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Habitat to Raise Additional Funds by Securing Mortgages

Habitat to Raise Additional Funds by Securing Mortgages

March 28, 1997 - Habitat for Humanity International is borrowing a tool from Wall Street to build additional houses with families in need.

Employing a financing technique known as securitization, Habitat’s local affiliates are now raising money by leveraging their existing mortgages. In a first-of-its-kind national program, nine of Habitat’s local affiliates have pledged over 250 no-interest mortgage loans to secure Habitat’s below-market-rate “Linda Mae Bonds,” named in honor of Linda Fuller, Habitat’s co-founder. The mortgage loans are secured by homes previously built by the affiliates. Issuing the Linda Mae Bonds will enable Habitat’s affiliates to stretch their existing resources to build more homes than they would have been able to otherwise.

Chase Manhattan Bank, MetLife, Norwest Mortgage Inc., PMI Mortgage Insurance Co., and The Prudential Insurance Co. of America each purchased a portion of the initial series of Linda Mae Bonds offered by Habitat. Those institutions, as well as Mortgage Guaranty Insurance Corporation (MGIC), have pledged to purchase up to $15,000,000 of Linda Mae Bonds, putting Habitat well on its way toward its goal of issuing $100,000,000 worth of bonds over the next five years. Currently, Habitat affiliates in the United States have approximately $400,000,000 in performing mortgages that can be securitized.

To construct this transaction, Habitat enlisted the real estate and securitization expertise of New York law firm Willkie Farr & Gallagher, which provided its legal services free of charge, and the financial and structuring advice of LIMAC, an affiliate of the Local Initiatives Support Corporation.

“Habitat for Humanity is constantly looking for more creative ways to generate the funds necessary to keep moving vigorously ahead with our plans to build houses for families who urgently need a decent place to live on terms they can afford to pay. The partnerships that have been worked out with these fine companies encompass an innovative method of matching a traditional financial process, previously not available to nonprofit lenders, with Habitat’s work,” said Habitat for Humanity International President and founder Millard Fuller. “Habitat for Humanity International is fortunate to have these financial organizations as substantial partners in our ongoing work of providing simple, decent housing for families in need.”

The money the affiliates receive through the securitization will be used to build more Habitat for Humanity homes. The affiliates benefit by having immediate access to money they normally would collect only over the life of the mortgages. Habitat for Humanity plans to expand the program as part of its five-year, $200,000,000 Rebuilding Our Communities Campaign that is raising money with and for affiliates.

This first pool of funds is expected to involved over $6,500,000 in mortgages. Norwest Bank Minnesota will serve as the trustee for the mortgage pool and Chicago Title will provide filing services on a cost basis. Habitat for Humanity expects to develop a second pool later this year. Affiliates participating in the first pool are Asheville Area (NC) HFH, HFH Cabarrus County (NC), Americus-Sumter County (GA) HFH, Coastal Empire (Savannah, Ga) HFH, HFH of Boulder Valley (CO), Flower City (Rochester, NY) HFH, Sumter (SC) HFH, Fort Worth Area (TX) HFH, and Greater Lynchburg (VA) HFH.