I'm sure a topic like this will lure out Chris Cook because I know I've discussed this very matter with him at length. In his absence awaiting arrival I offer the Community Land Partnership, an application of Islamic Finance for shared risk and reward.

http://opencapital.net/co-ownership.htm

From my own stable, a perhaps more conventional for-profit approach and an ongoing campaign to leverage seed funding, deploying a microfinance approach to seed fund building projects.

http://www.p-ced.com/Projects/Ukraine/CrimeanTatars/tabid/63/Default.aspx

Both models I believe engender community will by design, either by sharing risk and reward or creating businesses which pays back into the community.

The CLP model I believe to have the advantage in being able to attract private investment capital from the private ethical investor, with the P-CED model aimed more at the overseas community in crisis and development aid capital, albeit repaid.

Impact will be made I believe by getting involved as grassroots activists, understanding the problems and needs of individual communities to make the case for doing it.

Hola Carlos, I would like to interview you regarding your model, please contact me, 786-419-2615 Thanks

Hello! Thank you for participating.

Jeff, you are absolutely right. Under existing laws and corporate forms it is possible to develop diverse forms of homeownership and financing. We need to creatively leverage the nonprofit sector's experience with micro-finance. The goals of business models that provide a homeownership alternative to existing industry practices, could be; pre-qualify, pre-sell, and diversify the risk across median to low income markets.

Consumers eagerly await social entrepreneurs that can help them out now! Buying your home is a commission driven transaction. No one gets his or her commission until the bank is happy. The bank also determines the value of your home. How many consumers can tell if the appraiser exaggerating the value of the home?

It looks to me that Home Finance Consulting service is needed. Such service would increase consumers’ safety in mortgage shopping, help them improve their credit score, differentiate between lenders and their trade practices and identify lenders with high foreclosures, lawsuits or excessive consumer complaints. All of which can save the consumer thousands of dollars in interest and fees.

Carlos

Thanks to Jeff for the intro.

The solution I'm working on in Scotland and Norway - part funded by the Norwegian Government - involves a variation on the US Community Land Trust which we call a "Community Land Partnership".

The radical thing about it is that it allows a new form of investment in property not a million miles away from a "Real Estate Investment Trust", and does not involve conventional "deficit-based" funding involving bank credit secured by mortgages.

The outcome is that property can be financed - or in the case of foreclosure etc , refinanced - at a fraction of the cost of conventional mechanisms.

The deal is this.

The Banks doing the foreclosing do not sell the properties but transfer them into the hands of a "Custodian" eg a "Not for Profit".

The Custodian is a member of a US LLC the other members of which are:

(a) a "Club" of "Occupiers" (formerly owners);

(b) a "Manager";

(c) an "Investor" ie initially, the consortium or club of participating Banks.

An affordable Rental is set in respect of each property and this is linked to an agreed measure of inflation. Part of this Rental goes to the Manager and a proportion is set to one side as a provision and held by the Custodian as a Maintenance Pool/ Sinking Fund.

The balance goes to the Investor as a return on Capital.

Here's the Alchemy.

These Rentals are pooled (in proportion to the outstanding loans), divided into proportional "units", and sold off to Investors exactly like the quasi REIT's they are.

The outcome for the Occupier is an extremely affordable rental, because:

(a) there is no capital repayment - this being a form of "Equity";

(b) the return on capital is maybe 2 to 3% (and unrelated to the Fed interest rate).

Anything the Occupier pays more than his rent makes him an Investor, and if he buys enough units, the income he gets offsets the rent he is due to pay: the result is therefore "ownership".

Moreover, if he maintains the property himself and the standard is approved by the manager, the result is he gets to keep the maintenance provision.

The outcome for Investors is of property-based units bearing an index-linked rate of return which would probably be of the order of 2 to 3%, and these units may be sold at any time. A pension fund dream, in the way it matches their liabilities.

Also, there will be no shortage of investors in the Gulf, because this is Islamically sound financing, there being no debt and no interest.

Moreover, there is a virtuous circle here: the affordability of the rentals makes it less likely the Occupier cannot pay, and therefore makes the income stream more certain.

Finally, the Manager has an incentive to ensure that there are no "voids" when the property is empty, and that the properties are in good order, because he receives more income if that is the case.

Everyone in a CLP is "on the same side".

In this model, the Occupier may change; the Investors may change; and the Managers may change but property is never bought or sold again.

It is essentially a "Cooperative of Cooperatives" and offers a way in which long term investment may be introduced to allow many property occupiers to stay in their homes, and affordably "rent to buy".

It's simple, but radical, and requires no change of any law, as far as I know.

Best Regards

Chris Cook

Chris, thank you for sharing the model. For context sake could you describe the real estate market you are working in? For example, here there are more homes than jobs. We also have a growing senior population that cannot afford to maintain their homes on a fixed income. The median year a home was built here is 1939. Job growth is happening but concentrated in hourly wage occupations. Although, home prices are low, hourly wage earners are unlikely to develop sufficient savings to purchase.

Perhaps some of these foreclosures could be prevented if the terms were recast over several generations, rather than the traditional 30 year approach. In this scenario, the current occupier would be more of a steward for the future. Also, if a hybrid entity, similar to a CLP, bought the land and leased the buildings long term to the entire family, rather than the individual, perhaps a more sustainable outcome could be realized. As for the type of entity, for-profit versus non-profit, why we leave such an important issue (housing) to the free markets is beyond me. Who becomes the ultimate master of whom?

I have read some of the answeres and must admit, you guys have some great ideas. I would like to go back to the point about teaching borrowers about their mortgage and credit.

I have researched credit and how it works for more than 7 years, then we applied the research to live case studies to get as close to the credit scoring model as possible. What we found was phanominal.

The credit scoring model is not just about paying your bills on time and keeping your balnce low. It is a psychological rating of weather you take risk, how much you take and how well you manage that risk. This makes it a very useful tool for an employer to use from a background check to asses the type of employee their hiring and Insurance companies find the information useful in assesing the risk of the possible insured. This same Risk Character Assesment can be applied to every area of a persons life and they will approach life situations very much the same way they approach their finances or credit.

We have found a way to use credit to help people develop better risk characteristics and use this as an opportunity to teach them about a system that has been contoling our economy based on our own ignorance of the system and help them create a strategy based on credit laws and scoring models to help them improve their scores, resolve and pay off (if necessary) current debt and remove outdated debt that according to the law should not be affecting their score.

We have a 90% success rate at helping people improve their credit scores by 15-40 points in 30-45 days and 40-100 point in 6 months. This means you can teach positive human behavior by providing "Effective Credit Education" and using the credit score to grade the results. Using that type of Literacy with the new FHA laws, we either help people find their way through loan modificaion resolutions or move their mortgage to an FHA immediately. If a homeowner gets a loan modification to start their mortgage over and put the payments on the backend of the mortgage, cleans up their credit (For Real!! Non-of this Financial Literacy with no credit real score increase agenda, non of this Credit Repair mess and non of this Debt Management stuff)then they can move into an FHA. We're actually trying this out in Chicago and by the Grace of God it is working.

The combination of Understanding Credit and the scoring system, Building Positive Risk Characteristics and getting an FHA Mortgage is a recipe for saving our country from this mortgage chrisis. Finally, we have come up with a way to get millions of people in on a workshops that will help them save their homes. Now if we could just get our Government to listen, we'd be able to help more people.

Sorry for the long response, but this is a subject I have given my own livelyhood to help make change. We are just now getting some people to look at us seriously and I am very passionate about my work as I am sure all of you are.

By the way, I do believe this is best handled from a non-profit perspective especially to raise capital. The problem is all the funding is going to organizations who have been doing the same thing for 15 years and getting the same results, yet the numbers are getting worse and no one is saying "Hey, wait a minute, success should not be measured by how many people listen but instead how many are successful at using what they learn to deal with the real crisis." The organizations getting the funding refuse to see they are not as affective as they could or should be and have gotten so good at getting funding, they are loosing sight of how much more affective they could be if they'd only listen to knew ideas, concepts and approaches that didn't come out of their office, from their lobbying or from the a deal made with Legilature to keep their programs alive. Some non-profits have sold our communities out for a profit. What's with that????

Anyone can take the most qualified person, give them some literacy and take credit for the success of the consumer. But try teaching that same literacy to the least qualified and see what happens. What if we had a Literacy that works for the majority of the people and had outcome objectives that included resolving the crisis issue not just creating awareness that it exists and moving on to an issue that creates more money being saved in banks which allows the bank to use the money in private placement investing, then give the person who worked hard to save the money 4.5% interst if they're lucky? What does saving $1,250 in a bnak have to do with purchasing a home or saving your home? Saving money you can't afford to save is not Economic Development nor does it address the mortgage crisi, yet it is the major outcome objective of Financial Literacy.

How about we teach Financial Literacy that will SAVE OUR HOMES??? Maybe we'd see some real Economic Development instead of the Economic Crisis. Just a thought.

Cheryl, congratulations on your success rate. With such high success rate you may want to consider an entrepreneurship model, for example the Tupperware model of business in conjunction with a brand name like Suzie Orman or Oprah to structure a business opportunity that serves to improve the community. Imagine how many people you would then be able to help! You would not have to ask for government or foundation help then, and it would be sustainable over the long term.

It is common to think that raising funds in the nonprofit sector is easier than the private sector, that is not my experience. If you can demonstrate that your business model can be profitable and socially responsible then capitalizing your venture should not be a problem.

A multi-generational approach is an interesting idea. McGill University thought of this idea as flexibility within the building envelope. So as the life-cycle of the family changes the housing can as well. Demographic trends and changes in the labor market will eventually force the issue of housing diversity in tenure and design.

There will always be a tug of war between private interests and public interest. Social enterprise can serve as catalyst for both. For private interests by demonstrating that innovation in housing products and services is viable and profitable. For public interests by achieving community well being through economic success, which could lead to sustainable policies.

Talking to your lender now about your delinquent mortgage can literary take hours. Lenders now face a cash crunch due to the increasing number of mortgage defaults. As a result they have trimmed their workforce and sent operations overseas. For consumers the poor customer service increases their loan costs and stress, as they cannot resolve their issue in a timely manner. For lenders the average cost of a foreclosure is estimated to be $58,000. For municipalities the cost of a vacant property can exceed $34,000 and lead to a loss of property tax revenues, lower property values and increase violent crime.

Are there nonprofit innovations that we can leverage with social investment and package as social enterprises to change this dynamic?

To me this is both simple and complex. It is simple because it is based on US tax law, making it cut and dry. It is complex because there are so many variables involved. So, the essence of this is, making a quasi-bank status out of a non-profit conglomerate. This is not theory, there exists a conglomerate consisting of the Wild Life Habitat Trust (WHT) a 501(c) 3 and it’s subsidiary the Affordable Housing Center (AHC) a 509(a) 1. Together they could be the financial mechanism the poor here use to build them selves out of poverty.

What makes this a quasi-bank? A 509(a)1 can hold assets and a 501(c)3 can issue revenue bonds on those assets (not that the latter is important to what I trying to say here). This designation gives AHC a unique ability to hold mortgages on houses it sells or collect rent on the ones it owns.

What is the connection between WHT & AHC that allows this relationship? WHT provides oriented strand board (osb) from the lands it manages for AHC to build houses out of.

What other factors figure into the make up? An ombudsman would buffer and protect the best interest of the people WHT-AHC serves. Additionally, the Grameen Bank micro-financing could be overlaid to ensure administered self-governance of the people by the people.

Another financial mechanism to consider: To me this is both simple and complex. It is simple because it is based on US tax law, making it cut and dry. It is complex because there are so many variables involved. So, the essence of this is, making a quasi-bank status out of a non-profit conglomerate. This is not theory, there exists a conglomerate consisting of the Wild Life Habitat Trust (WHT) a 501(c) 3 and it’s subsidiary the Affordable Housing Center (AHC) a 509(a) 1. Together they could be the financial mechanism the poor here use to build themselves out of poverty.

What makes this a quasi-bank? A 509(a)1 can hold assets and a 501(c)3 can issue revenue bonds on those assets (not that the latter is important to what I trying to say here). This designation gives AHC a unique ability to hold mortgages on houses it sells or collect rent on the ones it owns.

What is the connection between WHT & AHC that allows this relationship? WHT provides oriented strand board (osb) from the lands it manages and used in the houses AHC builds.

What other factors would figure into the make up? An ombudsman would buffer and protect the best interest of the people WHT-AHC serves. Additionally, the Grameen Bank micro financing could be overlaid to ensure administered self-governance of the people by the people.

WillIam Blake (757)547-8221

Blake thank you for your contribution. I think there is a wealth of examples of how to lend, improve the community and be profitable. An under utilized resource are the credit unions, which have been rather silent in this crisis. Are credit unions responding with unique products to assist homeowners with ARM's?

Credit Unions have the potential but normally are understaffed. It is enough to keep up with their mormal demands. You talk about how long it takes a bank to respond to a Foreclosure issue, just look at what it will take to prevent it as an outside source. Another thing that is scaring the heck out of me are the Non-Profits offering counseling that takes 8 weeks to complete, with a certificate of completion for people to prepare to purchase a home in the next 12 months? What is that??? That is crazy to expect that kinf of commitment from any one family to successfully complete a program for something a year away. Mortgages are changing every week right now and what is being done about the persons overall outlook. If it takes 8 weeks to explain how a mortgage works, we shouldn't be setting them up for a home, we should be setting them up for a part time job at some of these Credit Unions.....

If we better used Government Dollars to effectively train people in a way that kept their interest and was not just for the purpose of justifying yet more grant dollars with outcome objectives to get seat fillers and give a certificates, perhaps we could answer questions like your asking. That money should be use to give leverage to organizations like Credit Unions in this time of crisis, not wasted on training that most participants will drop out of. Especially when they find out they still can't buy a home. Yeah give them a 12 month outlook. That way when they can't buy a home by next year, the program is over and no one is able to be held accountable.

Right now they provide Governemt Dollars for a program called the AFI (Assets for Independance) Program. The Government matches funds to banks and credit unions along with the funds of the consumer to save money to 1) Purchase a home 2) Purcahse a car 3) Start a business or 4) Pay off Student Loan. Now you as the consumer are allowed to save up to $2,000 a year and the mathing funds is from $.50 to $3.00 (That's as hihg as I have seen). The Government also funds "Housing and Credit Training", "Salaries" and other "Administrative Cost". Now the failitator can get a grant for $2,000,000 and the outcome must only be measurable. Guess what the success rate of that program is across the country? 30%. That means they have a fall out rate of 70%. Why? People don't finish the program. In Chicago that rate is 12%. Now, what happens to the money that went into the program for the other 78%?????? I know a non-profit that has been getting this money for 8 years.

We need more effective programs and better ways to resolve this issue that is not about self serving but is commuinity serving.

This is why I do what I do from a non-profit perspective. I am hoping to shape a new mindset about our purpose and how we can help people with a for-profit idea in a non-profit way and actually make a difference that is profitable for everyone. For me it is not just about the money and believe me I could use some. It's about going back to the old model in the non-profit world to create new and better resolutions to age old problems. The real estate crisis is not new in minority distressed communities. In fact that's were most of the froeclosures came from. It didn't become a crisis until it blead across the whole country regardless of who you are or where your from.

What's the reason we're in a crisis in the first place? We had a bunch of programs that never worked so when you take those models and try to teach them to someone who would not normally bein the situation their in and it doesn't work over and over and over eventually the rest of the country goes into crisis along with those who were already in a crisis. You begin to see, we've been funding a bunch of programs with very little impact. If the current programs worked before, why can't they help everyone now???

This whole thing is amazing to me....

Cheryl, I get your experience. Being entrepreneurial and knowing that you need sales to survive would change customer service at nonprofits. Credit counseling, pre-purchase programs, asset building programs, etc. Could be bundled into a weight-watchers of home finance. I think people would pay to have the peace of mind that they made the right decision and conducted all due diligence. When you go on you own to purchase a home there a just too many things to know and silly things can easily distract you, oh! nice fireplace! Wait a minute it you are not shopping for shoes, you are buying a 30 year mortgage.

In this case you would not sell financial products, just conduct due diligence and help people improve their financial standing so they can get the home they need with financing that is sustainable. What do you think $99 for membership, other services on a flat fee basis?

Thanks for the idea. With memebership I could offer for people to have discounted opportunities to come to workshops for updated info and other Financial Literacy. We do charge a fee and unfortunatly I had to go up 5 times my orignial fee to get people's attention. Now I have more clients than I can handle. The work is outpacing my ability to keep up.

What we decided to do is take 2 minority distressed clients as non-pay and 1 discounted client for every 1 full pay client. Today alone I got 7 new clients. When I was charging next to nothing I couldn't get 7 clients in a month. Now we are getting appointments for the client and their spose.

Now That's Amazing!!!!

If you want your community to enjoy a high quality of life your local economic policies need to favor small business. When do home prices go up? When there are jobs. Who creates 80% of the jobs in a community? Small businesses. What are small business? Companies with 5 to 50 employees and sales of not more than 50 million. The communities that consider their assets from this perspective and package them as benefits to these entrepreneurs could dramatically improve their housing market.

If we recycle excess real estate owned properties as an small business employee housing benefits program then we could attract more small business, which would in turn increase jobs. A diversity of housing types and tenures benefits small business by stabilizing labor costs, increase skilled labor and maintaining population density. To make a small business district viable you need 5,000 residents within walking distance. Developing a diversity of housing opportunities helps maintain population density.

The goal of small business housing benefits program would be to market under-utilized real estate and increase population density. To achieve this a community could inventory its commercial, mixed use and residential properties mix. Identify profiles of companies that would find such properties desirable. A relocation proposal would include a housing benefits program for employees relocating. Such program would offer REO properties that have been rehabilitated to be energy efficient near their employment. It would also include different forms of obtaining ownership for example; rent-to-own or cooperatives.

Given the amount of underutilized real estate it is possible to develop housing options for the different wage levels including hourly employees. The program would be financed through combination of grants, low interest loans, tax credits and accessible market finance. The program would target small businesses in high cost centers and businesses with a significant number of employees with adjustable rate mortgages. The program would buy-out their loans and assists them in achieving ownership once again with reasonable loan in an energy efficient home. Combined the energy savings and an appropriate loan would enable families to grow financially. Their new financial footing would enable the growth of small businesses, improving overall community well being and creating new jobs.

A social enterprise can develop a community solution that responds to a market or government failure. Examples, co-housing responds to the housing industry failure to provide community oriented housing, Flexcar.com responds to the temporary need for a car in a manner that is more accessible than renting a car. Cohousing is self-organized and often self-funded by residents, they are developers and future homeowners. Flexcar, started as public/private partnership and grew their model from this partnership. If your enterprise offers a tangible value to the community, then you can consider different business models other than nonprofit. However, your economic and value proposition need to be economically viable.

There are several ways, each offers different forms of risk and rewards for example; 1. cooperative forms provide opportunity to form a group shareholders, so each person buys a share and their risk is limited to the value of the share, food and farm cooperatives for example; 2. Limited partnerships, where an individual is seeking to mitigate their tax burden and needs to invest to shelter capital gains or acquire capital losses;

Understanding that some people need to shelter capital gains and other need capital losses can help you raise capital for your social enterprise. It will be necessary to sell the idea, and back it up with a business plan, which is not the same as a grant application.

This post points to possibilities in housing markets that deserve thorough exploration. Partnerships between corporations and nonprofits open the doors to an infinite number of viable initiates. Among these are the adoption of sensitive, compassionate practices by real estate and mortgage professionals and cooperative educational opportunities for consumers. The current housing crises is a human issue that can only be solved through a shift in public policy and public perspective. Once society recognizes that human suffering is the primary cost associated with foreclosure activity occasioned by predatory lenders, the blight affecting vulnerable communities will hopefully subside.

Will the person the who has never received any help please stand up? The common good makes common sense. That is what I learned from the Midwest and Canadian Prairie people. The rugged Marlboro individual did not settle the prairies, it was people working together to create something that they could not on their own.

We need to apply common sense for the common good in both the housing and credit products. In the US we have a rapidly growing senior population and more people earning hourly wages than ever before. If you include the escalating costs of energy and food then it becomes clear that creating change in our views of housing and credit is necessary. Thank you for your post Ed.

L'usufruit et la nue-propriété sont une opération de DEMEMBREMENT DE LA PROPRIETE du logement que l'emprunteur qui ne peut plus rembourser peut NEGOCIER avec sa banque prêteuse . L'emprunteur grâce à ce démembrement divise par 2 sa charge mensuelle de remboursement car il n'est plus que nu-propriétaire occupant. Il récupère la pleine propriété 120 mois plus tard (10 ans) à la fin du contrat de DEMEMBREMENT négocié avec la banque.L'USUFRUITIER temporaire est un organisme du mutualisation des risques ou une sté d'assurances . Claude CALAFELL FRA.TE.LO FRAgmentation TEmporaire de la propriété du LOgement megabrikbauxite@orange.fr tel 00334.92.00.59.99

In the US. personal finances are a sacred space and people rarely discuss or compare credit products. An unfortunate side effect is that households facing foreclosure do not ask for help due to shame. Households facing foreclosure also ignore their lender's call for fear of harassment. One could say that the foreclosure process is punitive and leads to depression, self-medication (addictions), family instability, job loss, increased health problems, homelessness, and sometimes concludes in suicide. The Allegheny County Sheriff's office has documented 3 suicides to date.

Recovering from foreclosure is a lengthy process and could take years. Lenders could alleviate the impact by assisting households to relocate before a job loss occurs. Offering to assist households to relocate can reduce foreclosure costs for lenders. It is estimated that a foreclosure costs a lender an average of $58,000 US.

Carlos,

We ahve set up a slef-sustaining model for Social Development in Rural India, which is fully self-sustaining through active community participation. From our experience in developing the model in the above lines, waht we did first was to identify the basic problems that these rural folks were facing and through an organized door-to-door and one-to-one campaign involving the unemployed local youth messaging each & every household of localities with our brand of solution and requesting for suggestions or opinions. This enabled us to gradually penetrate deep into the community to present our case and also enabling them to play a role in self-sustaining this model. once this was done - the door opened out automatically for the rural business folks to offer support in return for systems to develop their business worldwide. Incidentally most of their businesses are conducted through a shroud set up by agents to ensure no customer can directly reach them. We suggested that we could help them to present their skills in the lkargest Marketplace in the world - the US market. We suggested a team be present in the fair organized by the NABC every year to promote the cultural & various other related activities of Bengal. Money and support to actualize this dream has been offered to us to professionally handle the entire case and for ensuring that things were right each & every time. So Carlos the local folks where a project is selected for launch would be the best to finance and help the idea grow into a Resource Generating Tree.

Thanks

SBR

Thank you Sankha! It has been difficult to create community will on the subprime crisis issues due to consumers privacy about personal finances and the level of influence financial institutions have over all levels of government. The most successful model has done exactly what Sankha suggests, knock on doors locally, organize churches and business support where it can be found. NTIC http://www.ntic-us.org/ is a good example. They have organized consumers as well as developed relathionships with lenders to implement pipeline for loan modifications in order to avoid increased foreclosures in their communities.

Once such community will is established the issue becomes developing a business model that can become self-sustaining. In the case of NTIC it could consider forming a consumers cooperative that would provide future homeowners with education and support to avoid bad loans and lenders with unfair trade practices.

Sankha did you start with a brand solution? or did you launch the organizing effort and then developed a brand solution? Why do you think it worked so well?