Churches Help Home Buyers Realize Dream : Community: Ohio program is touted as model for getting real estate funding to residents of the inner cities.
An innovative loan program that unites inner-city churches with banks was touted Monday as a possible way to boost mortgage lending in South-Central Los Angeles and other low-income communities.
The loan program of Huntington National Bank, which began last year in inner-city church halls of Columbus, Ohio, has provided $26 million in mortgages to buyers who probably would not have qualified under traditional lending guidelines.
The program was the focus of a Monday meeting here of bankers, politicians and ministers called by U.S. Rep. Maxine Waters (D-Los Angeles). The meeting reflects the increased pressure on lenders and the government to come up with ways to increase mortgage lending to low-income Americans and to better fulfill provisions of the Community Reinvestment Act, the federal anti-redlining law.
The most striking feature of the Columbus program is that Huntington National operates it out of 18 Columbus churches, where borrowers are counseled on budgeting, improving their credit ratings and making formal loan applications. Huntington also uses flexible loan qualifying standards, often requiring no down payments.
The borrowers so far have been good credit risks and show lower than average loan delinquency rates, said Donald E. Walters, Huntington National’s community development director. The bank has $16 billion in assets and is Ohio’s fifth-largest.
The Columbus church-based operations are the essential element of the program because it helps many African-American borrowers overcome their distrust of banks, said Paul Taylor, a Columbus housing developer and consultant who organized the loan program for Huntington National.
“Churches are the most stable and trusted institutions in the inner-city community,” Taylor said. “They are also looked to for solutions.”
Pastor Timothy J. Clarke of First Church of God in Columbus, one of the first three churches to participate in Huntington National’s program, said the value of the program is that it “demystifies some of the things that people historically believed about banking institutions.”
Huntington’s church-based operation also solves the problem of lenders who want to penetrate the inner-city market but don’t know how to establish themselves in what for them is a new market.
“Most African-Americans feel that banks don’t want their business and that they are not treated on a level playing field. So there is a lot of suspicion and a lot of distrust,” Clarke said.
Taylor persuaded Huntington National to apply “non-traditional” underwriting standards.
Often, the down payment is actually a 5% discount from the seller on the sale price. “This helps the seller because they are cashing out,” Taylor said. “Many absentee landlords rent these properties because they can’t sell them--there is no mortgage money for buyers. These houses are headaches, so they are happy to sell them at a discount.”
Taylor has spoken before congressional committees, and his firm, P.T. & Associates, has set up similar loan programs for banks in Detroit, Indianapolis, Cincinnati and other cities.
Quinta Seward, an organizer with Communities for Accountable Reinvestment, a Los Angeles-based banking advocacy group, said the Columbus program is “a long-overdue idea. It’s a way to reach people who have been underserved and historically redlined.”
Huntington National’s Walters said the program has been successful and very profitable. The bank will have $35 million in low-income mortgage loans on the books by the end of this year and $100 million by the end of 1994.
“The glue is the urban church. It’s the common meeting ground that makes everybody comfortable, the bank included,” Walters said.
