There are more than 50 new faces in downtown Mandan, and Senator Byron Dorgan came to welcome them.
At a Grand Opening Celebration for Library Square II – Community Works North Dakota’s mixed-use tax credit project that includes 45 affordable rental units for seniors – Senator Dorgan was the keynote speaker. While making introductions, CommunityWorks Executive Director Paul Rechlin noted the Senator had served in the same role six years to the month earlier at a grand opening event for the first phase of the Library Square development. “When Phase I was already under construction and we faced unexpected financial shortfalls, Senator Dorgan Stepped up to help out,” said Rechlin. “His support came at a critical juncture. Without that support, Phase I would not have been the success it became, and without that success, we would not be standing here in front of the new building today.” Total construction and development cost of Library Square II was nearly $6 million, providing housing for not only 50 residents, but also building management personnel and staff offices for both CommunityWorks and Lewis and Clark Regional Development Council.
About 1,200 square feet is still available for professional office or commercial space rental. Several of the speakers also noted the importance of the Library Square developments to Mandan’s redevelopment program overcoming the effects of a huge diesel fuel plume underlying much of the downtown area. The four-story 63,000-square-foot Library Square II building is physically connected to the first phase by an enclosed walkway, making amenities of each available to residents of both buildings. The first phase, in which CommunityWorks was a co-general partner with owner MetroPlains Development, was a $5 million projects providing 46 affordable senior units. CommunityWorks was the sole general partner and is owner of the second phase, but partnered with MetroPlains for its development expertise during the construction period.
CommunityWorks ND as an FHA Lender
CommunityWorks North Dakota recently received approval from HUD as an FHA lender. The decision to pursue FHA-lender status was made after some lending partners, especially in rural areas, reported their low volume of lending activity did not justify the time and cost of getting the status or delivering the program. By becoming an FHA lender, CommunityWorks can help provide still another lending option to clients of our partnering lenders, and make loans that provide additional secondary market options. The approval allows CommunityWorks to provide both Title I (home improvement) and Title II loans. CommunityWorks lending staff is now undergoing the process of becoming a Direct Endorsement Underwriter which will allow staff additional underwriting authority.
Works in Progress
Mortgage financing has always been more difficult in rural areas than in cities, but ever since the financial crisis the secondary market has continued to pull away from rural markets, greatly exacerbating the problem.
At the core are the policies of secondary markets. Those markets are now generally not accepting appraisals unless recent comparable sales in the same community without need for adjustments can be provided. In countryside areas and small communities, that is almost never possible. Further, appraisal gaps – in which the cost of building a home exceeds its value – have always presented a problem to the investor markets; now it seems to be one that is insurmountable. And also affecting rural areas: with secondary markets now tightening requirements, the lending product of choice, if not necessity, is FHA, but in rural areas many banks are not approved lenders. The above can be capsulated in just one real-life example. A family, with both husband and wife having 800 credit scores, almost no household debt (16% back-end ratio), and a proven track record of successful farming, wanted to build a new home to replace the old family homestead in which they were living, They recognized there would be an appraisal gap, but they were putting in more than $100,000 cash to bring the loan –to-value ratio to below 80%. But not one secondary market, and therefore not a single bank or other lender, would provide the needed $192,000 loan because none of the comparables were near enough, and all required adjustments.
It isn’t just farm properties that are a problem. Among families we are working with, one, in a community along a four-lane highway, has been unable to finance a new home because secondary markets say the closest comparables in a similar community 15 miles away along the same highway are too far away; another in a mid-sized, market-center town in the heart of the energy impact area, hit a snag because the secondary market said six comparables provided in the appraisal weren’t enough, or close enough, and two more were required.
In other words, the investor markets appear to have little or no interest in rural markets.
What is particularly perplexing and frustrating is that rural lending is the safest lending. That is demonstrated by figures showing the lowest foreclosure and delinquency rates nationally are in rural states. North Dakota, among the most rural of states, has among the lowest loss rates. And our experience has been the same.
Ultimately, we were able to help in all three of the above mentioned cases. About $60,000 was covered under a first-time homebuyer loan bought by NDHFA, we sold about $136,000 as part of a with-recourse portfolio sale, and we did over $200,000 in-house, most of it at a 30-year term.
However, a relatively new (incorporated in 1995, lending since 2001) and small nonprofit like ours, in a state with few large corporations, no large foundations, and mostly small banks, does not have the resources to continue making large 20- and 30-year portfolio loans we cannot sell. Nor, it seems, does anyone else.
Overcoming that and the seeming stranglehold on local lending caused by nervous out-of-state investors and national policy will take more than time; it will take innovation, partnerships and a willingness to invest in ourselves.
Library Square II Project Highlights
Library Square is more than a roof over the heads of the residents. It provides a safe environment; amenities like chapel, exercise room, library; and other intangible benefits. The following are some personal stories from a few residents of Library Square of how living at Library Square affect their lives . . .
Betty Mae Johnson
Recently widowed, Betty Johnson found herself faced with creating a new life. A lower level apartment dweller, she climbed stairs outdoors. Her children were concerned with her safety, considering the harshness of winter weather; they began, ‘shopping around’ for a new home. They agreed upon Library Square II. “Even after the girls told me I’d like it, I had to see a couple of apartments for myself – and they were nice,” resident Betty Mae Johnson said. “I especially liked the views of the north. My son told me I’d see storms arriving before they were on top of me.” She enjoys socializing; it was so easy to get involved with pinochle and bingo with other residents, enjoying the close knit community of Library Square residents. Johnson owns her own car and drives for groceries.
Retirement for Lila Buchman meant changing up her life in a big way. Returning to North Dakota after spending three years in Minnesota, she considered Mandan’s Library Square immediately.
“I decided to live in Mandan,” resident Lila Buchman said. “Since my children live in different towns across North Dakota, this was a great choice. I can still drive to see each of them.” Buchman discovered Library Square II to be filled with opportunities. A safe community to drive around in, she could trek around a bit to shop for antiques or gather with other residents for activities. She noticed developed friendships among others. “The seniors on the ‘other side’ [Library Square] have become ‘old friends’ now.” Buchman said.
Forever changes, Rose Aken suffered a stroke twelve years ago. Unable to use her right arm and leg, Aken turned to Liberty Heights in Mandan. After independently living in that community for several years, she heard about Library Square II, and decided to check it out. The downtown location interested her, since she no longer drives – and she imagined she’d be able to remain self-sufficient. She’d walk outdoors to appointments, to shop or attend church. After touring a few apartments, Aken settled on a handicap accessible unit, completely changing her life.
“Now I can walk around as much as I want,” resident Rose Aken said. “I can walk to the grocery store with my cart or use the laundry room without leaving the building.”
Further, Aken said she finds ways to ‘go out without going out’. Cruising the halls for exercise or visiting with other residents keeps her busy. And others are helpful to her. When she’s struggling with a heavy load or unable to complete a task, she knows she can turn to one of many new friends.
“Library Square is a community of its own,” Aken said. “And when I get tired of walking or need to be alone, I just go home.”