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Stimulus funds aim to boost homeownership

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By KATHRYN FLAGG
ADDISON COUNTY — An influx of economic stimulus funding from Washington, D.C., could mean good news for hundreds of Vermonters struggling to buy or keep their homes.

That news came last week, when Vermont’s Congressional delegation announced that three Vermont nonprofit organizations — including one that serves Addison County — will divvy up $6 million to spur community development.

The stimulus funds — provided for in the American Recovery and Reinvestment Act — are being doled out through the Community Development Financial Institutions (CDFI) program, which was first established under the Clinton administration.

The funds, which were included in the stimulus act under provisions promoted by Sen. Patrick Leahy, D-Vt., will be used to fund a small business loan program, expand mortgage products to first-time homebuyers and offer consumers additional credit resources.

In Addison County, the biggest repercussions of this latest influx of stimulus funds will be for first-time homebuyers. NeighborWorks of Western Vermont, a nonprofit housing organization serving Rutland, Bennington and Addison counties, is claiming a $2 million slice of the funding for Vermont.

That money will go in large part to NeighborWorks’ second mortgage program, which helps Vermonters generate down payments for their new homes through a low-interest second mortgage, typically totaling 20 percent of a first-time homebuyer’s home cost. This means homebuyers borrow the down payment for their new home.

NeighborWorks will also use the grant to help qualifying homeowners stay in their home, if they’re struggling to stay on top of their mortgages. Some of the funding will be used to help other struggling homeowners pay for repairs to their property.

NeighborWorks of Western Vermont Executive Director Ludy Biddle said her organization’s “extraordinary success rate” is one of the reasons it earned this grant — which is twice the amount the nonprofit originally requested.

NeighborWorks serves homeowners, or future homeowners, earning 80 percent of the median income or below. The bulk of their loans come as second mortgages to help homeowners cover their down payment. These second mortgages, Biddle explained, give buyers more buying power — and makes first lenders and banks more likely to move forward with a “more challenging buyer.”

The group has about 500 outstanding loans spread among the three counties it serves. Though the loans go to individuals Biddle called “financially challenged,” and who often have poor credit histories and low salaries, NeighborWorks’ delinquency rate is below 5 percent.

In fact, in the organization’s 13-year history, NeighborWorks has only had to make one foreclosure, Biddle said.

She chalks that success up to education and counseling. That means working with clients before and after their home purchase, and sitting down with new homeowners to plan a budget for making secure mortgage payments.

It also means staying on top of clients. If someone falls behind on a payment, Biddle said, “they hear from us right away.”

The group also provides foreclosure counseling. This year, Biddle said, demand for that particular service is up.

NeighborWorks received 93 calls regarding foreclosure counseling in 2008. But in the first five months of 2009 alone, the number of those calls tallied 138.

BENEFITS OF HOMEOWNERSHIP

Biddle is a strong believer in the benefits of homeownership, so helping people buy and keep their homes is a cause near and dear to her heart. Homeownership, she said, provides someone with security and a place to build a happy, safe family. But it’s also about nickels and dimes.

There’s an “astounding difference,” she said, between the net worth of a renter versus that of a homeowner.

“Having equity in a home, even though we’re in a time when home values have dropped … (is a step) toward independence and security,” Biddle said.

It’s hard for Biddle to know just how many new homebuyers the $2 million grant will help in western Vermont. But she did say that when NeighborWorks requested the original $1 million grant the organization estimated it would create an estimated 207 first-time homebuyers, and would rehabilitate 200 housing units over two years.

“In a normal business year, we have helped between 60 and 70 households with their purchase of a home, and about as many with loans to make repairs to their home,” Biddle said. “This is definitely going to help us increase those numbers.”

The grant is by far the largest NeighborWorks of Western Vermont has received. Their last CDFI allocation totaled $490,000, and Biddle said the organization was able to lend that out very quickly. Up until they learned last week of the new stimulus funding, almost all of the group’s lending capital had been deployed.

Biddle credits Leahy for encouraging the group to double its request for funding. The generosity and scope, she said, are beyond what the organization could have imagined.

“All of us want to help as many people in urgent need as possible,” Biddle said.

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