Thursday, Sep. 18, 2008

Country's financial crisis looming over efforts to build affordable housing in Manatee

The country's financial crisis is looming over efforts to build affordable housing in Manatee

Tight times, tight credit

Whether the recent tumult in the U.S. financial sector will have an impact on local affordable-housing efforts is still unclear.

It will take time for the effects of Fannie Mae and Freddie Mac's federal takeover and Lehman Brothers' bankruptcy filing to filter down to the local level, experts say. But it likely won't help an affordable-housing market already hampered by tight credit.

"The credit crunch has had a huge impact because the banks don't want to loan anything these days," said Dan Barwick, president and chief executive of de Morgan Homes Inc., a local affordable-housing developer. The recent financial turmoil has "made the situation worse, but it was already there."

Fannie Mae and Freddie Mac were created to promote homeownership for lower-income families, primarily by making mortgages more affordable and accessible by buying them on the secondary market.

But the private, government-backed companies' growing exposure in the subprime mortgage meltdown prompted last weekend's takeover by the Federal Housing Finance Agency.

The move has affordable-housing advocates worried that the companies' homeownership mission will be lost in order to keep them solvent. To allay those fears, the finance agency said earlier this week that both Fannie Mae and Freddie Mac will continue to operate as usual.

While the takeover makes it tougher for low-income borrowers to qualify for a mortgage, there still is loan money available through other government programs like the Federal Housing Administration, a local mortgage banker said.

"Fannie and Freddie, up to a year ago, they were a better deal than FHA and now the roles have changed," said Pete Minarich of Benchmark Mortgage Co. in Bradenton. "The average and below-average credit borrowers can still buy a home. It's just now more credit-score and down-payment driven."

Brian Pruett, president of Pruett Builders, said those higher qualifying requirements still have affected his business.

"I've had deals fall through because clients couldn't get financing and these are people with good credit," he said. "Part of the problem from the financial sector was they shut off the money, but now it's opening back up."

But builders also are feeling the credit crunch themselves. The bankruptcy filing by Lehman Brothers, an investment bank that's a major financier of residential projects, likely will make credit even tighter, analysts said.

Already, the credit crunch has forced local developers to scale back or shelve their plans until the market recovers. Some projects have fallen into foreclosure: One is the Arbor Park project near Parrish, which was proposed to include about 150 workforce-housing units.

Manatee County defines affordable housing as selling for $176,000 or less, and workforce housing as costing between $176,000 and $201,600. About 300 such units have county approval but have not yet been built, said Suzie Dobbs, the county's community development manager.

Yet most new affordable homes that recently have come on-line initially weren't intended to be that way, she said. The market slump has prompted some developers to turn to the county's affordable-housing program to get buyers qualified and close the sale.

About 50 were in the Pulte Homes' Harrison Ranch project along U.S. 301 near Parrish, Dobbs said.

"They pretty much supplied every new affordable unit in the past year," she said.

Dobbs also was optimistic the federal housing-rescue bill passed in July will help mute any negative affects from the financial turmoil. The bill includes tax breaks for first-time homebuyers and more federal money for downpayment assistance.

But it will take an easing of credit to make a real difference, Barwick said.

"It's very, very difficult right now to obtain financing," he said. "That's going to make a turnaround very difficult unless things ease up."

Despite the turmoil, Barwick said his company now is planning two new projects that will include affordable units.

"It's slowed us down a little but, but it hasn't killed us," he said.

Herald Staff Writer Melissa Followell and material from the Washington Post contributed to this report.