.5 million has been
disbursed from the original loan of
$21.3 million plus recycled funds,
funding 436 mortgages.
FY’13 Next 1,000 Homes Fund is the
third extension of the original Next
1,000 Homes Fund created in 2005 with
a $2 million/year loan from MHFA. FY’13
Next 1,000 Homes Fund of $2 million
will be made available to affiliates
at 3.0% interest for 25-years. A 2.25%
loan origination fee will be charged
for all funds disbursed before January
31st, 2013 to help cover program costs.
After January 31, 2013, the origination
fee will increase 0.2% per month in
order to cover HFH-MN’s holding costs
to MHFA. Affiliate loan repayments
to HFH-MN are used to re-pay the loan
to the MHFA. As of June 30, 2012, approximately
$13.9 million has been disbursed from
Next 1,000 Homes, funding 169 mortgages.
HFH-MN Green Mortgage Fund was established
in 2012 with $750,000 in funding from
the Community Development Financial
Institution (CDFI) Fund to be originated
over a 3-year period. HFH-MN has designated
the funds for pledged mortgages used
to finance homes built to Green Communities
Criteria or LEED standards. In order
to provide an incentive to build homes to Green Communities
Criteria or LEED, the FY’13 Green Mortgage
Fund of up to $280,000 will be made
available to affiliates at 2.25% interest
for 25-years. A 2.25% loan origination
fee will be charged to help cover program
Annual Funding Process
FY’13 Annual Funding Process - Timeline
The FY’13 Request for Applications will be available
on June 15, 2012. Please reference
the FY’13 HFH-MN Funding Allocation
Request for Applications (Word) for details
of program guidelines. Following is
the FY’13 Loan Fund Allocation timeline:
|Request for Applications Posted
June 15, 2012
|Applications due to HFH-MN Office
August 10, 2012 (5:00 p.m.)
|Loan Committee reviews applications and makes recommendation
to HFH-MN Board
September 6, 2012
|Final Allocation by HFH-MN Board
September 13, 2012
9/20/12 – 6/30/13
Application – A complete Application consists of the following 7 items:
- The detailed program and operating budget and a
12-month cash flow projection approved
by your Board for the 12-month fiscal
year ending June 30, 2013. If you operate
a ReStore, please include the ReStore
budget if it is separate from the affiliate
budget. See sample Cash Flow Budget and HFH Projected Cash Flow Budget templatate.
- Financial statements (balance sheet, income statement compared to budget and annual statement of cash flow)
for the 12-month fiscal year ended
June 30, 2012. If you operate a ReStore,
please include the ReStore financial
statements if they are separate from
the affiliate financials. If you do
not prepare an income statement compared
to budget, please provide the report
that compares your financial performance
to budget, such as a cash flow budget
compared to actual report. See sample
HFH Actual compared to Budget Cash
- A completed Mortgage Portfolio Quality Report for each mortgage or contract for deed you hold as
of June 30, 2012. Please use the Mortgage
Portfolio Quality Report template.
- The affiliate Historical Summary of Sources of Support showing data for the 12-month fiscal years ending
June 30, 2010, 2011 and 2012 and projections
for FY’13. Important Note: FY’12 sources
should match the affiliate’s FY’12
financial statements and FY’13 projections
should match the affiliate’s FY’13
budget. HFH-MN is seeking to ensure
that affiliates continue to receive
strong support from their local communities.
Should significant decreases in local
support be evident, funding allocations
will be adjusted accordingly. Please
use the Historical Sources template.
- A count and brief narrative of your affiliate's
plan for new housing production, A
Brush With Kindness and ReStore over
the next five years and how HFH-MN
resources will be utilized to accomplish
your program goals.
- The approximate date you anticipate drawing the
funds based on cash flow needs. Note:
the 21st Century Fund availability
is dependent upon the monthly payments
received from affiliates throughout
the entire year. Therefore, not all
affiliates will be able to access their
allocation at the same time. Also,
if the affiliate receives an allocation
from both 21st Century and Next 1,000
Homes funds or Green Mortgage funds,
the Next 1,000 Homes Funds and Green
Mortgage Funds must be drawn first
or at the same time as 21st Century
- A copy of your current Fund Development Plan. An “ideal”
Fund Development Plan includes planned
fund sources, amount, timing and the
responsible committee or staff person.
Funding Criteria – The following 4 Criteria are used as a guide for
- Broad Allocation of Resources throughout the State
The 21st Century Fund is allocated
to HFH affiliates on the basis of
(a) the number of Minnesota Family
Investment Program (the State’s welfare
program to help low-income families
with children) or “MFIP “ households
residing within each affiliate’s
service area compared to the statewide
total and (b) the capacity of the
affiliate to build and grow home
production. The State of Minnesota
required these criteria as a part
of the 21st Century Funding legislation.
- Local Fund Raising
Funding available under this program
is intended to leverage affiliates’
local fund raising efforts. As such,
these loans should be considered
as matching funds to those raised
locally. Each affiliate’s budget,
Historical Sources of Support and
Fund Development Plan will be reviewed
to ensure that no more than 50% of
an affiliate’s program and operating
support comes from HFH-MN loan funding.
- Home Production
HFH-MN CRR system is used as a guide
to the affiliates’ financial health,
capacity and the related risk of
an HFH-MN allocation. The CRR measures
risk based on percentage of the portfolio
pledged (# and $’s), portfolio delinquencies,
cash management, debt service coverage
and other debt-load. Details of the
HFH-MN Credit Risk Rating criteria are available
Additional Funding Requirements – The following conditions pertaining to the affiliate
and their Mortgage portfolio must be
met at the time of application or disbursement
and be maintained as long as the affiliate
is a borrower of HFH-MN:
- Must be in good standing with the HFH-MN, MN Secretary of State, the MN Attorney General's Office, and HFH-I.
- Must file the appropriate Form 990 with the IRS.
- Before the loan disbursement, affiliate must provide
a Borrowing Resolution for the amount
awarded from their Board of Directors.
- The percentage of an affiliate's mortgages that
may be pledged will not exceed 50%
of the performing mortgages in an affiliate's
portfolio both in dollar amount of
principal outstanding and in number
of mortgages, minus any mortgages pledged
to another lender. Performing mortgages
and balances must be certified by a
current Mortgage Portfolio Quality
report at the time of loan disbursement.
- Must submit Annual audited financial statements for affiliates with annual revenues
exceeding $250,000 or assets in excess
- Must submit quarterly financial statements and a
quarterly Mortgage Portfolio Quality
their entire loan portfolio for as
long as the affiliate is a borrower
- Loan proceeds from HFH-MN must be used for building
- HFH-MN will debit an affiliate’s bank account for
the monthly loan payments.
- Outreach and marketing efforts need to ensure MFIP
families in their community are aware
of the Habitat program.
- The property pledged must be covered by title insurance
or have an attorney's opinion as to
status of title. Title must be vested
in homeowner and any filed encumbrances,
liens, covenants, etc. must be acceptable
to HFH-MN. In addition, the homeowner
must have both property and liability
insurance with the affiliate named
as loss payee.
- The first mortgage loan amount and/or the amount
disbursed to the affiliate may not
exceed 80% of the appraised value of
the home. The value of the property
will be determined based on a copy
of an appraisal submitted to HFH-MN.
- Only mortgages, not contracts for deed, can be pledged.
- A professional servicer must service all homeowner
loans. Please see HFHI’s Mortgage Servicing
Standards for minimal servicing requirements
- Any mortgage pledged to HFH-MN must be for property
- The property for which the mortgage is pledged,
must have been sold to a family whose income does not exceed 50% of the greater
of State or County median income at
the time the homeowner applied to Habitat
for a home (see 2012 HFH-MN Income
income requirement must be verified
and documented by the affiliate.
- Once pledged, a mortgage cannot become more than
90 days delinquent – at this point
the affiliate must provide replacement
- No mortgage in the portfolio will be accepted as
collateral if the homeowner has been
more than 60 days delinquent in the
past 12 months. Recently closed mortgages
may be pledged at the discretion of
- No outside subordinate financing such as home equity
loans may be placed on any properties
whose mortgage has been pledged as
collateral to HFH-MN without the prior,
written approval of HFH-MN.
- A flood plain determination must be completed for any pledged loan; and if a pledged property lays in a flood plain all appropriate and recommended remedies must have been taken.
Once approved for an Annual Allocation, affiliates must submit a request for Disbursement. Affiliates can request disbursement anytime after the Allocation is awarded, up to June 30th of that fiscal year.
The Disbursement Request consists of the following materials:
- Loan Disbursement Request form
- Any documents necessary to determine affiliate in
good standing with MN Secretary of
State, MN Attorney General, HFH-I,
HFH-MN and the IRS, such as an annual
financial audit and IRS Form 990.
- Current Mortgage portfolio quality report form
- Uniform Commercial Code search of the MN Secretary
of State records to confirm the collateral
is unencumbered (HFH-MN will conduct
the UCC search).
- Borrowing resolution including new amount to be
borrowed, total outstanding balance
owed HFH-MN and authorized signers.
- For each mortgage to be pledged:
a) Mortgage Information Sheet form
b) Homeowner payment history
c) Copy of recorded mortgage in
a form acceptable to HFH-MN.
d) Original homeowner promissory
note in a form acceptable to HFH-MN.
e) Current Title Opinion or Title
f) Evidence of homeowners property
g) Flood hazard determination
i) Homeowner application and income verification
After the Disbursement Request is completed, HFH-MN will schedule a loan closing. HFH-MN staff will attend the closing at the affiliate’s office. The closing documents will include the following:
- A Promissory Note or an Amended Note between HFH-MN and the affiliate for the total amount to be repaid at the time of closing.
- A Loan Agreement and Security Agreement, or Amended Loan documents.
- A Loan Certification that outlines the outstanding principal balance at the time of closing and monthly payment for all loans pledged to HFH-MN. Your monthly payment to HFH-MN will equal the sum of the homeowner monthly payments of the pledged loans.
- An Assignment of Mortgage for each mortgage pledged which will be recorded in the appropriate county.
- The original Homeowner Promissory Note endorsed to HFH-MN. It is absolutely necessary for you to have the original note in order to close the loan.
- An Authorization to Debit your bank account automatically for the amount of the monthly payment.
- A Disbursement Authorization that we will sign authorizing our trustee to automatically credit your bank account for the amount of the disbursement.
Habitat for Humanity of Minnesota
Office: 2401 Lowry Ave NE #210
Minneapolis, MN 55418