The Treasury's many "rescues" have overlooked a small but significant piece of the financial services industry in the United States, to the detriment of affordable rental housing.
For decades blue-chip, nonprofit multifamily lenders, serving areas as diverse as New York, Alabama, Massachusetts, California, and the Carolinas, have made mortgages on buildings that low- and moderate-income families are proud to call home.
With millions of homes expected to go into foreclosure over the next few years, an ample supply of affordable multifamily rental housing is more crucial than ever. The severe liquidity constraints faced by our nation's leading nonprofit lenders threaten that supply.
Like other financial companies, these lenders depend on the availability of credit to finance housing, so the seizing up of the credit markets has hindered their ability to mitigate the crisis and finance additional housing. For example, the nonprofit lending consortia formed by banks and thrifts to serve underserved communities throughout the country have very successful track records of pooling private capital to finance the expansion of affordable rental housing.
A recent survey of our nonprofit lender members found that they currently hold more than $1.5 billion of seasoned multifamily loans.
For example, since 1974, New York's Community Preservation Corp. has financed the development or preservation of over 130,000 housing units — an investment of more than $7 billion. Over the past two decades the California Community Reinvestment Corp. has financed more than $856 million of loans for over 26,000 affordable housing units. In a typical single transaction, the Community Investment Corp. of Chicago recently provided a $360,000 mortgage to a "ma and pa" landlord to finance a six-unit housing flat in the Austin neighborhood on the West Side.
These lenders are making loans that are the building blocks of community development, often expertly combining things such as the low-income housing tax credit, community development block grants, and Home Investment Partnerships Act subsidy program.
These nonprofits have no troubled assets, most have never had a loss on a loan, and the rest have total losses under 1%. Their multifamily mortgages finance the preservation and/or construction of affordable homes, providing jobs for small businesses and residents of formerly underserved communities.
Even with this great track record, however, the liquidity crisis is impairing these lenders' ability to meet the needs of our urban and rural communities.
Since Fannie Mae and Freddie Mac are still not providing liquidity to this important part of the market, it is crucial that the federal government step up to supply the needed financing for affordable rental housing.