SOMETIME AFTER THE FIRST OF THE year, a relatively small, Washington, D.C.-base financial institution will issue its second security backed by affordable housing loans, providing further impetus for a private secondary mortgage marke for low-income, multifamily housing mortgages. Such a market will not only complement, but also compete with the government-sponsored secondary market giants.
If the new issue is as successful as the first--and there is every reason to believe it could be even more so--then Fannie Mae and Freddie Mac will no longe be the only game in town. That means that lenders who are too small to play bal in the big leagues, or whose loans don't quite fit the "one-size-fits-all" requirements of the traditional secondary agencies, will have another alternative.
And wouldn't that be something for the National Cooperative Bank (NCB), a government-sponsored enterprise (GSE) itself? Created by Congress in 1978 to provide loans and financial services to cooperatives, NCB was forced to go private in late 1981, lest it fall under the privatizing scalpel wielded during the Reagan years.
But now, 13 years later, the outcast is back, bigger and better than ever, with $1.2 billion in servicing ($1 billion of it is on housing loans) and a number o affiliates. And it is playing in the same arena as its larger rivals.
"With our first security, we proved to the affordable housing world that there is a private market beyond the agencies to finance affordable multifamily housing," says Grace Huebscher, president of NCB Mortgage Corporation and the person in charge of all the bank's real estate activities. "And now we're gearing up to do another one. Our goal is to become a conduit that buys loans from other players, pools them with our own loans into mortgage-backed securities and sells them to investors." The goal in 1995, according to NCB officials, is to do $30 million in mortgage-backed securities backed by affordable housing loans.
While NCB's focus on affordable housing is laudable, it's not without at least some self-interest. Technically, the institution is still considered a government-sponsored enterprise (oversight is provided by the Farm Credit Administration) with a public mission to provide a broad array of financial services to the nation's cooperative business sector, financing economic growth and community development in urban and rural America.
Under that charter, the bank, which is owned by its co-op members, is required to put forth its "best effort" to direct 35 percent of its time and assets in pursuit of low-income businesses, including housing. That's a tad higher than the 30 percent low- and moderate-income housing mandates placed on Fannie Mae and Freddie Mac by the U.S. Congress.
NCB is further away from meeting its goal than either Fannie Mae or Freddie Mac are from meeting theirs. But then, the bank doesn't have the advantage of being able to access the government's coffers either. "We're often placed in the GSE bucket, but we're not the same," says Huebscher. "We have absolutely no access to Treasury funding. The only thing that ties us to government is our broad charter."
Even with that handicap, however, the bank has managed to put up some pretty impressive numbers. Since being reconstituted as a privately owned cooperative financial institution, it has:
* Originated almost $2.4 billion in total transactions (made up of loans to all types of co-ops).
* Serviced more than $1.2 billion in loans.
* Originated almost $1.3 billion in real estate loans, which includes loans and leases to its more than 1,000 members, half of which are housing co-ops.
* Financed more than 20,000 units of affordable cooperative housing.
Three million residents
Affordable cooperatives? Isn't that an oxymoron?
Not at all. While most people...