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First off, let me say that I have the utmost of respect for Habitat for Humanity and Jimmy and Rosalynn Cater. I was too young to vote for Jimmy Carter but I was old enough to sit in the gas lines. But ironically I have to thank Jimmy Carter for allowing my Dad and I to spend quality time together. Who can ever forget us pushing that out of gas VW Beetle into the Amoco gas station in Potomac, Maryland. Those were the days. And in the spirit of full disclosure, I also supported the Carter family by purchasing a six pack of Billy Beer.

An interesting statement was made to me last night that made me start thinking. A former affordable housing counselor from Maryland was telling me about the 20% default rate on Habitat for Humanity mortgages in his area. He said that it was his opinion that while Habitat did a great job of building homes that they had no real strategy for dealing with homeowners that defaulted or fell behind on their mortgage payments afterwards. When he volunteered to help them with this problem, he was rebuffed.

I did a search for more information on Habitat for Humanity mortgage performance and was surprised to find no useful information at all on the web about this. I looked at the Habitat for Humanity UK site and US site but there is nothing at all about loan performance. The US charitable tax return does list an interesting item for unrealized losses of $463,721. In addition on page 165 of the annual return, linked to here, it shows that the beginning balance due for notes and mortgages was $26,816,751 and the ending balance was $27,982,018 an increase of $1,165,267.

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I have no expectation that those loses relate entirely or specifically to mortgage repayment performance by Habitat homeowners but absent any specific information on Habitat for Humanity mortgages, all we are left with is questions. I’ll send them a letter, ask them about mortgage performance and let you know what the response is.

I’m sure that it would be a PR nightmare for Habitat to have footage of a homeowner foreclosed or evicted and all their stuff piled at the curb, but the program is so flexible in determining an affordable mortgage payment that adjustments could be made to remedy the default without foreclosure or loan forgiveness.

Eventually, a resident that fails to provide a fair and reasonable percentage of income towards a mortgage payment is simply holding back someone else that could take advantage of that opportunity. And without proper supervision of mortgage repayments a portion of donations made to Habitat for Humanity would then be used to subsidise homeowners not making payments. Not good.

While I think that most people would be understanding of unique circumstances that prevented a homeowner from making mortgage payments until the situation was resolved, say for example a medical issue. This information could be easily presented through an accounting of loan performance and a category table that listed why loans were not performing as scheduled. However, if there are Habitat for Humanity homeowners that are not making the mortgage payments they should because it is not convenient or they don’t want to, then I’ve got a real problem.

While I am usually fighting against unfair collection activity by lenders I think if the situation is true I’ll have to fight for collection efforts on Habitat for Humanity defaulted mortgages.

Enabling poor money behavior is neither loving nor helpful when you are attempting to give people a chance to climb the economic ladder. If the mortgage is in default due to underlying issues then let’s devote efforts towards resolving those issues to allow the homeowners to get back on track.

If you are aware of any more specific information regarding Habitat for Humanity mortgages that are in default, please contact me.

And Habitat folks, if this is true, please contact the Myvesta Foundation for free international assistance and help in putting together a strategy of care and compassion to deal with these issues.

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Steve

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