2007 Funding Partners Annual Report
Release Date:February 26th, 2008
The power of partnership was evident during this past year, as the organization was able to post a record year in spite of much-publicized turmoil in the housing market.  Through a growing network of public, private and not-for-profit organizations, Funding Partners was able to deliver more capital to more households than any year in our history.  Now in our second decade serving Colorado, the organization has become a vital source of capital and technical expertise for those seeking to serve families and individuals that comprise a vital component of our workforce: The estimated 40% of Colorado families earning less than $52,800 per year.   
While different programs offered through Funding Partners target specific income ranges according to the source of capital utilized, the primary function of the organization facilitates the delivery of residential units considered affordable to those priced out of the market.  Although mainstream financial markets seek to develop products that provide initial affordability, Funding Partners is dedicated to long-term affordability and stability within the community.  Consequently, the organization defines ‘affordability’ in slightly different terms and context than our banking partners.  Like many in our industry, FP believes a home is affordable when rent comprises no more than 30% of gross monthly income, while a mortgage (PITI) is affordable when it comprises no more than 38% of gross monthly income.  The difference is attributed to tax and investment advantages of ownership versus renting.
As the exuberance creating home ownership within financial markets recognizes greater scrutiny in Colorado and, indeed, across the nation, our resolve to address immediate needs within the state comes into sharper focus.  Critical to our mission as a Community Development Financial Institution (CDFI), FP will work through our network of partners, develop new alliances and initiate responses to alleviate deteriorating conditions without losing sight of long-term objectives.  Just as we have long eschewed the use of exotic mortgage instruments, FP accepts that a certain level of economic pain must be borne in the short term if, collectively, we are to re-establish comprehensive vitality within our communities.  We welcome this challenge and invite your continued participation.   
The following information provides a snapshot of accomplishments in 2007.
Housing Production and Rehabilitation
Through the Mammel Affordable Housing Loan Fund (MAHLF), FP originated 9 project-based term loans for a production level of $3,652,961, a record year for the program.  Activity highlights include:
  • In participation with Mile High Housing Fund of Denver, Thistle Community Housing was issued subordinate financing in the amount of $1,280,000 to acquire and rehabilitate a 94-unit rental project in Longmont known as The Cannery.  FP purchased $500,000 of the total loan.  Primary financing was provided by First National Bank of Colorado in the amount of $4,280,000.  The project preserves these units for households earning less than 60% Area Median Income.
  • Rocky Mountain Community Land Trust was provided a construction draw loan in the amount of $550,000 to begin development of mixed-income single family subdivision in Colorado Springs known as Woodmen Vistas.  The project is undertaken to compliment adjoining neighborhood developments of Pikes Peak Habitat for Humanity and Classic Homes Cumbre Vista.  Ultimately, RMCLT will deliver 11 owner-occupied homes permanently affordable to households at or below 80% Area Median Income.
  • CARE, Inc. received $623,541 in gap financing to acquire a 36-unit multi-family rental project in Windsor, known as Cottonwood Apartments.  The property was purchased from the previous owner to prevent a market rate conversion, while retaining both long-term financing and rental vouchers through USDA Rural Development.  The project serves households below 50% Area Median Income.
  • The Colorado Coalition for the Homeless received $660,000 in subordinate acquisition financing for a commercial property 4 blocks from the State Capitol Building.  The site will be redeveloped as a mixed-use project serving households transitioning from homelessness to those earning less than 60% Area Median Income, known as Uptown Lofts.  Senior financing was provided by FirstBank of Denver in the amount of $1,540,000.
  • Huerfano/Las Animas Housing Resources received a draw loan in the amount of $126,000 to acquire a vacant lot in Trinidad and construction of a single-family home.  The unique aspect is two-fold: the project is the first undertaken by the agency; and, the previously existing home at the site was foreclosed upon by a local institution and subsequently razed by the Colorado Brownfields Foundation due to methamphetamine contamination.  The site has been given a clean bill of health from the State and the new home will be sold to a household earning 80% of Area Median Income.
During the year, activity under the MAHLF program provided critical financing to create or preserve 344 rental units, all but 5 of which are permanently designated for households below 50% AMI.  Additionally, 12 single family ownership units will be produced and sold to households below 80% AMI.  Total project costs amounted to $43,401,130, which means every $1 of FP financing attracted $11.88 in equity and commercial financing.  Performance measures include:
  • 2007 MAHLF production represents an increase of 48% over 2006 activity levels and 68.9% over the rolling 3-year average of $1,490,167.  This can be primarily attributed to increased loan fund liquidity and corresponding marketing efforts.
  • The number of housing units preserved or created in 2007 represents a 48.3% increase over 2006 and 46.5% increase over the 3-year average of 113 units.
  • Since program inception in 1997 through 2007, FP has originated 62 project-based loans representing $14,360,945 in volume; 2,272 housing units created or preserved; and, leveraged $205,001,478 in equity and commercial financing.
  • Delinquency remains at 0% with no losses incurred since program inception.
Residential Assistance
Through the House to Home Ownership (H2O) Down Payment Assistance Program®, FP originated 82 subordinate mortgage loans to assist first-time buyers with income levels at or below 80% AMI.  This resulted in production of $800,881 for the year.  Additionally, 2 loans were issued for relocation expenses to families impacted by the closure of the Dry Creek Mobile Home neighborhood in Fort Collins. Performance measures include:
  • Loans were originated in 14 of the state’s 64 counties, with the greatest volume in Boulder County: 18 loans and $341,180 in production.
  • Production volume in 2007 represents a 27.1% increase from 2006 and 0.9% increase over the 3-year average production.  Although the Front Range continues to experience pronounced softness in the owner-occupied housing market, high-cost markets remain vibrant.  
  • 19 loans (23.2%) were issued to single-parent households.
  • 104 adults with 56 minors (160 total) individuals entered home ownership under the H2O program.
  • Since program inception in 1999 through 2007, 1,033 H2O loans have been originated representing $7,851,229 in total volume; 461 loans have been repaid (44.6%) with all principal recycled into new production.
  • Full or partial loss has been recognized on 61 loans resulting in capital loss of $337,956 (4.30%).  This amount has grown significantly since 2004 (1.88%) though within the loan loss reserve level of 5% of outstanding portfolio, as reflected on FP financial statements.  All losses have been absorbed through substantial grant capital within that fund.  
  • As of December 31, 2007, the outstanding H2O portfolio is $3,911,416 with 510 borrower files. 
  • Effective January 1, 2008, the H2O program was modified to better conform with recent revisions to secondary market requirements while simplifying the equity sharing formula.
Third-Party Services
Under contractual relationships with outside agencies, public authorities and private-sector employers, FP originates loans and services portfolios that are similar in nature to our own programs.  In 2007, FP originated 86 subordinate residential mortgages representing $1,021,936 in production volume.
  • Eagle County and The City of Glenwood Springs each established an Employee Home Ownership Program (EHOP)®[1] during the year, while Fraser Valley Foundation, La Plata Regional Housing Authority, Delta Housing Authority and Yampa Valley Housing Authority either established or contracted with FP to service down payment assistance programs in the respective markets.
  • Wheat Ridge 2020 entered an agreement with FP to originate and service a home improvement program within the city.  
  • The City of Grand Junction and the Roaring Fork Community Loan Fund entered into administrative agreements with FP to manage dedicated revolving loan pools in the respective markets.   
  • Origination volume represents the key metric under contractual relationships as a flat fee is assessed at closing rather than a percentage of the loan.  In 2007, originations increased 91.1% over the prior year and 92.5% increase over the 3-year average.  As new clients are added in the resort and West Slope markets, origination volume is anticipated to grow through 2008, though at a more conservative pace.
  • To the extent possible, contract debt instruments based upon the equity sharing model were modified, effective January 1, 2008, to mimic modifications to the H2O loan product.  This provides greater uniformity across all product lines, while conforming to secondary market requirements.
Under such agreements, FP currently manages loan portfolios consisting of 228 files representing $2,219,720 in outstanding credit as of December 31.  Across all residential assistance programs, FP has originated 1,296 mortgage loans representing $10,505,319 in production volume within 26 Colorado counties since 1999.
Across all loan programs during the year, FP originated 182 loans representing $5,488,438 in aggregate volume; 49.2% higher than the previous record of $3,678,299 achieved in 2005.  The number of transactions, however, fell short of the record set in 2003 when 231 loans were issued at the height of the purchasing boom.
Unaudited financial performance of the organization reflects a more challenging environment, with a reduction to Net Assets in the amount of $124,292 versus an increase of $225,159 in 2006.  Excluding non-cash items, the organization will recognize a Net Loss of $19,604 for the year ended 12/31/2007.  During the prior year, the organization benefited from non-recurring entries; however, the primary cause for the large deviation rests with a mid-year adjustment to increase the non-cash provision for Loan Loss Reserves, coupled with an increased aggregate loan portfolio.  Although originated loans provide a future income stream, the reserve for potential losses is recognized immediately, thus creating a revenue imbalance until such time adequate repayment occurs.  During the year, the organization also recognized a significant decrease in corporate and philanthropic support which allows the organization to deliver products and services at the lowest possible cost.  The Board of Trustees is committed to elevating awareness and interaction with the larger community to enhance existing relationships, while forging new alliances that strengthen the financial health of the organization.   
During the year, several community members were appointed to the Board of Trustees, including:
  • Jeff Cook, Branch Manager – US Bank
  • Marie Edwards, Realtor – Coldwell Banker
  • Jeff Powell, President – Frazier & Associates
  • Stephen Wessler, VP Regional Manager – Red Stone Agency Lending
  • Darcy McClure, Human Services Director – City of Loveland
  • Tom Hemmings, Chief Financial Officer – Colorado Housing & Finance Authority
Internal management tools have been improved, providing greater data integrity and redundancy, while enhancing staff efficiencies.  Preliminary discussions have taken place to secure off-site management of operations during an emergency event.  Formal arrangements are anticipated within the 2nd quarter of 2008.
As of year-end, FP’s aggregate loan capital base (excluding third party contracts) was $10,835,636, an increase of 29.8% from 2006.  A breakdown shows 43.0% of capital derived through regulated financial institutions, 41.9% through federal and local governments, 9.9% through corporations and the balance of 5.1% through foundations, associations and retained earnings.  All non-permanent sources of capital have been renewed or re-committed for a minimum of 5 years, more typically 10 years, providing sufficient long-term liquidity. 
  • At year end, 83.0% of total loan capital was either deployed or committed with 76.1% outstanding.
  • A dedicated Loan Capital Reserve account was established and funded with $482,022, representing 4.5% of total capital.  That fund will be grown over the next several years to reach the optimum level of 10% of total capital.
  • Fannie Mae issued a 3-year senior credit facility for $1,000,000 to support production under the MAHLF program.
  • Bank of the West entered into a long-term investment agreement in the amount of $500,000 to support the MAHLF program.
  • Colorado Housing & Finance Authority (CHFA) renewed and extended an existing senior credit facility (from 3 years, $500,000 to 5 years, $1,500,000) in support of the MAHLF program.
  • The City of Grand Junction entered into a long-term investment agreement in the amount of $100,000 to establish a dedicated revolving loan pool in that market.
2008 Outlook
In response to the economic and financial devastation experienced along the Front Range, FP is working to build a consortium of private, public and non-profit agencies to arrest further deterioration of the owner-occupied housing market.  The program will be initiated in pilot form to work through logistics in select neighborhoods in the metropolitan area before a wider roll out across the state.
Employer assisted housing initiatives, particularly within the resort and Western Slope markets, will add significant activity levels in terms of loan volume and technical assistance.  Look for the EHOP product brand to become synonymous with the concept as public and private sector interests seek out greater leverage and efficient implementation. 
More communities and regions across the state will look to form dedicated capital sources within their market, while FP is uniquely positioned to provide cost-effective administration.  Adapting the management information tools, efficient delivery systems, multiple product lines and familiarity across the state, FP is able to bring initial discussions to implementation phase quickly with a high degree of competence.       
Thank you for taking the time to understand how your investment in Funding Partners is changing the economic, physical and social condition of the 3,500 Coloradans FP has directly impacted!  With numerous possibilities yet to be explored, we look forward to engaging you and your organization in further discussion of expanding business activities within underserved communities!
Betty Lou Swift                                   JoeRowan 
Betty Lou Swift                                      Joe Rowan
Board President                                     Executive Director

[1] Employee Home Ownership Program (EHOP)® is a registered Service Mark of Funding Partners for Housing Solutions, Inc.  All rights reserved.



Contact Information:
Joe Rowan
Funding Partners for Housing Solutions
214 S. College Ave, Second Floor
Fort Collins, Colorado 80524