NEIGHBORHOOD REINVESTMENT CORPORATION STATEMENT OF PRINCIPLES Neighborhood Reinvestment Corporation, chartered by Congress in 1978, guides an inter-connected system (see next page) of community-based institutions linked by a secondary market to revitalize lower- to moderate-income communities spanning the United States. Neighborhood Reinvestment's guiding principles are: (1) creation and support of vital, resident-led partnerships; (2) solid backing of the private sector; (3) collaborative community renewal; and (4) quality training and technical assistance. Creation and support of Resident-Led Partnerships The creation and support of vital, resident-led partnerships encourages individual participation, capitalizes on existing capabilities and ensures tailored tools and techniques for addressing situations unique to each area. These partnerships are comprised of participants from the community, private sector (usually insurance and financial) industries and state and local government agencies. Solid Backing From the Private Sector Neighborhood Reinvestment believes that renewing communities depends on access to safe, affordable housing. Furthermore, the Corporation maintains that responsible individuals should not be hindered in achieving access to safe, affordable homes because of economic or racial prejudice. To support this premise, Neighborhood Reinvestment has worked extensively to devise methods to utilize and invest public and private funds. Additionally, Neighborhood Housing Services of America, which administers the Corporation's secondary loan market, works for both NeighborWorks® organizations and private sector lending communities by providing products promoting local conventional and conventional lending and access to credit to all responsible borrowers. Collaborative Community Renewal the non The ideal approach to community renewal includes both the provision of affordable housing for the residents, and the improvement of positive educational and employment opportunities, attractive and safe recreational facilities and a sound public infrastructure in a mixed-income setting. However, a comprehensive vision of neighborhood revitalization does not necessarily mean each NeighborWorks® organization can afford to tackle all relevant issues, or should. Each Neighborworks® organization is encouraged to address the most critical issues, collaborate with other institutions tackling other concerns and advocate solutions to deteriorating conditions that other institutions are not confronting. Neighborhood Reinvestment works closely with each community to determine which mix would best fit their needs. Quality Training and Technical Assistance The Corporation's highly trained professional staff, with disciplines ranging from lender to organizational development expert, have worked extensively to develop enterprising solutions for each particular community being served. Neighborhood Reinvestment recognizes that what functions in Duluth may not apply to Los Angeles; and what works in Savannah may not serve Fairbanks. The Corporation sponsors Training Institutes open to volunteer board members and staff of any organization dedicated to renewing distressed communities. In order to advance the above-mentioned principles, Neighborhood Reinvestment assists the NeighborWorks® network in applying the following essential methods: lending to existing and potential home owners who are not eligible for conventional or government-sponsored lending programs; rehabilitating existing housing stock for current home owners and building new homes when appropriate; producing and managing affordable mutual housing and rental units; improving commercial properties and commercial districts which often results in creation of employment opportunities; and collaborating with various organizations to attract investments into the communities, including cooperating with crime-fighting enforcement agencies, uniting with community educational and other public institutions, and working to fill in social service and recreational gaps with existing non-profit organizations. ENVIRONMENT As exemplified by the headlines, many neighborhoods and communities have become danger zones--where walking to school from home could be hazardous to one's health--while other areas are losing their ability to attract and maintain residents. Both types of communities are already considered, or are on the road to becoming, undesirable places to live. There are several contributing factors. Elements include older housing stock, lack of affordable housing, disparate income levels, persistent stereotypes promoting prejudice against different races, disparities in funding public education and infrastructure, rising crime rates and disinvestment in communities by local government, schools, churches, grocery stores and banks. These components combine to accelerate pressures on already distressed neighborhoods. Contrary to popular belief, the communities described above are found in Anywhere, USA. They are not strictly comprised of severely distressed inner-city neighborhoods, or the half-forgotten locales of rural America. These locations are frequently mentioned in connection with the decline of the nation's living standards because the ravages of crime and disinvestment are seen in these areas first. However, people realize that the deterioration of our communities includes what were once considered safe havens, like the suburbs and small towns, as well. For this reason, Neighborhood Reinvestment, together with local partners, works across a broad spectrum to renew the United States' communities and bring hope to people everywhere. Communities range from rural New Mexico to Davenport, Iowa, and core urban areas such as Detroit, New York and Los Angeles. Specific social, economic and institutional considerations heavily influence the Corporation's initial strategies when fostering a resident-led organization; and later, when assisting the organization expand its services, meet financial needs and evaluate results. Significant factors related to neighborhood revitalization include: Home Ownership Rates: In 1990, the rate of home ownership in core urban areas was 49%; the national rate was 64%. Income Distribution: During the 1980s, the gap in income distribution widened, particularly affecting minority communities. According to 1990 census data, more than 40% of Americans fall into the low- to moderate-income range. Additionally, there is little evidence of improved education and/or employment opportunities for youth (especially minorities). Home Purchase Prices: The national median purchase price of homes increased from $43,000 in 1976 to $141,000 in 1992; a 228% increase, while median family income increased from $14,900 to $36,800 during the same period (a 148% increase). Interest Rates: Long-term rates, 6% at the end of January, are expected to remain stable into FY 1995. These combined with the draft Community Reinvestment Act regulations, and a steadily rising economy set a most favorable stage. Affordability: Despite the recent drop in interest rates, affordability for lower-income families has remained a great concern. In the nation's 44 largest cities, 75% of lower-income families are paying more than 30% of their income for rent, while less than 33% are receiving housing subsidies. For many lower-income families, 30% of their total income for housing is unaffordable, given the costs of health and child care, food, transportation and other necessities. KEY AREAS OF FOCUS FOR FY 1995 Neighborhood Reinvestment Corporation is dedicated to revitalizing our nation's communities, however the Corporation has access to very limited resources. The core of Neighborhood Reinvestment's strategy includes promotion of long-term solutions consisting of creating and strengthening resident-based, private and public partnerships, expanding access to credit, and providing training and information in community and economic development. Expanding Access to Credit Providing expanded access to credit is a critical activity of NeighborWorks® programs. Unless the poorest, responsible family, and the most deteriorated structure in a neighborhood can be addressed, the confidence level of all investors (i.e. homeowners, potential homeowners, lenders, renters, city government, insurers, business people and adjacent neighborhoods) will flag. Thus, one key tool is the creation of local revolving loan funds from which all responsible households may borrow. The revolving loan funds include moneys from Community Development Block Grants, city and state governments, foundations and Neighborhood Reinvestment. Loans made through these revolving loan funds are eligible for purchase by Neighborhood Housing Services of American (NHSA). These loan sales expand the ability of local programs to lend to those who otherwise would not have access to credit. Key to these funds is locally controlled, flexible equity built up through program operations or from foundations, various businesses and Neighborhood Reinvestment Corporation grants. Furthermore, the NeighborWorks® organizations act resourcefully to leverage their precious capital. This is evidenced by the fact that $137 million was leveraged by the FY 1992, $5 million equity capital appropriation Neighborhood Reinvestment made available to the NeighborWorks® organizations. Similar results are expected from the Fiscal Year 1994, $3 million equity capital appropriation. For example, a grant of $0.5 million to Neighborhood Housing Services of America is likely to result in $5 million in multi-family loans made to NeighborWorks® organizations. During the past several years, many financial institutions working closely with one or more NeighborWorks® organizations have established special lending pools to expand the availability of credit. Some work directly with Neighborhood Housing Services of America to expand first mortgage availability. Many financial institutions have created their own in-house operations, and utilize the NeighborWorks® network to market their products and conduct preliminary counseling and underwriting. This has resulted in a rapid expansion of local lending by NeighborWorks® organizations and loan purchases by Neighborhood Housing Services of America. Local lending from revolving loan funds for completed projects grew from $22.6 million in 1991 to $26.1 million in 1993; a 15% increase. Neighborhood Housing Services of America nearly doubled its loan purchase and loan origination operation during this period, resulting in a total of $29 million in activity in |