Lots of credit unions make loans for housing. Not that many get involved in the housing that leads to a loan.
But Meriwest Credit Union, San Jose, Calif., does, and in the process it has built not just a niche for itself, but much greater awareness of its offering along with a big dollop of goodwill in the community.
Since 2006, Meriwest has been involved in the Federal Home Loan Bank of San Francisco's Affordable Housing Grants program. In the most recent round of funding, it was the only CU to receive a grant. Those grants are used in conjunction with local Habitat for Humanity to help build new homes, including eight units of affordable housing in Walnut Creek, Calif., and six in Cupertino, Calif.
Greg Meyer, community relations manager with Meriwest, said its role as a funder to the low-income developments is only possible due to the FHLB membership. Winning a grant is no slam dunk, said Meyer, who described the process as "competitive," especially since banks can use the grants to meet their CRA requirements.
In all, Meyer said Meriwest has been able to return more than $3.5 million to its local communities through the grants.
How did Meriwest come to be involved in the Affordable Housing Program in the first place? Meyer said that for many years, the FHLB was bank territory. But seeking to produce more purchase mortgages, it joined the FHLB and in the process was able to access its Workforce Initiative Subsidy for Housing (WISH) program, which allows for matching grants of up to $15K for qualified borrowers who are at less-than-80% of average median income (AMI). Meriwest has since processed more than 200 WISH loans.
Meriwest works with three primary programs: the WISH/IDEA (Individual Development and Empowerment Account) Home Purchase Grant programs, the Affordable Housing Grant (AHP) Program, and the Access to Housing and Economic Assistance for Development (AHEAD) program.
As CUs that are members of the FHLB know, it's not a difficult process to join. A CU must purchase stock, must either originate or purchase long-term mortgages, and must have at least 10% of total assets in residential mortgage loans (excluding securities sold under repurchase agreements), among other requirements.
The word "grant" can be processed by the CU exec brain as "time consuming, pencil-snapping, paperwork-filled drudgery," but Meyer indicated Meriwest has not found the process onerous, although he said each grant is a bit different, so it requires some understanding. "The AHP grant is granted from the FHLB to housing development organizations that have their grants sponsored by a member like Meriwest Credit Union," he said. "MCU will process the grant paperwork for them and, if approved, will manage the process of creating deeds of trust and other required documentation. If it is used to create funding for rental housing, the property needs to be maintained in an affordable status for a set number of years. If the AHP funds are used for downpayment support, the funds are secured with a deed of trust and forgiven 20% per year, so after five years the homeowner no longer owes money."
Since starting its membership in 2006, MCU has been involved in $3 million in WISH/IDEA grants, $440,000 in AHP Affordable Housing Grants, and $65,000 in AHEAD grants.
Meyer had a relationship with the local affiliate of Habitat for Humanity prior to joining Meriwest-he oversaw a similar program for Citibank--and has worked on several projects as a volunteer. He brought that relationship to MCU, which is how it came to be involved. Habitat for Humanity requires all homeowners to put in at least 500 hours of sweat equity.
All that sounds and feels good, but bottom line, what's in it for Meriwest?
"The programs give us traction in the community as a sponsor of services to the disadvantaged," answered Meyer. "It gives us a bigger footprint in our community; a footprint we would not have been able to achieve during a recession without the assistance of the FHLB. We gain greater recognition for our efforts in support of our community. Hundreds of Silicon Valley residents have benefitted from the membership we have with the FHLB."
Meriwest was most recently approved for a $160K grant for eight homes for low-income families at $20K each. The MCU AHP Grant Funds will be used as down payment assistance for Habitat clients in the Pleasant Creek home development in Walnut Creek, Calif., where Habitat is building 10 homes.
What About The Risk?
No credit union in this environment can enter into any new relationship without wondering about the risk. In this case, Meyer said the risk involved comes only if the homeowner sells the home to someone ineligible for the mortgage, which would require the balance of the AHP grant be repaid. Habitat, he said, does a good job of monitoring.
Why should any credit union get involved with a similar program from their FHLB? "During the recent recession, we did not have any money to contribute to the many fine community development organizations serving disadvantaged families in our region," Meyer said. "We have greater name recognition and are known as a CU that serves not only its members, but its community."
Frank J. Diekmann can be reached at firstname.lastname@example.org.