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Twin $5 million loans to help metro and nonmetro housing funds finance the repeopling of foreclosed homes were announced Tuesday by the McKnight Foundation.
McKnight will charge the two funds 2 percent annual interest for using its money over the 10-year term of the loans. The money will go to the Family Housing Fund, which works in the seven-county metro area, and the Greater Minnesota Housing Fund, which will use the money in foreclosure-hit areas elsewhere in Minnesota.
The latest money differs from McKnight's usual grantmaking, which has provided multi-year operating support to both organizations. That's because it comes in the form of loans that will primarily be re-lent to nonprofit developers to buy and rehab foreclosed homes for sale to new owners.
Because rehabbed homes have been selling recently for less than the cost of buying and fixing them up, gap subsidies are also needed to cover costs in excess of the resale price and help repay the loans. That money will come from federal funding approved last summer to help foreclosure-hit areas, as well as state housing money and other sources.
The McKnight money is more significant to the Greater Minnesota Housing Fund because it had raised only $750,000 to date for its foreclosure recovery fund, according to program officer Andrew Schlack. The organization has mostly concentrated on developing new housing units since its 1996 founding, and it had to dip into other money recently to finance $1.5 million in foreclosure recovery loans to Duluth and Rochester nonprofits.
"We're trying to dig ourselves out of the current crisis," Schlack said. The latest money will be for those communities, plus St. Cloud and the counties of Chisago, Isanti, Sherburne, Rice and Wright, because they were awarded federal money.
Schlack said the fund hopes to recycle the money multiple times through properties as they are acquired and marketed, so he isn't sure how many houses will be rescued from foreclosure.