Financing Tools LongTermDebt, Project Loans, Specialized Financing

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Financing ToolsLong-Term-Debt, Project Loans,
Specialized Financing
Robert White Twin Cities HFH, Minneapolis
MN Vice President, CFO - Twin Cities
Affiliate Board Officer - State Support
Organization
an approved CDFI lender Former
CFO - National Homebuilder
Mortgage Finance Corp.
CPA, MBA, CCM

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The SimpleHabitat Model
Donations Cash or Inkind
Property Infracture Cost
30,000
-30,000
-80,000
70,000
Sponsorships, Inkind, Volunteers
Construction Costs
10,000
-110,000
110,000
Home Sale
Mortgage Note
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The Real WorldHabitat Model
Funding Gap
Inkind land limited. Land opportunity arises.
Property Infracture Cost
0
-30,000
-30,000
55,000
-80,000
Sponsorships paid late. Grants held until
completion
-20,000
Construction Costs
5,000
Delinquency increases.
Home Sale
-110,000
60,000
-50,000
Mortgage Notes
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The Real WorldFinance Issues
Funding Gap
Inkind land limited. Land opportunity arises.
Property Infracture Cost
We need a bigger facility soon!
0
-30,000
-30,000
Can we accumulate land inventory?
55,000
-80,000
Sponsorships paid late. Grants held until
completion
-20,000
Construction Costs
5,000
Notes takes too long to collect. Do we have to
wait?
Delinquency increases.
Home Sale
-110,000
60,000
-50,000
Mortgage Notes
Can we start this project with a cash short-fall?
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Long Term Debt, Project Loans, Specialized
Financing
Affiliate Goals
Financing Tools
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Accelerating GrowthMortgage Secured Long Term
Debt
Home Sale
Mortgage Portfolio
10,000
Sell Mortgages Bank owns mortgage
notes. Servicing by bank. Payments go direct to
bank with recourse if delinquent. No loan or
asset recorded by affiliate
Pledge Mortgages Bank holds mortgage notes in
trust until loan paid in full. Habitat retains
servicing, collections, delinquency risk. Loan
asset booked by affiliate.
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Mortgage Secured DebtRisks
Mortgage Portfolio Stability Delinquencies Payoffs
Growing Related Resources Land
Volunteers
Donations
Staff skills Prudent Debt Levels Debt to
Portfolio Ratio Repayment Cashflow Expected
Growth Term Matching
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Bridging Project Funding Gaps

• Lines of Credit
• Public Financing
• Specialty Sponsorships

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Bridging Project Funding GapsLine of Credit
Start of Project Partial funds in-hand Remainder
identified certain
50,000 short

• Project Completion
• Collect cash from
• Mortgage note sale
• Sponsorship collected
• Public grant
• TIF financing
• 50,000 received

50,000 plus 3,000 interest
50,000 loan

• Loan Secured by
• Contract Payment
• Inventory, Receivables
• Mortgages Cashflow
• Cash

Line of Credit Loan
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Bridging Project Funding GapsPublic Financing

• State, County, City Agency
• Grant
• Inkind
• Project Loan 0
• Tax Increment Financing (TIF)
• Long-term market rate loan repaid from increased
  property tax revenue.
• Federal HOME Funds
• Grants
• 0, forgivable, long-term affordability
  guarantee.

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Bridging Project Funding GapsSpecialty
Sponsorships

• Offering Donors Sponsorship Choices
• Development
• Land
• Financing Capital or interest donation

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Accumulating Land Inventory

• Mortgage Notes Bulk Sale
• Public Financing State Agency
• Seller Financing
• Options
• Labor Trades

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Facility Financing

• Bank or Seller Financing
• City or Empowerment Zone Funding
• Bulk Sale of Mortgage Notes
• New Markets Tax Credits (NMTC)

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Tools to CoordinateOperations with Finance

• Cash Management
• Inkind
• Sponsorship Changes
• Public Funds Negotiation
• Options
• Portfolio Management minimize delinquencies
• Administration Tips
• Pricing Houses Sponsorships
• Scheduling to Maximize Sponsors / Work camps

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• Housing is all about personal stability, family
  and a sense of belonging.
• Bill Faith, Coalition on Housing and Homelessness
  in Ohio

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Economics of Debt Growth

• Permanently Expanding Production - Donations
• Affiliate production is limited only by
  donation, land and volunteer potential of the
  community.
• Permanent capacity is from drawing-in and
  maintaining donations.
• Accelerating Production - Debt
• Debt accelerates home building by drawing in
  more donations, volunteers and awareness through
  more build opportunities.
• By drawing resources to Habitat faster and
  earlier, affiliate reaches maximum community
  potential sooner.
• Remember - debt must be repaid from future
  resources.