Woodbury's imaginative program uses a revolving loan fund to help people buy foreclosures.
Each month, Jeanne Hoffman sends off a check for $62.50, and she's actually grateful to pay that bill.
The money goes to the city of Woodbury for an interest-only deferred loan that helped her buy a foreclosed townhouse.
Since Woodbury's Foreclosure Purchase Program began in 2009, Hoffman and 44 other buyers have qualified for the $25,000 loans, at 3 percent interest, city officials said.
The program is growing, and so is interest in it.
"It helps families buy, helps stabilize the neighborhood and tax base, and helps lenders and Realtors put deals together," said Woodbury city planner Karl Batalden, who administers the program.
Unlike other programs that rely on limited federal funds, Woodbury funds its revolving-loan program primarily with a local Housing and Redevelopment Authority (HRA) levy, but uses a federal block grant, too.
The interest-only payments that buyers make are nearly covering the operating costs of the program, which is becoming a model for other communities.
"We're unique because it's a local commitment to a local problem, funded by local dollars," Batalden said.
The 45 loans given so far total more than $1.1 million, he said.
Woodbury's HRA uses the program to help applicants buy foreclosed townhouses, condos, twin homes and single-family houses. There's a balloon payment after 30 years or when the house is sold.
Hoffman, the 45-year-old owner of a small house-cleaning business, said the loan, which is really a second mortgage, helped her buy her two-bedroom townhouse for $79,900, plus her appliances.
Now, when she writes out her monthly check on the Woodbury loan, Hoffman said, she sees a greater purpose than simply making a payment.
"When you give it back, it's like you're helping someone else," she said. "You're paying it forward, and it feels good because you're helping to keep the program going."
Woodbury also stands out because Batalden works closely with lenders and real estate agents, said a half dozen people in the mortgage industry.
"I haven't seen anything like it at all," said Kathy Lawler, a lending officer with Summit Mortgage in Woodbury. "It's not driven by the county; it's actually driven by the city."
Lawler said Woodbury's flexible program allows higher income brackets and home prices than other programs.
Under Woodbury's guidelines, a buyer's income cannot exceed 115 percent of the current area median household. For a one-person household, the limit is $67,620. For a family of four or more, it's $90,000.
"It's truly for working people who either want to get back on their feet or take advantage of this market," Lawler said. "It's meant to go back into the homeowner who wants to invest in the community and stay. That's the difference I've seen."
Other assistance programs target hard-hit neighborhoods or geographic areas, but Woodbury's is for any home in the city that's in foreclosure, facing foreclosure or in short sale, before the home is vacant. (In short sales, a lender agrees to be paid off at a price that's less than what's owed on the mortgage.)
To qualify for the loans, applicants must contribute at least 5 percent of the total cost of buying the home, with a purchase price that cannot exceed $256,500.
Lawler said in nearly every purchase agreement that her agents draft under the program, sellers agree to concessions such as paying closing costs, which go toward that 5 percent for the buyer. Some buyers are able to get into a home without spending a dime out of pocket, she said.
"The process is very simple," said Felecia Mann, a 30-year-old insurance worker who bought the townhouse she'd long eyed for $100,000, with the help of a Woodbury loan. "Seriously, it's just a couple of pages of paperwork and your lender fills it out," she said.
In addition to her payment on her first mortgage, Mann pays $66 a month on her interest-only loan for her townhouse near Valley Creek Road and County Road 19.
"It's a little more work for your borrower and for the lender, but the truth is, if the borrower qualifies, it's a terrific program," said P.J. Harris, a mortgage banker at Prime Mortgage, a division of the Business Bank in Minnetonka.
"The work that's done by the bank, by Woodbury and the borrower is a very worthwhile endeavor. It makes a difference," Harris said, adding that borrowers can get a better home for the money without expanding risk.
"This is helping the financial stability of the neighboring properties," Batalden noted. "A vacant home is a potential public safety threat, a potential infrastructure threat, a potential code violation," he said.
Last year, Minnetonka officials sought Batalden's advice while developing guidelines for their own program.
Lawler, the Woodbury-based lender, said she can't understand why more communities aren't following suit.
"Woodbury has made it simple," she said. "Here's the money. Use it. Put it back into our community, and get it up and running.
"That keeps the people coming. It keeps the tax dollars flowing on those properties, and we can thrive as a community."
Joy Powell • 651-925-5038