U.S. Bank starts $1M housing fund

Since the city tore down the ramshackle foreclosed houses there years ago, the two lots in north Minneapolis have sat empty -- holes in a neighborhood scarred by the foreclosure crisis and then last summer's tornado damage.

Now, if all goes according to plan, they will be filled with two new houses next summer, with families to call them home.

It's one of several redevelopment projects to be financed through a new $1 million housing fund U.S. Bank just launched, aimed at rehabbing foreclosures in north Minneapolis and the Dayton's Bluff and Frogtown areas in St. Paul. The Minneapolis-based lender said it had success with a similar fund it piloted last summer in Milwaukee and expects the Twin Cities fund to rehab at least two dozen houses in the first year or so.

U.S. Bank's new Twin Cities Restoration Fund will give neighborhood developers access to zero-interest, short-term loans to redevelop foreclosed properties before investors can snap them up for rentals. The fund offers developers up to $250,000. When projects are done and sold, the developer pockets the profits and returns the borrowed money to the revolving fund so more projects can be financed.

The fund comes as money for HUD's extensive Neighborhood Stabilization Program, which has been financing foreclosure rehabs around the country, has all been allocated, said Steve Cramer, executive director at Minneapolis-based Project for Pride in Living. Cramer's group is one of four community development groups selected to participate in the new housing fund. One of its first projects is building two new houses on the empty lots in the Hawthorne area of north Minneapolis.

"This money comes along at just the right time," Cramer said. "The federal resources are being exhausted at this point."

Cramer said he expects the $250,000 he's been allocated to cover eight to 10 houses over three years.

Three other developers were selected to participate in U.S. Bank's new fund: Urban Homeworks, Greater Metropolitan Housing Corporation and Dayton's Bluff Neighborhood Housing Services.

Banks have been under heavy pressure from community groups and activists to do more to address neglected bank-owned homes that can destabilize neighborhoods. In Milwaukee, for instance, a broad-based group called Common Ground led a campaign to get five banks, including U.S. Bank, to address the foreclosure crisis in Sherman Park, a badly affected neighborhood on Milwaukee's north side. U.S. Bank eventually pledged $16 million for affordable mortgages there and in other areas.

Lisa Glover, director of community affairs at U.S. Bank, said the new revolving funds are separate from that effort and didn't result from community pressure. The revolving fund sprang from direct conversations the bank had with Milwaukee city officials prior to Common Ground's campaign, she said, and the revolving redevelopment fund isn't focused on Sherman Park. None of the other banks created a revolving redevelopment fund, she said.

So far the Milwaukee fund has financed four home renovations, which are "rolling fast," Glover said. "They are selling within a week."

Glover said U.S. Bank is considering starting similar redevelopment funds in other metro areas such as Cincinnati.