An Unfinished Subdivision Given New Life by Santa Fe CDFI Homewise

An Unfinished Subdivision Given New Life by Santa Fe CDFI Homewise

Homewise will build 166 houses in the undeveloped portion of the Tessera subdivision, 22 of which will be priced to be affordable to households earning up to 65 percent of the area median income. Credit: Homewise

Once a stalled project with no clear future, the Tessera subdivision located in the hills of northwestern Santa Fe is on track to provide affordable, sustainable homeownership opportunities for area residents. The unfinished subdivision was purchased in 2014 by Homewise, a nonprofit community development financial institution (CDFI) serving northern New Mexico with the mission to promote homeownership among low-income households through homebuyer education, sustainable mortgages, and financial counseling. The CDFI plans to complete Tessera by building and selling 166 single-family detached houses by 2021. Tessera buyers will have access to affordable mortgages, one-on-one homebuyer counseling, and free financial health workshops provided by Homewise. The mixed-income development will include 22 low-income homes reserved for buyers who obtain financing from Homewise.

A New Direction for a Stalled Subdivision

Tessera is a two-phased subdivision of a 146-acre property, initially intended by developer Hurlocker Homes as a luxury residential community with homes priced at up to $1.2 million. When Homewise obtained the property after it had been returned to the bank in the wake of the recent housing crisis, the first phase consisted of infrastructure, 3 houses, and 88 buildable lots; the second phase contained 78 buildable lots. Homewise has begun building houses in the first phase and is expected to develop the second phase starting in late 2017. Homewise has 10 floor plans for its houses, ranging from a 2-bedroom, 2-bath, single-story house up to a two-story, 4-bedroom, 2-bath residence, all in the Pueblo Revival style. The houses include ENERGY STAR® appliances and are designed to meet the requirements for Leadership in Energy and Environmental Design Gold certification. Homewise uses high-quality materials and energy-saving construction techniques to reduce homeowners’ utility bills and maintenance costs, increasing the long-term affordability of the residences. The market-rate houses begin at $293,500, and the affordable homes are priced to be affordable to households earning 65 percent of the area median income (AMI).

Homewise’s price point for the market-rate houses and the inclusion of low-income housing represent a substantial departure from the original plan for the subdivision. The handful of lot- and homeowners in Phase I were anxious about the transfer of the unfinished portion of Tessera. Residents of neighboring subdivisions were also concerned that the new economic targets for Tessera might change the character of the development. Homewise assuaged these fears by modifying its plan based on input gathered at public meetings and other events. The new plan maintained the original lot sizes as well as the design characteristics of the neighborhood while allowing less expensive houses.

Homewise is offering all Tessera buyers affordable, fixed-rate 30-year mortgages in addition to a free money management workshop. Although the market-rate residences are available to buyers who elect to obtain mortgages from Homewise or another institution, only Homewise mortgage clients can purchase the 22 houses sold at prices below market rate and can choose from 3 designs — with 2, 3, or 4 bedrooms. Buyers with household incomes of less than 120 percent of AMI are eligible for up to $40,000 in downpayment assistance.

Homewise, a community development financial institution serving northern New Mexico, offers a range of services including homebuyer education courses, free consultations, and financing to promote sustainable homeownership. Credit: Homewise

A Full-Service Homebuying Experience

Homewise was established in the 1980s as a nonprofit that primarily issued home improvement and rehabilitation loans. In the mid-1990s, Homewise became a CDFI, which allows the organization to access federal funding, and began offering a full spectrum of homebuying services for low- and moderate-income residents of northern New Mexico, including financial counseling, realty services, and financing. Homewise’s approach goes beyond simply issuing a mortgage, because the CDFI places the highest priority on their clients’ long-term financial well-being. Homewise requires all buyers applying for Homewise financing to attend its homebuyer education workshop. Homewise also offers each client the services of a home purchase advisor, and buyers of the affordable Tessera houses are required to work with an advisor. Together, the advisor and client evaluate the potential homebuyer’s financial readiness and determine an affordable housing price range. The advisor helps clients formulate a readiness plan if they are not yet in a financial position to buy a house. Such plans typically call for the client to take actions such as increasing savings, reducing debt, and improving credit scores. The CDFI also provides incentives for homebuyers who successfully execute a readiness plan; for example, closing costs are reduced by $250 for buyers who meet their downpayment savings goals.

Homewise’s services continue with a member of the organization’s salaried realty team, who shows househunters properties within the household’s budget. Once a buyer selects a house, Homewise provides financing through either one or two mortgages. Clients who are able to make a downpayment large enough to avoid having to purchase private mortgage insurance, which can add hundreds of dollars to monthly payments, receive a single mortgage. Because most Homewise clients cannot make the 20 percent downpayment, the CDFI offers a first mortgage without mortgage insurance for 80 or 90 percent of the purchase price and a second mortgage at a higher interest rate for the remaining amount. Homewise then sells the first mortgage to Fannie Mae to generate funds for additional mortgages while retaining the second mortgage. Homewise services both mortgages, having found that local mortgage servicing reduces defaults by providing flexibility when buyers have difficulty making payments. Local mortgage servicing is also beneficial because mortgage holders are more likely to seek help from a servicer with whom they have developed a relationship of trust than from an unfamiliar company. Local servicing has reduced the delinquency rate for Homewise mortgages, according to Laura Altomare, Homewise’s director of communications and development; just 1.1 percent of all loans serviced by Homewise from 2009 to 2014 were seriously delinquent (at least 90 days late) compared with approximately 7.4 percent of loans backed by the Federal Housing Administration during the same period. For more on Homewise’s efforts to promote sustainable homeownership, see Spring 2016 issue of Evidence Matters.

A Bright Future for Tessera

As of May 2017, 43 market-rate houses and 10 below-market-rate houses have been built and sold in Tessera’s first phase. An additional 78 homes will be constructed in the second phase. Demand for houses in the subdivision has remained steady, according to Altomare, with families attracted by the high-quality home construction, the development’s extensive network of trails winding through more than 30 acres of open space, and the availability of affordable financing from Homewise. With the completion of Tessera, Homewise will have developed its eighth community of economically integrated, financially stable homeowners.