Specialized lenders provide options for those wanting to create affordable housing projects.

Specialized lenders provide options for those wanting to create affordable housing projects

California lenders who want to help create affordable housing, but shy away from the complexity of making those kind of deals, still have an option: They can ask somebody else to do the lending for them.

That is the premise of two California lenders specializing in affordable- housing finance. The two institutions, California Community Reinvestment Corp. of Burbank and Savings Association Mortgage Co. of Santa Clara, collect funds from other institutions and funnel the money into particular projects.

"A lot of banks don't have the expertise to delve into low-income housing deals and that's where we get involved. Basically, we lend out their money for them," said California Community Reinvestment President Dan Lopez.

To date, the 18-month-old lender has lent $17.03 million and has another $95 million of loan commitments to projects currently under construction; the lender will translate those commitments into mortgages when projects are finished.

Twenty-year-old Savings Association Mortgage has a total loan-servicing portfolio of $80.79 million, with outstanding commitments of $72.64 million.

Neither CCRC nor Samco offer construction finance or mortgages on single-family homes. Instead, the two lenders provide only "permanent financing," or mortgages, on rental apartment projects. Both lenders are active throughout California. In its short life, CCRC has help build apartments in South Central Los Angeles, Sun Valley, San Diego and Santa Ana.

While comparatively small, both Samco and CCRC are well known in the banking industry and are models for similar institutions in other states.

"They are looked at as the leading lending consortia" in the low-cost housing field, said Anita Landeck, vice president in the Los Angeles office of Local Initiative Support Corp., a New York-based fund that provides assistance to low-cost housing projects.

The two institutions have a different set of relationships with their member institutions. CCRC is geared toward big banks. To join the Burbank-based housing lender, banks must contribute at least $1 million. Those funds are combined into a "blind pool," which becomes the source of CCRC financing.

"Each of our lenders contributes equally to all of our project loans, on a pro rata basis," said Lopez.

In contrast to CCRC, Samco requires only a $1,000 contribution to join. Member institutions of Samco can choose the projects to which they wish to lend, rather than channeling money into a blind pool. Some institutions opt for a small position in many mortgages, both to spread out their risk and maximize the social good of their community-reinvestment dollars.

The 20-year-old organization has both banks and thrifts on its membership roster.

Among mortgage lenders in the affordable-housing arena, "we have been in this area for the longest period of time," said executive director Charles Goetze. "Our experience should play a large role for people considering participation in our mortgages."

With both homelessness and inadequate housing in the headlines, banks and thrifts are often attracted to the notion of fostering low-income housing. Yet these deals are among the most complex in residential real estate.

That complexity stems from the rents on low-income housing, which are often too low to pay off mortgages. That means that multiple lenders, rather than a single mortgage lender, must get involved. Also involved are subsidies from housing bonds and redevelopment tax-increment revenues. Sometimes private investors get involved in affordable housing, to take advantage of the low-income housing tax credit, which is one of the few tax shelters to survive tax reform.

A single deal may involve a local redevelopment agency, a State of California housing agency, federal housing funds in the form of HUD block grants and private investors who want the tax credit.

"You have to figure out how this deal can work with everyone's different requirements in there. There is a lot of hand holding and deal structuring," said Lopez.

Samco's Goetze said "we are familiar with how tax credits work and we already have knowledge of State of California funding." He added Samco has also "done a significant number of deals involving secondary financing from cities and municipalities."

Public funds, in fact, provide secondary financing in 80 percent of the cases where it is needed, according to Goetze. Private investors, including the tax-credit limited partnerships, make up the balance.

PHOTO : Housing: Low-cost options exist