April 9, 2010
Dear Colorado Habitat for Humanity Affiliates:
USDA’s Rural Development is committed to the improvement of rural communities. This includes the creation of affordable homeownership opportunities for low income families in rural Colorado, which is why we are pleased to partner with Habitat for Humanity.
Earlier this year, Habitat for Humanity International approved the use of the USDA 502 Loan program as a way for rural affiliates to access capital and build their capacity to serve more families. Since then, Colorado has been at the vanguard of this new alliance, closing the first four loans with Habitat partner families. This experience has taught us many lessons, some unexpected. The following conclusions have informed the new policies and processes that will shape our partnership going forward:
Habitat for Humanity affiliates would like to access this new capital without putting a burden on partner families. USDA must balance these concerns with Federal statutes.
Federal regulations require specific forms and approved documents that should be standardized for efficiency.
Rural Development does not currently have the capacity to conduct the individualized technical assistance required to allow the partnership to move ahead smoothly and maximize investment in rural communities through Habitat for Humanity.
It is the desire of both Rural Development and Habitat for Humanity of Colorado that this partnership be managed in such a way that all parties are pleased and the result is more low income families served. To that end, USDA has requested that Habitat for Humanity of Colorado take on the role of packaging all Habitat/USDA loans, developing recommendations and policies regarding the use of those loans, and providing technical assistance to affiliates utilizing the program.
HFHC will serve as the primary contact for Rural Development staff on individual loans as well as the overall partnership
HFHC will develop, secure legal review, and acquire USDA approval on standardized mortgage documents for use in the 502 program
Affiliates will submit loan applications to HFHC for initial review and pre-qualification assessment, and HFHC will submit the complete, pre-approved application package to USDA
HFHC will provide technical assistance to affiliates regarding house pricing, interest subsidies, second notes, and other issues specific to 502 loans
USDA will work with HFHC to develop documents, policies, and practices that meet federal regulations and streamline the process
USDA will make disbursements at closing to HFHC; HFHC will make payments to affiliates
According to policy, HFHC will charge a 5% processing fee to cover training and administrative expenses. If the volume of these loans is such that administrative costs are exceeded by fees, they will be returned to rural affiliates in the form of grants at the end of each fiscal year.
Both USDA and HFHC are already working to develop a simple process that will enable USDA to mobilize as much capital as possible to rural communities through the Habitat for Humanity program. To learn more about this, and about how your affiliate might benefit from the program, please attend the USDA workshop on Friday at Camp Colorado. Additional trainings will be held at Knowledge Cafes and/or conference calls.
We look forward to working together to develop thriving rural communities!