When the dust settled after the financial crisis in 2008, there was some whispering privately that low-income Americans, who just didn't know better, had overreached. It was poor Americans who had in fact triggered the housing collapse — not a perfect storm of culprits including failed corporate governance, risk-taking from wealthy Wall Street guys and widespread mortgage fraud.
"There was this narrative that people, who were too dumb, signed paperwork," said Mike Loftin, an affordable housing executive based in Santa Fe, New Mexico. "But that's the wrong conclusion."
Loftin is chief executive of Homewise, an enterprising nonprofit with roughly $90 million in assets. Run like a for-profit venture, Homewise offers affordable mortgages with low down payments — hallmarks of many nonprofits. But the organization also develops and sells residential property to clients. Property sellers and mortgage lending officers are all salaried staffers. That means nobody works on commission, and prospective homeowners aren't nudged into borrowing more than they can afford.
Plus, there's a big financial education component. Future homeowners are paired with money coaches. Basic savings habits are ingrained. Down payment savings goals are set. And complex homeownership terminology is explained in mandatory Saturday classes. The courses have become so popular locally that non-Homewise clients are referred. Financial preparation well before loan origination and shopping for property can take months and in extreme cases years.
"We have tough love around here," Loftin said.