West Texas housing CUSO changing lives, and is prime example of credit unions reaching out to low-income groups

EL PASO, Texas – A credit union service organization, founded by a coalition of local credit unions with help from credit union foundations, has enabled 28 low income El Paso families to own their own homes and is arranging to help an additional 30 attain the same goal, according to Larry Garcia, president of the El Paso Credit Union Affordable Housing (EPCUAH). “Yeah, I told them it’s an unwieldy name but that’s the one the board chose,” said Garcia, who added that the CUSO had managed to dramatically change the living circumstances of the 28 families in a way that would not have been possible otherwise. “Essentially, the 28 families were renters – lifetime renters,” he said. “There is no way they could have ever afforded to have purchased their own homes.” Garcia said that many people from outside the El Paso area fail to understand how badly off the region is economically and what a key role credit unions can play in addressing it, Garcia explained. “We have among the poorest census tracts in the nation,” he said, adding that when the CUSO started making the housing efforts they often found that they would have households with three incomes making barely $20,000. The original 28 families were able to make their purchases, he said, only with the help of the El Paso Housing Authority. The public agency loaned the families money for down payments and took a second lien on the properties. The CUSO took the primary lien but Garcia said that, through working with Fannie Mae, the CUSO had guaranteed that there would be a market for the loans even with two liens. “It’s an experimental product,” he said, “that Fannie Mae decided to buy after being reassured about the quality of the loans and the organizations holding the liens.” The CUSO was now working on arranging for low-income families to be able to purchase another 30 similar properties and was nearing recognition as a Fannie Mae qualified loan originator. That designation will allow the CUSO to make loans more easily and not have to keep them in the portfolio waiting to satisfy Fannie Mae’s requirements, he said. The idea for the CUSO arose in 1999 after the New Mexico State University released a study of El Paso’s low-income housing needs funded by the National Credit Union Foundation (NCUF), according to Elaine Laroa, executive director of the Texas Credit Union Foundation (TCUF), one of the organizations funding the CUSO (CU Times, May 1). The study determined that a market exists of 19,350 potential homeowners in El Paso who have not purchased a home because they do not qualify for conventional mortgages, according to the TCUF. The study found that these potential homeowners were renters that fall within the $15,000 and $21,000 income range, which is 50% to 80% of the median income for the area. The study concluded that the households identified as potential homeowners had the ability to service a mortgage between $41,000 to $55,000 but, for this group, the impediment for home ownership was not level of income, but rather non-traditional sources of income, debt, and lack of down payment. In addition to making mortgage loans, the CUSO works to improve the financial education and background of people who will likely, at some point approach with a need for homes. In working with the low-income groups in the area, the CUSO found that the bad credit is tied to the low income of the family and having very little options for economic emergencies. The CUSO also found that a good portion of the bad credit is due to the family’s inability to afford medical insurance. Area low-income families can not afford a doctor which requires insurance or payment before treatment, so they use the hospital emergency care, the CUSO said. Other times, due to their low pay, they are forced to seek cash from predatory lenders. These lenders charge extremely high rates, to meet their monthly or unexpected expenses and if the family misses a payment they immediately get reported to the credit bureau or have their car repossessed, the organization added. The CUSO helps to counter these financial pressures by providing education in financial literacy, credit management, and budgeting, Garcia said. This Financial Literacy education coupled with innovative small products allow credit union members to avoid predatory lending traps, to establish mainstream credit, and become informed consumers and home buyers, Garcia added. The eight credit unions, most of which are of only moderate size, which stepped forward to help fill these funding and education gaps are: El Paso Area Teachers FCU ($211 million), El Paso Bell FCU ($55 million), El Paso Employees FCU ($126 million), Fort Bliss FCU ($379 million), Golden Key ($36 million), Government Employees CU of El Paso ($805 million), Mountain Star FCU ($17 million) and West Texas ($36 million). The CUSO has been funded by the NCUF to the tune of $225 million spread over three years, according to Laroa, and has a commitment for $2.25 million over the same time period from the TCUF. The NCUF decided to commit to the CUSO after its board decided to make affordable housing a “signature focus” for the Foundation, according to the NCUF’s executive director Gary Officer. A “signature focus” issue represents an issue in which a donor organization is willing to especially invest its resources and expertise, Officer said. In much the same way that some foundations specialize in children’s issues and others in health care, the NCUF decided to make affordable housing a specialty. In addition to helping to fund the CUSO, the Foundation has also helped it apply for funding for its financial education effort through the federal Department of Housing and Urban Development, Officer said. [email protected]