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.

Loan Capital

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.

The 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 costs.

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:

Application – A complete Application consists of the following 7 items:

1. 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.
2. 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 Flow.
3. 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.
4. 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.
5. 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.
6. 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 Funding.
7. 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 loan approval:

1. 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.
2. 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.
3. 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 at hfhmn.org.     

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:

1. Must be in good standing with the HFH-MN, MN Secretary of State, the MN Attorney General's Office, and HFH-I.
2. Must file the appropriate Form 990 with the IRS.
3. Before the loan disbursement, affiliate must provide a Borrowing Resolution for the amount awarded from their Board of Directors.
4. 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.
5. Must submit Annual audited financial statements for affiliates with annual revenues exceeding $250,000 or assets in excess of $500,000.
6. Must submit quarterly financial statements and a quarterly Mortgage Portfolio Quality Report for their entire loan portfolio for as long as the affiliate is a borrower of HFH-MN.
7. Loan proceeds from HFH-MN must be used for building in Minnesota.
8. HFH-MN will debit an affiliate’s bank account for the monthly loan payments.
9. Outreach and marketing efforts need to ensure MFIP families in their community are aware of the Habitat program.     

1. 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.
2. 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.
3. Only mortgages, not contracts for deed, can be pledged.
4. A professional servicer must service all homeowner loans. Please see HFHI’s Mortgage Servicing Standards for minimal servicing requirements and guidance.
5. Any mortgage pledged to HFH-MN must be for property in Minnesota.
6. 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 Limits). This income requirement must be verified and documented by the affiliate.
7. Once pledged, a mortgage cannot become more than 90 days delinquent – at this point the affiliate must provide replacement collateral.
8. 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 HFH-MN.
9. 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.
10. 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.     

Disbursement Request
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:

1. Loan Disbursement Request form
2. 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.
3. Current Mortgage portfolio quality report form
4. Uniform Commercial Code search of the MN Secretary of State records to confirm the collateral is unencumbered (HFH-MN will conduct the UCC search).
5. Borrowing resolution including new amount to be borrowed, total outstanding balance owed HFH-MN and authorized signers.
6. 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 Insurance
f) Evidence of homeowners property insurance paid
g) Flood hazard determination
h) Appraisal
i) Homeowner application and income verification
     

1. 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.
2. A Loan Agreement and Security Agreement, or Amended Loan documents.
3. 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.
4. An Assignment of Mortgage for each mortgage pledged which will be recorded in the appropriate county.
5. 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.
6. An Authorization to Debit your bank account automatically for the amount of the monthly payment.
7. 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
Phone: 612.331.4439
Fax: 612.789.0846

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