Evolution of the Consortia's Product Mix

In response to changing market conditions and unmet credit needs, the consortia’s products and services have evolved considerably over the years. The loan terms have been altered, new lending products have been developed, and consortia have ventured into new product and service areas.

Change in Terms
Over time, consortia have made product enhancements to their existing permanent loan programs in order to streamline the borrowing process and reduce transaction costs. In addition, specific changes were made to deal with specific market needs. For example, Chicago's CIC for three years offered a 6 percent fixed rate, nine year mortgage with a 25 year amortization in order to instill confidence in two specific neighborhoods, and offered the participation in the pool to a small group of investors at a reduced return. To reach those properties that did not quite meet regular underwriting criteria, CIC carved out 20 percent of its overall investor commitments to a higher risk loan product with higher allowable loan-to-value ratios and lower required debt coverage and equity.

New Loan Products
To respond to specific market needs, the consortia have developed an array of new loan products over time; these include:

• Loans for acquisition with moderate rehabilitation (WCRA)
• Loans for the development of assisted living housing (WCRA)
• New permanent loans on non-tax credit properties where rent restrictions are imposed to guarantee affordability (CCRC)
• Loans to investors acquiring aging multifamily HUD IRP projects (AMLC)
• An initiative with USDA RD providing permanent first mortgages on some of the older RD properties that are being flipped with new ownership and substantial rehab taking place (CICNC)
• Seamless acquisition, rehab and permanent loans to individual owners of buildings who agree to rent at 80 percent of AMI or below (CCRC)
• Multifamily construction loans (NLP)
• Economic development loans for real estate based projects serving a low income population or located in a low- to moderate-income area (WCRA and NLP)
• Preservation loans allowing the consortia to underwrite to the HUD Section 8 rents where other lenders refuse to take the congressional appropriation risk (UCRC)
• The provision of various short-term loan products such as bridge loans or working capital
• The development of specific loan products for special needs; for example:
• CIC’s “Troubled Buildings” Initiative, which takes control of problem buildings and facilitates a transfer of the building to a new responsible owner.

Other Products
Consortia have also developed new additional, non-lending products for both their members and for developers and building owners, including:

• Tax-exempt bond financing to provide an investment test-eligible product for member banks while also offering an alternative financing structure to the increasingly competitive 9 percent credits and undersubscribed private activity bond allocation (WCRA and CCRC)
• Equity investments in preservation products where non-profits are attempting to facilitate a transfer of ownership on expiring use public subsidized projects such as Section 8 (CCRC)
• In certain areas, small matching grants of a maximum of $5,000 per unit to enable completion of rehab without substantial cost increases and delays that come with usual public subsidies (CIC)
• To both address the unmet demand for competitively-priced predevelopment funding, and to also provide member banks with a CRA investment opportunity, predevelopment loan programs (NOAH and ICRC)
• Its own tax credit equity fund (HCRC)
• Life –safety repairs to old mobile homes owned and occupied by very low income individuals (ICRC)
• Administration and liaison services for underwriting, compliance monitoring, and loan documentation

Services
Consortia have augmented their loan, equity and grant programs by offering certain services, such as regular seminars on affordable housing programs and issues (HCRC), evening courses in property management to improve the professionalism of critical small building owners (CIC), and consulting for developers preparing LIHTC and other funding applications (HCRC).

Future Products
Finally, consortia are constantly evaluating the needs of their specific markets, and are currently investigating a number of potential new products and services to meet those needs in the future, including:

• Development expertise and financing of for-sale affordable housing to address the workforce housing shortage in urban markets (CCRC)
• More aggressive acquisition/bridge and predevelopment financing to enable affordable housing developers to move quickly in escalating real estate markets (CCRC)
• New ways to provide small subsidies to help preserve the roughly 100,000 substandard rental units in the Chicago metro area (CIC)
• Institution of a bond program, not only to access the tax-exempt rates and possibly the non-competitive 4 percent tax credits, but also lower the transaction costs and provide CRA-related investments for member banks through the use of private placements (NOAH)
• Financing new projects such as charter schools, hospice care facilities and college housing on minority campuses (CICNC)
• An equity gap loan product and a predevelopment loan product (HCRC)
• A new product to address expiring Section 8 facilities and a new product for land assembly for nonprofit housing providers (NLP)