ICBA - Tools & Resources - Helping Hands: Working with Habitat for Humanity to Reach Would-Be Homeowners (October 2003)
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Helping Hands: Working with Habitat for Humanity to Reach Would-Be Homeowners (October 2003)


Helping Hands
Banks work with Habitat for Humanity to reach would-be homeowners

by Todd Melby

Although the cost of a Habitat for Humanity home varies depending on the market, there is one constant: Each home the nonprofit constructs requires significant local financing.

In places like Hickory, North Carolina and Annapolis, Md., Habitat for Humanity-the nation’s third-largest homebuilder-is increasingly turning to community banks for support. The nonprofit homebuilding group is a founding member, with the ICBA of the Homeownership Alliance, which provides the benefits of homeownership and the financing system that supports it. ICBA annually contributes to Habitat for Humanity, donating $10,000 to the cause earlier this year.

“Affordable housing is a major issue here and has been for quite some time,” says Hickory’s Pat Moss, a woman who seems perfectly positioned to understand the importance of the issue and do something about it.

A member of the Hickory City Council until 2001, Moss now serves on the boards of Habitat for Humanity of Catawba Valley and Catawba Valley Bank. One of Moss’s major accomplishments on the council was working closely with Habitat to revitalize a crime-ridden Hickory neighborhood.

“You always accomplish more when you cooperate,” Moss says.

Located near Charlotte in the western part of the state, Hickory has been a manufacturing hub for decades. Companies here produce furniture and textiles, and in more recent years, fiber optic cable. While that carried the local economy for much of the 80s and 90s, the boom has ended.

“Now that the economy has gone south, donations are hard to come by,” says Mitzi Gellman, executive director, Habitat for Humanity of Catawba Valley.

Since 1985, the organization has overseen the construction of 83 area homes. Habitat for Humanity buyers must put in hundreds of hours of sweat equity into the construction of their house-and often those of other buyers-and pay for the house, though the loan is interest-free.

Low- and moderate-income buyers need the assistance. U.S. Census figures show that nearly one-third of Hickory’s households have incomes of less than $25,000.

Finding Funding

Today, five banks are providing all the funding for yet another Habitat for Humanity house in the city. Catawba Valley Bank is part of that effort, but its commitment extends beyond a single house. During the next five years, the bank plans to contribute $15,000 to Catawba Valley Habitat for Humanity.

“Homeownership and the pride of homeownership is a fundamental basic of any family’s financial stability,” says R. Steve Aaron, Catawba Valley Bank president and CEO.

That’s why the bank, which began as a de novo in 1995 and has grown to 12 branches with about $420 million in assets, has supported its local Habitat chapter in other ways. Several years ago, it helped the organization land a $100,000 Federal Home Loan Bank grant.

“Habitat for Humanity is a tremendous organization,” Aaron says. “It’s one we are going to continue to support.”

As Habitat for Humanity’s senior director for corporate programs, Scott Anderson knows how critical grants from banks can be to the organization’s 1,670 U.S. affiliates. “If you have community bank funding leading the way, it can be huge,” Anderson says.

Anderson points to several ways banks can get involved:

  • Offer a challenge grant to be matched by other local banks or businesses;
  • Form a coalition with other community banks in your state to build houses;
  • Assist Habitat chapters by offering to service mortgage loans; or
  • Serve on the board of directors of a Habitat affiliate.

By investing in Habitat’s future, community banks don’t just help their community they help themselves, Anderson argues. “By demonstrating leadership within their community, bankers receive public relations exposure,” he says. “By being associated with the Habitat brand, they can leverage an international brand that is known for integrity, effectiveness and efficiency.”

In Maryland, a new program has invigorated bankers. Called “Banking on our Communities: Maryland Bankers Supporting Low-Income Housing,” the initiative hopes to raise $807,000 to build at least 12 houses in 18 counties. Contributions qualify under the Community Reinvestment Act and are usually eligible for state tax credits.

Group Effort

Severn Savings Bank in Annapolis has been active in the Maryland effort. In 2002, Severn Savings contributed $5,000 to a “Banker’s Build” house (all the financial support was raised by local banks). This year, Severn doubled its support and challenged its competitors to do the same as part of “Banker’s Build 2.”

“There’s a lot of competition,” says Scott Kirkley, Severn Savings Bank senior vice president and CRA officer. “If one bank sees another bank giving, they try to match it.”

As customers have flocked to Severn Savings in recent years, deposits have jumped to about $400 million. That’s enough to qualify the bank for the more arduous “big bank” CRA exam. Kirkley says the Severn Savings’ financial commitment to providing low-income housing will help when examiners look over the books.

Severn Savings isn’t just doling out money to the local Habitat chapter. It’s also servicing about $1.9 million in mortgage loans for the organization, which saves a Habitat volunteer from hours of time-consuming paperwork involving tax payments, insurance payments and homeowner savings accounts.

“It was a nightmare for them,” Kirkley says. “I was worried when we took this on, but it has worked out OK.”

The arrangement has several advantages. In Annapolis (population 33,200, located just a short drive from both Baltimore and Washington, D.C.), Habitat for Humanity borrowers are required to tuck away $25 per month for home repairs. With Severn Savings servicing the loans, it’s easy to set up a savings account-and for some people, it’s the first bank account they’ve had.

The bank also reports the loan repayments to credit bureaus, which helps borrowers establish or improve their personal credit worthiness. And when borrowers fall behind on payments, Severn Savings-not Habitat for Humanity-sends reminders.

Kirkley seems to like the arrangement. He says he is particularly inspired by a borrower who makes house payments every week. It turns out the woman is paid weekly and she wants to be sure that the mortgage gets paid first.

This kind of hands-on effort to improve the lives of everyday people in local communities is central to the mission of community banks, says Moss of Catawba Valley Bank. “It’s what community banks are supposed to be doing,” Kirkley chimes in. “We invest in the community and they invest in us.”

Todd Melby is a free-lance writer in Minneapolis.

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