Magazine article American Banker

Habitat Offering Allows Banks to Serve the Poor

Magazine article American Banker

Habitat Offering Allows Banks to Serve the Poor

Article excerpt

By conventional standards, the deal offered a low return and comparatively high risk. But that didn't stop banks and other investors from snapping up a recent $6.5 million mortgage securitization-and asking the issuer for more.

The transaction was the first-ever securitization by Habitat for Humanity International, a Christian ministry that finances homes for the poor. The deal is one of several that mortgage lenders recently delivered to Wall Street without following traditional securitization procedures.

The Habitat for Humanity transaction didn't fit the mold for a number of rea- sons. The issue supplied a roughly 3% return, several points below the rates of conventional mortgage securities. Also, at a little more than $6 million, the deal was tiny compared with securitizations of $100 million or more that underwriters generally handle.

The Americus, Ga., organization got a Wall Street law firm to structure the deal pro bono and then sought investors who would be satisfied with nonfinan- cial rewards, said Regina Hopkins, general counsel for Habitat for Humanity.

Chase Manhattan Bank and Norwest Financial Corp. were among those buying into the deal, and have already indicated interest in the $10 million offering Habitat for Humanity plans for the fall.

"I don't think anyone would buy the securitization to make money," said Chase Manhattan vice president Michael Swearingen.

Instead, the investment allows Chase to indirectly serve low-end borrowers whom the company's mortgage unit can't reach, Mr. Swearingen said.

Indeed, Habitat for Humanity's securitization is backed by loans that carry no interest rate and require no down payment. …

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