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Thank you, Mr. Chairman, members of the committee. I am delighted to be here to address the very important subject of increasing home ownership in America, particularly home ownership among low- and moderate-income citizens.

In 1974 the Federal Home Loan Bank Board established a task force to encourage savings and loan associations to participate in local neighborhood-revitalization programs. This task force grew to encompass the five financial reporting agencies as well as HUD. The Urban Reinvestment Task Force’s success in creating sustainable partnerships that stimulated new investment of private-sector capital with a minimum of government involvement led to the establishment of the Neighborhood Reinvestment Corporation by an act of Congress in 1978 (P.L. 95-557).

The mission of the Neighborhood Reinvestment and the NeighborWorks^(r) network is to:

• Revitalize distressed communities by creating and working with local partnerships of residents, the financial services industry and the public sector

• Operate a secondary market through Neighborhood Housing Services of America (NHSA) for unbankable loans made by NeighborWorks^(r) organizations

• Provide information, training and replicable revitalization approaches to local communities

Neighborhood Reinvestment was created to serve as a highly flexible, non-bureaucratic laboratory where new ideas could be tested, studied and refined. Since its inception in 1978, Neighborhood Reinvestment has done just that. The Corporation has replicated successful neighborhood revitalization projects and brought these models to hundreds of communities across the United States through the 190-member NeighborWorks^(r) network. This network now serves 825 distressed urban, suburban and increasingly rural communities faced with a lack of investment across the country. Today, flexible revolving loan funds, innovation, private-public partnerships and local control remain hallmarks of Neighborhood Reinvestment and the NeighborWorks^(r) system.

The national NeighborWorks^(r) network of 190 local organizations lies at the heart of Neighborhood Reinvestment’s efforts. Each organization is a 501(c)(3) corporation led by a local board of residents, business leaders and public officials. Its mission is to revitalize distressed communities.

Each organization has a locally established strategy for revitalizing its neighborhoods. These strategies include:

• working with conventional lenders to develop flexible loan products that work in target distressed communities;
• operating revolving loan funds for those who cannot borrow conventionally;
• creating and improving affordable housing; and
• creating complementary approaches such as crime prevention, economic development and youth work training.

These strategies have proven to be quite successful. In FY 1998 (compared to FY 1997), the NeighborWorks^(r) network:

• improved 13,769 units by creating new homeowners, doing major rehabilitation and creating affordable mutual and rental units, a 22 percent increase;
• sparked a total investment of $819.3 million in their neighborhoods, a 51 percent increase;
• provided minor repairs for 12,702 housing units, a 13 percent increase;
• expanded its ownership of affordable long-term mutual and rental housing to over 20,000 units, an increase of over 30 percent;
• provided nearly 41,000 families with home ownership counseling;
• expanded training contact hours to 149,106, a 23 percent increase; and
• supported the NeighborWorksâ secondary market vehicle, Neighborhood Housing Services of America, Inc. (NHSA), achieve their second highest year of loan purchase ever, and their highest year of purchasing high risk, non-conventional recourse second mortgages for rehab. This allows for continued recycling of precious funds a second and third time. With the recent sale of AA-rated first mortgage security, additional NHSA capital will be released to purchase many more revolving loan fund loans from local NeighborWorksâ organizations.

The engine that drives this system is the flexible, local revolving loan fund. Neighborhood Reinvestment provides seed capital to attract additional capital that may come from local banks, insurance companies, local government, foundations and other investors. Each NeighborWorks^(r) organization sets its own underwriting terms and policies. The loans made from the revolving loan funds fill the gaps in an otherwise-fragmented set of resources available to lower-income borrowers. Local determination of best use and the flexibility of these funds are the critical resources for broader community revitalization. For example, the revolving loan funds are used for:

• Gap financing – used in conjunction with conventional loans to assist families rehabilitate and purchase their homes;
• Equity capital – to secure blighted properties for rehabilitation and sale, secure mutual or rental units as well as purchase property for future rehab or development;
• Major rehabilitation, minor repair and emergency loans – used to help existing very low-income and frequently elderly homeowners maintain their homes and avoid the predatory lending scams that often target this population;
• First and second mortgage loans – for those buyers who cannot fully qualify conventionally; these loans are tailored to the buyers’ ability to repay;
• Down-payment and closing costs for first-time homebuyers; and
• Economic development – for small business start-up or expansions.

In 1993, declining interest rates and increasing employment rates led a small group of NeighborWorks^(r) organizations to band together to concentrate on a proven neighborhood revitalization strategy: increased home ownership targeted at the existing renters in their communities.

While the desire to own was strong, the barriers were also high. These barriers included:

• lack of consumer information from trustworthy sources;
• inflexible mortgage products;
• lack of down payment and second mortgage money; and
• lack of good financial and rehab advice.

Homeownership gives residents an equity stake in the economic mainstream of America, building long-term assets for families as well as their communities. Home ownership also improves city tax bases, provides lending, increases ensuing opportunities and stabilizes school attendance. In 1993, Neighborhood Reinvestment set ambitious five-year goals:

• to create 10,000 new homeowners;
• to provide homebuyer counseling to 75,000 potential buyers; and
• and to generate $650 million in total investment in resource-poor communities.

Long-term NeighborWorks^(r) partners, such as banks, thrifts, insurance companies, mortgage companies, foundations, credit unions, utility companies, real-estate agents and others were supportive and eager to help. One hundred ten NeighborWorks^(r) organizations began to work on these goals. When the campaign ended in December of 1997, the goals had been exceeded. The participating NeighborWorks^(r) organizations had:

• secured homeownership for 15,880 low- and moderate-income families;
• counseled about 102,000 families; and
• attracted $1.1 billion in investment in distressed communities.

While these results are very exciting, equally important to measuring the Campaign’s success are the demographic and statistical data of the families NeighborWorks^(r) organizations have helped purchase a home:

• 95 percent are first-time buyers;
• 69 percent earned less than 80 percent of the median Metropolitan Statistical Area income;
• 60 percent are minorities; and
• 42 percent are female-headed households.

As a result of this successful Campaign, private sector partners challenged the NeighborWorks^(r) network to build on the existing systems in place and the lessons learned. This exciting new effort, the Campaign for Home Ownership 2002, was launched in January 1998. The NeighborWorks^(r) Campaign for Home Ownership 2002, running from 1998 through 2002, has ambitious goals:

• create 35,000 new homeowners;
• secure $2.5 billion in total investment;
• counsel of 270,000 potential homebuyers; and
• create 50 home ownership centers across the country. These one-stop shops provide customers all of the services and training necessary for buying a home.

At the start (1993) of the first NeighborWorksâ Campaign for Home Ownership, 20 NeighborWorksâ organizations participated, each providing on average 22 new homeowners a year. By 1998, 108 NeighborWorksâ organizations had joined the NeighborWorksâ Campaign for Home Ownership 2002, each of them were producing on average 37 new homeowners a year–a 68 percent average increase in output— that is an example of the power of peer mentoring in a technical assistance environment.

To date both the NeighborWorksâ Campaign for Home Ownership 2002 and the Home Ownership Pilot have produced impressive results. During the first fifteen months (25 percent of the five years) of the Campaign alone:

• 8,700 families have become new homeowners, or 25 percent of the goal;
• over $730 million in total reinvestment has been secured, or 30 percent of the goal; and
• 16 new home ownership centers have opened, or 32 percent of the goal. (Currently 22 additional centers are underway.)

Significant funding of the NeighborWorks^(r) organizations’ revolving loan funds has had a dramatic impact. One excellent example is the Laredo-Webb Neighborhood Housing Services (NHS) in Laredo, TX. In January 1999, the Laredo-Webb NHS received an additional $500,000 grant for its revolving loan fund to further stimulate local investment. The results are remarkable – in the first six months of FY 1999 the NHS, when compared to the first six months of FY 1998:

• increased total private and public investment from $3.7 million to $13.7 million, a $10 million increase equaling 20 times the initial $500,000 grant;
• quadrupled private investment from conventional banks from $3.4 million to $12.5 million;
• tripled the number of new homeowners created, from 57 to 191; and
• assisted five times as many families through pre- and post-purchase counseling from 89 to 486.

The Campaign partners, such as Freddie Mac, Fannie Mae, Allstate, State Farm, World Savings and over a dozen others, are committing their resources (both financial and in-kind), their talent and their systems. They and others who join the campaign are and will continue to be critical to this new effort.

Clearly the NeighborWorksâ network has a long track record of increasing home ownership for low- and moderate-income families by partnering with local lenders, businesses and government. The reauthorization of Neighborhood Reinvestment by this committee would have a positive impact on home ownership levels in distressed communities – a critical step toward revitalizing these fragile neighborhoods.

Multifamily Initiative

Despite the successful and widespread home ownership efforts of the NeighborWorks^(r) network, neighborhood revitalization is not only about home ownership. Affordable, quality multifamily housing is also essential to helping distressed communities. Consequently, a number of NeighborWorks^(r) executive directors have come together to begin a Multifamily Initiative. The Multifamily Initiative was launched in early 1999 with 18 charter members. The Initiative focuses on three key areas: asset management, resident services and housing development. The Initiative’s goals are:

• to define and create strong, long-term systems and standards for asset management;
• to increase the stock of affordable housing held permanently by NeighborWorks^(r) organizations; and
• to define and establish quality standards for resident services.

One of the types of multifamily housing NeighborWorks^(r) organizations develop and manage is Mutual Housing Associations. A Mutual Housing Association is a private, nonprofit 501(c)(3) partnership organization that develops and manages affordable housing. The association owns the housing, not individual residents. As of March 1999 Mutual Housing Associations own or manage 5,406 permanently affordable units nationwide. Mutual housing residents have pride of ownership because of certain membership benefits, such as:

• lifetime right to occupancy;
• right to nominate family or household as successor;
• financial stake through payment of membership fees; and
• significant control in decision-making concerning operation of the housing through participation in resident councils.

One of the keys to a successful mutual housing association is the presence of a strong capital base. Allowing mutual housing associations to be eligible for funds under the Cranston-Gonzalez National Affordable Housing Act would aid in the successful creation and continuation of mutual housing as an affordable housing option.

Neighborhood Reinvestment provides training and technical assistance on lending, construction management, financial management and community revitalization through Training Institutes held in major cities across the country, five times a year. These Institutes deliver a comprehensive curriculum of courses, and each Institute serves an average of 770 community development practitioners.

Neighborhood Reinvestment also provides other specialized training to NeighborWorks^(r) organizations including orientation for new NeighborWorksâ executive directors, as well as training for "veteran" executive directors and emerging community resident leaders. Regional training needs are supplemented through the provision of courses and workshops delivered by Neighborhood Reinvestment’s district offices as needed. In addition, the Corporation has encouraged peer mentoring in the NeighborWorks^(r) network at every opportunity. Examples of peer mentoring include the NeighborWorks^(r) Campaign for Home Ownership and the Rural NeighborWorks^(r) Alliance.

For instance in the coming years, along with continuing and improving upon current programs, Neighborhood Reinvestment will:

• complete its major curriculum development initiative, formalizing each training content area into a structured program of study affiliated with at least one college or university offering academic credit to practitioners interested in degree programs; and
• pilot distance learning modules in order to reach practitioners who are unable to bear the cost of travel to Institute locations and to increase training delivery efficiencies over time.

The NeighborWorks^(r) system has proven to be an effective mechanism over time to revitalize distressed communities nationwide. It has improved its efficiency and effectiveness over its 20-year history in leveraging limited public funds with private capital. In 1994, total public- and private-sector investments totaled $268.4 million; in 1998 total investments in distressed communities amounted to more than $820 million. In fiscal year 2000 and beyond, Neighborhood Reinvestment and Neighborhood Housing Services of America look forward to continuing our mission to support NeighborWorks^(r) partnerships of residents, private-sector and public-sector leaders as they work to revitalize distressed neighborhoods and communities in rural, small town, suburban and urban settings.

Thank you for your time and consideration. I look forward to your questions.