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January 30, 2003
NeighborWorks Network Helps Low-Income Families
    by William Baue

The Neighborhood Reinvestment Corporation operates the NeighborWorks Network, a coalition of local organizations that provide community investment loans to low-income residents.

Low-income neighborhood revitalization routinely relies on community investment, which is one of the three prongs of socially responsible investment (SRI). The Neighborhood Reinvestment Corporation, which was chartered by Congress in 1978 as a public nonprofit, provides such community investment, as well as the technical assistance and training necessary to rebuild neighborhoods. Neighborhood Reinvestment operates the NeighborWorks Network, a coalition of 223 local organizations in urban, suburban, and rural regions that provide loans and hands-on assistance to their neighbors.

"The key to Neighborhood Reinvestment's success was involving people and sustaining improvements," said the National Manager of Neighborhood Reinvestment's Rural Initiative David Dangler. Mr. Dangler was the founding director of Rutland West Neighborhood Housing Services, a NeighborWorks organization in Vermont. "Instead of using the old outside-in, top-down, bulldozer approach, Neighborhood Reinvestment employed an inside-out, bottom-up approach."

Local residents make up the majority of the governing board of each local organization. In 2001, more than 3,100 volunteers served on local NeighborWorks boards in 2,339 communities.

"Just about all of the NeighborWorks Network organizations work as community development lenders and have their own loan funds," Mr. Dangler told

Low-income residents typically do not qualify for conventional loans, but local NeighborWorks organizations use their revolving loan funds to finance individually tailored, affordable loans. The revolving funds replenish themselves through loan repayments, freeing up money to finance more loans. For the fiscal year 2002, NeighborWorks revolving loan funds totaled almost $95 million.

According to a 2000 survey, almost three quarters (71 percent) of borrowers are very low income families that earn less than 50 percent of the local area median income or low income families that earn 80 percent of the local area median. Women represent 44 percent of individual borrowers, which is almost double the national average of individual female mortgage borrowers. And 29 percent of borrowers are African-Americans, compared to 13 percent of the U.S. population.

"Local NeighborWorks organizations also have access to a national secondary market through Neighborhood Housing Services of America (NHSA), which offers extra liquidity to the local NeighborWorks organizations," said Mr. Dangler.

NHSA is a private nonprofit that purchases rehabilitation loans and first mortgages, as well as originating multi-family development loans. Through the end of fiscal year 2002, NHSA had purchased and originated more than $521.6 million from local NeighborWorks organizations in cumulative. NHSA bundles these loans into a portfolio, and uses the portfolio as backing for securities that it sells to institutional investors.

"Here's the opportunity for social investors," explained Mr. Dangler. NHSA's major social investors include such diverse institutions as Fannie Mae (ticker: FNM) and Freddie Mac (FRE), the State of New Jersey, and State Farm Insurance Companies. "Let's say they could make $5 million available at 4 percent for 5 years, or whatever the terms are. They invest in NHSA, who will look to other sources to buy down or subsidize those funds in order to make them available to the individual NeighborWorks organizations, which is a nice way to buffer risk for the social investors."


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