PERSON OF THE WEEK: In a recent interview with MortgageOrb, Mark Tribuna, senior advisor, CRA Note Exchange, explains how the company’s online secondary platform helps walk Affiliates of Habitat for Humanity (Habitat Affiliates) through the complex process of preparing their non-traditional loans for sale, which, in turn, creates a stronger pipeline of funding for much needed housing projects.
Q: What is a Habitat Affiliate?
Tribuna: An Affiliate of Habitat for Humanity is an independent, local nonprofit organization that helps build and finance housing for low-income families in a particular region. There are about 1,200 Habitat Affiliates around the world. While Habitat Affiliates can use Habitat for Humanity’s branding and other resources, how they raise money to build homes is completely up to them.
Q: How do Habitat Affiliates come across notes?
Tribuna: Many individuals or families that Habitat Affiliates work with might not achieve homeownership through traditional lending channels. So, with the help of generous sponsors, Habitat Affiliates provide affordable mortgages to these people, which generates capital for building homes.
Q: If sponsors are funding the transactions, why do they need to sell the notes?
Tribuna: A couple of reasons. First, by selling the notes, Habitat Affiliates can repeatedly reinvest the proceeds and help even more people overcome the barriers to homeownership. Second, the pandemic had a devastating impact on Habitat Affiliates and most nonprofit organizations that depend on donations to provide services.
For example, one way that many Habitat Affiliates raise money is through sponsored events, like dinners or golf tournaments. But COVID totally shut down these in-person gatherings, which really hurt their ability to raise money. Even though the worst of the pandemic is behind us, many Affiliates continue to struggle with fundraising. So, the ability to sell notes provides much needed operating capital during a very difficult time.
Q: Can affiliates utilize any platform that trades mortgages?
Tribuna: They can if they are market-savvy and have the staff expertise and resources, but most do not. Truthfully, Habitat Affiliates are much more experienced at building homes and raising money than working with the secondary market. Some may have a local bank that is willing to work with them and buy their notes. But typically, the loan files they create are not salable in the broader market.
Q: How do they overcome this hurdle?
Tribuna: The best way is to utilize an experienced partner with an online platform that can walk them through the tedious process of preparing loans for sale. This is what CRA Note Exchange specializes in. Basically, we help get an Affiliate’s loan files in order until they are in salable condition. Then we hold their hand through the process until they receive the sale proceeds.
The other benefit of using an online platform is that Affiliates can get exposure to many potential buyers and sell their notes to the highest bidder, thus generating the most money possible. In our case, we buy the loans from the Affiliate and handle the sales for them for a modest fee based on a percentage of the sales amount. Plus, we only collect a fee if there is a successful sale, so there’s very little risk for the Affiliate.
Q: Who buys the loans?
Tribuna: Banks and investors, mostly, but it depends on where the notes are located and what an individual buyer’s goals may be. CRA Note Exchange categorizes loans by their geography. So, a bank that needs to fulfill requirements of the Community Reinvestment Act might use the exchange to find and buy a note that is secured by a property in its CRA zone.
This is why the exchange works so well, and why we’re seeing more organizations take advantage of it. Habitat Affiliates can use the platform to raise money to build more homes, and banks can use it to generate CRA credits. Ultimately, it’s helping to create stronger communities by expanding homeownership, too. It’s not just a win-win, but a win-win-win scenario.