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CEDAR RAPIDS — The fledgling Neighborhood Finance Corporation of Cedar Rapids has closed on eight loans in the two months since the organization began lending in Cedar Rapids, and has another 10 loans pending.
That’s a good start to an initiative officials hope will stabilize deteriorating core neighborhoods through new investment and in turn spur others to invest in their homes, they said.
“I’m extremely pleased,” said Scott Overland, the District 2 City Council member who championed bringing the program to Cedar Rapids. “It’s getting a head of steam, and I think as we get out after a year, two years, three years, my estimation is it’s not only going to be successful, but we’re going to start to see the results. It’ll gain its own momentum as time goes by.”
Cedar Rapids’ Neighborhood Finance Corporation is affiliated with a program under the same name in Des Moines that has been operating for more than 30 years.
In Cedar Rapids, private lenders have created an $8 million loan pool to provide loans in targeted neighborhoods, including Wellington Heights, Kenwood, Mound View, Taylor and others, with up to $10,000 forgivable over five years. Traditional lenders may find loans in these areas too risky.
Just about any improvements could qualify — new bathroom, roof, garage, floors, ceilings or other items — said Overland and Stephanie Preusch, executive director of the Neighborhood Finance Corporation. The organization works with a city inspector to determine renovation items that will be required as part of the approval process in the case of some loans. Loan options for purchasing, refinancing, front porch upgrades, home improvement and second mortgages are available.
“People want to see their neighborhood be stable, safe and that it appreciates in value along with the rest of the city, that we don’t end up creating areas in the city where, gee, there’s disinvestment, and nobody wants to move there,” Overland said. “We want all these neighborhoods to be viable alternatives for people that want to live in those areas.”
The program is not contingent on income, but borrowers must qualify from a credit standpoint as they would for a traditional loan.
The city of Cedar Rapids has committed $1 million annually for five years to support the forgivable-loan initiative. While local business leaders donated start up money, the Neighborhood Finance Corporation is expected to be self-sustaining through fees generated by loans.
Thus far, two loans have been for purchases, one has been for refinancing, four have been for home improvement, and one has been for a second mortgage. The $322,799 in loans is expected to lead to $147,150 in rehabilitation value, and $52,148 will be forgiven. Among pending loans, five are for front porches, one is for purchase and four are for home improvement, totaling $193,700 in loans and $203,414 in total rehabilitation.
Mary Belcher, of Cedar Rapids, was the first loan recipient in early January and used the money to make updates to her 1929 home in the Taylor neighborhood, according to the Neighborhood Finance Corporation’s February newsletter. She pulled up the carpet on the first floor and varnished the floors upstairs. Next up, the bathroom will get a new bathtub, toilet and vanity, and this spring she intends to replace garage siding, which still had damage from the 2008 flood.
She praised the “free money,” according to the newsletter.
Preusch said applications are a little slow this time of year, but as word-of-mouth spreads and real estate agents start touting it as a selling point, she anticipates getting busier.
“Once you get that first neighbor that does it and they start talking about it when everybody comes out of their house, that’s where our referrals come from,” Preusch said.
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