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Sonoma County Habitat for Humanity bolstered by help from local banks

Three local banks are spearheading a novel financing arrangement that will allow a Sonoma County nonprofit to buy and rehabilitate foreclosure homes for low-income families.

Officials at the nonprofit, Habitat for Humanity, said the program will reduce significantly the cost and time needed for it to develop new affordable housing.

"New construction costs more and it takes longer," said Kathy Fong, executive director of the nonprofit, which has built 12 homes in the county since 1991 and has two more under construction.

Making use of a $500,000 credit line, the nonprofit closed on its first purchase, a three-bedroom house on West Third Street, at the end of December. The new credit line enabled it to pay the entire $191,000 price up front, giving it an advantage in negotiations.

"It makes a huge difference to come in with 100 percent cash," said former Santa Rosa mayor Jane Bender, president of the group's board. "We just didn't have that before."

The credit line is offered by First Community Bank, Exchange Bank and Luther Burbank Savings, which belong to a consortium of local banks formed in 1990 to lend to affordable housing developers.

"None of the big banks would do this, but our local banks said, &‘This sounds good,'" Fong said

The financing arrangement with Habitat for Humanity - to buy existing homes for conversion to affordable housing, rather than building new units - is new for the banks too.

"It hasn't been proposed before," said Kathy Pinkard, president and CEO of First Community. Habitat first sought a loan from the Santa Rosa lender, which then proposed the arrangement to its partner banks.

"It's really a sign of the times, because there's so much housing stock that's for sale," Pinkard said. "Providing affordable housing to our community is really important to this bank and most community banks, so we thought it was a perfect opportunity to take to the consortium."

The $500,000 is part of a financing package of just over $1 million now available to Habitat. Redwood Credit Union also provided a $250,000 credit line, to be used for up to 70 percent of the price of foreclosed properties.

Both lines of credit have an interest rate of 1 percent over the prime lending rate; currently that comes to 4 percent.

Also, Santa Rosa lent the nonprofit $280,000 in federal housing grant funds. That loan comes with a non-compounding, 3 percent interest rate, with no principal or interest payments due for 30 years.

The average cost to the nonprofit to build a 1,200-square-foot home is $225,000 to $250,000, a price that doesn't include the land - which is usually donated - or permits and various other site improvements, said Greg Putnam, the group's treasurer.

Additionally, said Fong, it takes roughly three years to finish a home project, starting with acquiring the property. By contrast, because of the foreclosure purchase financing plan, Habitat expects to be able to move in three families this year to finished homes.

Families must commit 500 hours of sweat equity to qualify for a Habitat home, must need the shelter, and have an income of 50 to 60 percent of the region's median income, or between $41,300 and $49,560 for a family of four.

On West Third Street, Habitat's new house shows the wear that comes with being unattended: An unkempt yard, window shades fallen askew, a lighting fixture broken on the floor.

But within 90 days - after some $30,000 to $50,000 in repairs to be paid for by the funds from Santa Rosa - it should be ready for a family to move in, Fong said.

Across the street, neighbor Marcelino Lemos applauded the program and the changes to come.

"This neighborhood, we all kind of look out for each other and this will be good for the community," he said. "Better the house be filled than empty."

In a time when foreclosures and short sales are about half of all home sales, and affordable housing remains a pressing need for many, approaches such as the one pairing Habitat with local lenders can make a difference, Bender said.

"We felt strongly that by buying up bad stock and rehabbing it and selling it to a family, we're not only helping a family we're building up a neighborhood," she said.

"My dream and our hope is that this might capture the imagination or hearts of people throughout the community," she said, "and banks and others will say that this is a program that for the short term could work."

You can reach Staff Writer Jeremy Hay at 521-5212 or jeremy.hay@pressdemocrat.com.

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