Creighton Blackwell left a 15-year career in the for-profit banking world to work at Coastal Federal Credit Union so he could have the flexibility to focus more on his community. As a board member for his local Habitat for Humanity chapter and serving as a vice president for Coastal FCU, he was able to help pioneer a low-interest lending relationship between his credit union and low-income families in Wake County, N.C.

“No one around here had ever done this,” Blackwell said. “This is the largest [commitment] the Habitat [chapter] has ever had.”

In the past year, Raleigh, N.C.-based Coastal FCU committed $6 million in loans to its local Habit for Humanity in a low-interest lending pilot recently approved by Habitat International.

The $2.9 billion CU led the charge as the first third-party lender for Habitat for Humanity of Wake County in September 2016 with an initial $3 million commitment, allowing the Habitat affiliate to build 30 more houses than usual during the fiscal year. In May of 2017, Coastal FCU committed to an additional $3 million.

“They indicated interest from the beginning,” said Kevin Campbell, president and CEO of Habitat for Humanity of Wake County. “They were the first and largest commitment. Other banks have participated but not to the degree Coastal has.”

Habitat’s policy shifts

According to Campbell, Habitat for Humanity recently moved away from a policy of charging 0 percent interest on loans, a principle that came from an Old Testament passage that prohibited charging interest to the poor. After some debate about the context of the scripture, Habitat for Humanity shifted its approach from a 0% interest principle to an affordability principle. Since the United States Department of Housing and Urban Development defines affordability for house payments as 30 percent of a family’s income, Habitat for Humanity affiliates like Campbell advocated for finding third-party lenders to give out low-interest loans so that they could build more affordable houses.

Last year, Wake County Habitat—which is also one of Coastal FCU’s select employee groups—approached Coastal’s Blackwell about the possibility of writing low-interest mortgages to Habitat home owners after the local Habitat chapter discovered some of their owners could afford 2 percent mortgages at a 30-year fixed rate.

A ribbon-cutting ceremony at a Wake County Habitat for Humanity home in North Carolina. The group is a SEG of Coastal FCU and the credit union has pioneered a low-cost lending program with the local Habitat chapter.
A ribbon-cutting ceremony at a Wake County Habitat for Humanity home in North Carolina. The group is a SEG of Coastal FCU and the credit union has pioneered a low-cost lending program with the local Habitat chapter.

When Coastal received a low-income designation from the National Credit Union Administration 18 months ago, the CU began looking for ways to better serve low-income consumers. “Mortgages and housing is a business we’re pretty efficient at,” said CEO Chuck Purvis. “We can make money at 2 percent interest, and we’re picking up their entire banking relationship.”

Coastal covers 90% of each loan and Habitat for Humanity has offered to step in if there is any problem with collecting the mortgage making the loan less risky for the credit union.

“We probably need $6 [million] to $7 million dollars in commitments each year, so Coastal is picking up half of that,” Campbell said. On average, Wake County Habitat asks third-party lenders for deals ranging from $1 million to $1.5 million.

“We’ve always had an affordability need, but it’s really ramped up now,” Campbell said. “There’s been an excess of demand over supply. It’s hard to find housing under $300,000.”

In a year, Habitat International will review the lending pilot to see if it delivered the same success rate to its buyers.

Early adopters

As the first Habitat for Humanity affiliate in North Carolina to go down the path of third-party lending, Wake County Habitat is grateful for Coastal FCU’s willingness to be the first adopter of its program.

A year before becoming Wake County Habitat’s first partner, Coastal FCU gave a $100,00 grant to sponsor a Habitat house. Purvis, a 2017 winner of the Credit Union Executives Society’s Outstanding Chief Executive Award, said he realized at the time that Coastal could have a larger impact.

“Chuck was calculating number in his head,” Campbell said. The CEO realized the lost interest between a 2 percent 30-year fixed-rate loan and the market rate was the same amount of lost revenue it took to sponsor a home, and Blackwell didn’t want his CU to just have a one-hit-wonder success story.

“With the Habitat program, that’s an issue, a concept, that at the bank, we wouldn’t have done that,” Blackwell said. “We didn’t think that deeply enough in a non-traditional way. But to not sponsor something but also ask how we could put 30 families in homes? That’s completely a ‘type-of-impact’ statement. That’s what the credit union and the movement has allowed us to do.”