Neighborhood Housing Services in Alaska Scores Big with Down-Payment Assistance Program

Rachel’s Story as Case Study Underscores Importance of Down-Payment Aid

February 28, 2007—Rachel, a disabled mother raising three children on her own in Anchorage, found the courage to dream. Despite the daily struggle and hardship to pay for groceries and heating fuel, all on a household annual income of only $22,000, she still believed in the dream of homeownership.

With personal conviction and perseverance, and with the help of Anchorage Neighborhood Housing Services (ANHS), a NeighborWorks® member in Alaska, Rachel learned how a creative down payment savings approach would help her achieve the American dream.

Rachel and her three children relaxing at home in Anchorage.

“To save for her own home, Rachel applied her [Section 8] rental voucher as a down payment,” said Barb Worley, director of lending and homeownership for ANHS. “She received her voucher through the Alaska Housing Finance Corporation (AHFC) and was required to attend an eight-hour homeownership class.”

The voucher down payment program that Rachel enrolled in September 2003, allowed her to save $1,000, receive pre-qualification on a mortgage, and meet with ANHS counselors regarding financial literacy programs for first-time homebuyers. By March 2005, she met with Alaska USA Federal Credit Union, a lending partner of ANHS, to discuss her mortgage options. After completing all coursework, and working hard toward her savings goal, Rachel purchased a new condo in the summer of 2005 for the price of $194,900.

“For Rachel to qualify for a home in that price range, ANHS used several layers of creative financing, including Home$tart funds, HOME funds administered by ANHS as a third mortgage, funds from ANHS revolving loan fund as a second mortgage, and a first mortgage from a lender partner,” Worley explained. “Along with her Section 8 voucher, that subsidizes her monthly payment, Rachel’s mortgage payment comes out to be $504, which is 27 percent of her monthly income.” That monthly payment, according to Worley, includes principal, interest, taxes, insurance and homeowners’ association dues. Since her closing in November 2005, Rachel has been successfully making her mortgage payments on time.

AHFC announced Alaska’s first voucher for down payment pilot program in July 2003. The program became possible nationwide in 2000 when the U.S. Department of Housing and Urban Development released the final rule allowing individuals and families to use Section 8 vouchers for homeownership. The pilot program specifically targets qualified families where either the head of household or spouse is a person with a permanent physical, mental or developmental disability.

When the program was announced in 2003, more than 50 area residents were eligible for homeownership vouchers. At least 20 of those vouchers were reserved for disabled families, with the remaining number available to disabled families and working households, according to Director of Public Housing at AHFC Wes Weir.

“Agencies statewide have been partnering with AHFC to make the program successful,” Weir said. “The Municipality of Anchorage’s AnCHOR program and [Alaska Community Development Corporation] provide participants with down-payment assistance, and Anchorage and Fairbanks Neighborhood Housing Services provide counseling services.”

But regardless of the policy legalese, the layers of regulations, or the fluctuations in the market, Rachel and others like her measure the program in human terms. “Because of recent market conditions, we’ve had to be more creative in the past few years with funding our down-payment program,” Worley said. “But Rachel’s success story shows how valuable this type of aid really is and its importance in the community.”

In an effort to increase home ownership, ANHS developed its revolving loan fund in 2001 using money from the Community Development Financial Institutions (CDFI), NeighborWorks America, and a loan from Wells Fargo. ANHS set their rate and term for the loan in order to sell loans to Neighborhood Housing Services of America (NHSA). The revolving loan fund administered by ANHS is now valued at $1.8 million. Because ANHS was able to market loans to NHSA, to date they have made 124 down payment assistance loans, valued at $2.8 million, and in turn has leveraged more than $13 million in mortgages products.