Travis County Commssioners Court
March 2, 2004
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Item 38
38. Authorize working group to move forward with the development of a single family lease purchase program for the housing authority of Travis County. What do you have in mind for the working group?
>> I believe the working group was set up the last, a couple of weeks ago.
>> we did have several question last time.
>> yes, sir.
>> and you all have the answers today.
>> yes, sir, to remind me I'm with [indiscernible] company, we did take time to prepare the answers to the questions that you all laid out in our last meeting two weeks ago. We attempted to respond to those questions and the information that was contributed y'all by the housing authority. Some of the questions that you had revolved around essentially the success stories associated with these transactions. We have provided those to you as -- as a separate exhibit basically success stories that were -- that run the media in the areas where these programs were put on the ground in the past and also some personal testimonials from folks who have actually participate understand the program in southern california.
>> in addition to that, you all had asked for some kind of a -- of a characterization of the demand, anticipated demand in the area. That we attempted to -- I don't think we attempted. I think that we actually put that on paper. Pretty sufficiently to give you an idea of what kind of a response we received in the community, in addition to that we are giving you an overview of the infrastructure to give you an idea of how this program works on a day to day mechanically, then of course you asked for information about the firm that I represent. That's included as the fifth and final tab in that brochure or handout. I will be happy to answer questions about any of the information that's there in front of you.
>> well, the most startling information that I received at the last meeting was that of the 19 attempted -- 17 have been unsuccessful.
>> that's not an overwhelming success story. Did I interrupt you?
>> you were about to explain.
>> yes, sir, as best I can explain. Just to reiterate, there was a Ron for the lack of success -- reason for the lack of success, simply because the teams that put those deals on the ground didn't realize the need to put a sufficient infrastructure in place and support that infrastructure throughout the origination period. That being said those deals that had been successful have a very experienced deal team in place, a comprehensive working knowledge of the real estate market. Every aspect associated with the lease purchase program from marketing opportunity to actually originating the lope, educating the -- the loan, educating the lenders, bowers, counselors, as well as the property management all the way through to the assumption of the loan, which is the eventual goal. Providing 200 families the opportunity to live in a home of their choice and then assume the outstanding balance of their mortgage loan. Making them a credit borrowers as we like to call them. Does that speak to your concerns?
>> [indiscernible] is not the same as satisfied or resolved.
>> probably a better point. Some of those concerns still exist?
>> right.
>> mr. Davis, you did do a little research.
>> yes, sir, I did. I attempted to contact and talk to people that were involved in other programs around the country. I talked to -- to people that were -- had done programs and -- in louisiana, arkansas, arizona, virginia, and california. In addition I talked to another housing finance corporation in -- in Texas that had -- that had considered these programs. I would say I was given five programs that gave negative responses and one program giving positive responses. Some of the issues that -- that were involved in it is that it was just -- it was a lot more work than the -- than the people had expected and it was -- they were not able to -- there were -- there was some situations where home buyers were or the public thought that a lot of people made applications that -- that really weren't suitable for the programs. I mean people got the impression if they had no credit or very bad credit that this was something that they could -- that could offer them the chance of buying a home, which is not really the case. And so there was -- there was I think in mississippi the person told me that the -- that the governor had made a public service announcement about the program, they got, you know, hundreds and hundreds of applications it kind of got things started off on the wrong foot. There have been certainly difficulties, my impression is that these programs are pretty labor intensive and you really have to know what you're doing and requires of course the 39 months that the hub buyers in the lease situation, there's a lot of management that has to be done through the program. So --
>> mr. Hilgers, he either sent us a letter or somebody else gave it to us. The letter was basically to the effect that during the initial communication with you and I guess the board about the possibility of a housing -- of this housing project, that he had mentioned the availability of the smart program but had not insisted on it. And -- and that would seem to suggest that maybe you all should have a follow-up conversation.
>> yes. In fact we've had two meeting was mr. Hilgers and his staff. And have agreed to have ongoing dialogue in regard to implementing and serving the community through his program as well as how this program could benefit from that. I believe cooperation.
>> what action are you hoping for today?
>> actually hoping that you all will allow us to move forward with the continued development and implementation of the project in light of the fact that we are trying to make this program available to the home buying community within the next two to three months. We would request permission to move forward. That would include the new ... Make the program available in may.
>> what if we do this? I'm not ready for action today. However, it seems to me that in two weeks, March 16th.
>> yes, sir.
>> if I were to see sort of written 7 reasons why -- written reasons why we could make a -- this program successful, and to be honest in the back of my mind, are the numbers 19 and 17.
>> yes, sir.
>> so what I'm asking I guess is how do we make sure that we fit ours under the two that are successful.
>> become 3 out of 20.
>> yes, sir.
>> I assume that the 17 that were not so successful still probably had lessons to teach.
>> I'm sorry.
>> some negative, some positive. We would want to avoid whatever obstacles, you know, got them sidetracked or --
>> by all means. Mr. Davis did categorize it correctly. Mississippi and louisiana where there was just an overwhelming response at the outset. Again that speaks to the concern that there are shortcomings in the infrastructure in those programs that have been unsuccessful. Constantly we spent the last -- again i've been involved with this program since '96 in it's various forms. We spent the last three years in earnest making sure that those same tragedies don't befall the programs we have put in place simply because we realize that the community has to live with the ramifications of that. We have gone to great lengths over the last 18 months to make sure that we have a full cadre of lenders as you have seen in this packet. We have lenders willing to pay a commitment fee in this program. That's unprecedented. Only happened one other time before, if arizona where I required them to pay a half a point whereas they are willing and agreed to pay a full point to powers patriot here. Understood that we have found that the program administrator who has that skill set, if you will, that I referred to earlier that made sure just paramount to the success of the program. So if those kinds of concerns, put some kind of a response on paper that would sort of lessen the concerns and allow us to move forward. Be happy to do that for you.
>> [indiscernible]
>> rent -- I'm keith hoffpower. Over the last few months I have spent extensive time working with not only lenders but also the reality community. Making sure that we have laid the foundation so that the kind of relationships that are crucial to this type of a program are put in place. The responses that we have gotten from the realtor community has been outstanding. I spoke at the hispanic relators association lunch a couple of weeks ago, the phone has not stopped ringing since. All of them want to know as soon as the lenders are put in place so they know how to bring their people to. One of the pieces of information that I put before you this afternoon is a letter from one of the lenders that is going to participate in this program. He identified I believe 175 miles that are suspended while continuing through the processing. For either lack of -- lack of cash or credit issues. Of those 175, he estimates that 70% of those files would qualify for the lease purchase program. We only have enough fund to serve about 200 homes. That's -- that's pretty much half of where we are trying to go. That's with one lender. Additionally, he reiterates in his letter that he is willing to take $3 million and low didn't any will be left over, should there be any left over, he would like to have an additional allocation. The commitment number that's we provided to you and the -- in the pamphlet are conservative estimates that the lenders who are mentioned in there felt very comfortable including in that information package. There are at least two of them that would like a sizable increase in the amount that they represented. So it is part of our plan and part of our infrastructure to utilize the program administrator to foster those -- continue to foster and develop those relationships with the lenders and the realtor community. One of the things that will be done is that there will be a lender training provided, prior to the rollout of the program, there will also be realtor training provided prior to the rollout of the program. So both parties know what -- how the transaction works and who the transaction is best suited for.
>> okay. I would like to see I guess some written explanation on where this would go on the county's financial statement. Whether this can do that or what if we can get that in two weeks. The other thing is that it would seem to me, if we follow the recommendation and appoint the housing authority's board, the board of this corporation, it would make sense to me to put one or two persons on the board who have a lot more familiarity with this area than Commissioners court. And the board of the Travis County housing authority. This is -- it's a pilot program I think that could be remarkably successful and benefit a lot of residents. At the same time it could -- it's one that could easily fail.
>> absolutely.
>> let's think about that between now and the 16th. So in my view what we ought to do is authorize putting together more specific information to allow us to make an issue formed decision on March 16th. Commissioner Sonleitner.
>> > I will go one step further from what the judge was talking about. I would say what do we need to do to ensure this is not on the caffe are in terms of there is no conduit debt. There are things in terms of what can we do to make sure it isn't. I will leave it at that. I'm kind of the same place that the judge is. It's baby steps. I think one of the -- the one thing that you do have going for you is that from reading harvey's good memos, those that were successful were completely overwhelmed and unprepared. I think that is one place where you all are is you understand that it is not easy, it is going to be something that will take a lot of work, and that you are going to need to be prepared to handle what comes your way. So I think knowledge that it isn't a quick fix, not everybody that walks in the door is going to get one of these houses is a huge step in terms of you understand the difficulties up front as opposed to it really does seem to be that folks didn't really know what we are getting into. I think that is a positive thing going for you. But I would like to see more of a written plan. But I want to see that it is not on the caffer but any stretch of the imagination.
>> any problem with taking this course.
>> that's fine.
>> and committing basically to -- the 16th or two weeks.
>> I guess reduce to writing -- snoold be fine.
>> anything else today?
>> no, sir, thanks for your time.
>> appreciate y'all's work on this.
Last Modified: Wednesday, March 2, 2004 9:13 AM