Interview #088 Jul/Aug 1996

An Interview with Wendy R. Sherman

Wendy R. Sherman was recently appointed President and CEO of the Fannie Mae Foundation, as part of a significant expansion and restructuring that will make the Foundation an even more […]

Wendy R. Sherman was recently appointed President and CEO of the Fannie Mae Foundation, as part of a significant expansion and restructuring that will make the Foundation an even more prominent player in the housing field.

Prior to coming to the Foundation, Sherman was Assistant Secretary of State for Legislative Affairs; Director of EMILY’s List, the largest financial and political resource for pro-choice Democratic women’s candidates; Chief of Staff for Maryland’s then Congresswoman (now Senator) Barbara Mikulski; and Special Secretary for Children and Youth and Director of the Office of Child Welfare for the State of Maryland. She has also worked with the National Center for Urban Ethnic Affairs, the National Neighborhood Coalition, and University of Southern California’s Washington Public Affairs Center where she managed a multi-city capacity building project in public-private partnerships. Her previous housing experience was with The Enterprise Foundation as Director of Resource Development.

This interview took place on June 7, 1996.

Chester Hartman: This is a perhaps a somewhat premature interview. You’re brand new at the Fannie Mae Foundation; the Foundation itself was recently reincarnated; and although you have a rich and diverse background, in recent years at least, it’s largely not directly on housing issues per se. Nonetheless, the Foundation has been an important player in the housing field and obviously will be even more so with its new resources. So we at Shelterforce would like to get some idea of your early thoughts on the Foundation’s upcoming role in the housing arena. Could we start by having you describe this new Fannie Mae Foundation and how it differs from the former entity?

Wendy Sherman: I’m delighted to do the interview, and while it may be a bit premature because we’re just getting going, I’ll lay out some of the issues we’ve got to sort out. Fannie Mae made a decision to create an expanded foundation and philanthropic effort. So as part of its capital restructuring, Fannie Mae gave the Foundation $350 million worth of stock. It is not an endowment, and it’s not $350 million to spend in a year. Depending on the strength of the stock, I would guess it will last 5-7 years. At the end of that time – probably before that time – Fannie Mae will have to make a decision about what it wants to do to keep the Foundation going.

When the original decision was made, a decision was also made – in part because of the tax regulations involved and the law – that the Foundation should become an even more separate entity than it had been before. It had been a corporate foundation. So in this new incarnation people who were working at the Foundation in the corporation left Fannie Mae and became Foundation employees. The Foundation is a separate operation from the corporation, in a separate building.

When the people who did the traditional grant-making and program-related investments came to this new location, some other programs that had been at the corporation came over as well. They include what was called the Office of Housing Research, directed by Jim Carr, and all of the public service outreach advertising – so the ads that people are seeing on the ten o’clock or eleven o’clock news or on Bullets basketball are now brought to you by the Fannie Mae Foundation.

CH: That was for tax purposes?

WS: No. I think the feeling was that the public service outreach advertising, in the form that it’s in, has really a charitable purpose. In other words, it is broadly reaching out to American citizens and saying to them: “You can have access to affordable housing. You might be able to get started on the path to homeownership, and we can at least give you some information that might help you get on your way.” It’s appropriate for that message to be paid for by the Foundation.

In addition, two other programs came over. One is the New Americans Program, which is an effort to reach out to new citizens and immigrants to this country, because it was found in some research done in 1995 by Fannie Mae that immigrants who are renters are three times more likely to become homeowners than are other renters – because part of the American dream is to become a citizen and own your home. The New Americans Program is just marvelous. It’s not only reaching out to communities of different immigrant groups, and putting out materials in a variety of languages – some of our guidebooks now come in seven languages – but we’ve developed and have started to distribute an English as a Second Language training module talking about homeownership and buying a home, to be used with teachers of English as a Second Language.

The last piece is an initiative trying to end some of the discriminatory practices in the mortgage lending business. We have a beginning of a program, where we are going to work with community colleges and other partnerships to help folks take courses and get into the mortgage lending business, so that the people who sit across the table – they become loan officers – may look a little bit more like you, might understand your culture and your values.

So we have all of these pieces, and probably will create some new pieces. And what we’re doing now is beginning to figure out how they can work in synergy to do a better job.

CH: How big is the Foundation staff right now?

WS: We’re not quite to where we want to be. When all is said and done, it will probably be something like 60-65 staff.

CH: And it’s all here in Washington?

WS: It’s largely here, but we do have five regional Foundation people as field officers. I think everybody would agree that more is happening out there than is happening here in Washington.

CH: Where are they located?

WS: In Atlanta, Dallas, Pasadena, Chicago and Philadelphia. Actually, at the moment, we’re recruiting for someone for Pasadena and Dallas, so if any of your readers are interested they should let us know.

CH: Let me pose some questions about national housing policy. Nationally, the housing picture is not a happy one, particularly for low-income folks and people who are their advocates. Housing also seems to be virtually invisible on the political scene among the presidential and congressional candidates. Do you have any sense about why it is such a back-burner issue? Or maybe you don’t agree with that characterization.

WS: I think, overall, it has not had the prominence in federal policy terms that we all would like. But it’s ironic. As you know, many years ago I worked in the neighborhood movement and began working with Geno Baroni and Art Naparstak in the late 70s. Just a few days ago, I met with Pablo Eisenberg of the Center for Community Change to talk about where things are, and afterwards he sent me a paper I wrote for the National Neighborhood Coalition in 1979 about what we needed to do to move the housing agenda. It’s fascinating. We were saying how horrible it was that nothing was going on at the federal level and how few funds there were. In terms of programs, if not dollars, what we have now is a wealth of riches compared with that era. We were talking then about the need for homeownership counseling and trying to certify counselors all over the country. The Foundation has just given $2 million to help launch a homeownership counseling institute.

But it’s true: housing doesn’t have the visibility it needs. I think that in part is tied to the struggle to acknowledge the needs of cities. We have become a political electorate that feels more suburban than urban, which creates a great disservice to the American people, because our urban centers in many ways are the hub and heart of the country. People talk about the Midwest as being the heartland of the country, and it is in one sense, because of our agricultural roots. But the American roots are the immigrant, urban cities that have created this country’s vitality and a lot of its innovation. So I think some of it is related to the fear, concern, and anxiety over the cities, and people wanting to escape from them. I do have a sense – and maybe this is the legacy Jim Rouse left to all of us – that we are on the edge of people deciding they want to reclaim the cities. On that precipice, understand the importance of homeownership. People talked for a long time about how important it was for low-income people to have access to affordable housing – which is absolutely true. But I’ve also noticed in the last few years people talking about mixed-income communities as a way to ensure the economic vitality of a neighborhood and a city. [see Shelterforce #80] I think these strains are coming together, and it will build a much broader base for housing to become a front-burner issue.

CH: How much do you think race is a key factor in not paying attention to the cities and as a barrier to the kind of restoration of the cities you were just talking about?

I also see one other change, because I’ve been talking to lots of national groups since starting in this position. Most national groups are talking about housing, homeownership, about community policing and safety. They’re talking about education, job training and day care, and they’re talking about the interconnections of all of these. I think we will see more and more collaborative efforts to put all of the pieces together, so that in fact there is viability for neighborhoods and for cities.

CH: What should be the role of private philanthropy in trying to make affordable housing more of a front-burner issue on the national scene?

WS: That’s a tough question, in part because of the environment in which we are currently living. One of the things private philanthropy can do best with the dollars that we have is to leverage collaboration and leverage experimentation. We can take risks, we can show policy makers and politicians that something can be done. We can demonstrate what might be done if only there were a federal, state or local policy that made it more easily done. We can show that if only there were a waiver, if only financing were allowed to be packaged in a certain way, then we might be able to replicate that experiment and do it on a larger basis. Philanthropy can seed those ideas and role model the changes.

The Fannie Mae Foundation is in a particularly good position to do this, in that we have the research capacity to test out new approaches and give them credibility; we can say, “Here’s the proof, this works.” Research tells us what the obstacles are, it suggests new solutions.

CH: Some of the larger foundations – Casey, Surdna, etc. – which have been supporting housing have been favoring community-building initiatives, along social dimensions, to accompany more traditional physical housing, stressing a neighborhood’s strengths rather than its deficits, trying to build healthy neighborhoods. Is that something the Fannie Mae Foundation will also be emphasizing?

WS: I think everybody will be emphasizing that. What the Fannie Mae Foundation has done best and will probably continue to do best is housing, and, somewhat more broadly, community development and homeownership. But our role will probably continue to be that piece of the puzzle that might leverage some of those other pieces or work in partnership with some of those other pieces. Even with the resources we have, there is the danger the Foundation can spread itself too broadly trying to do a little bit of everything. Part of our strength is the expertise we’ve developed. What we have to do is take that expertise and use it to leverage and create collaborations that get at some of these broader issues.

I don’t think that, intellectually, most people would disagree with what some of the larger foundations are doing, because if you help someone build a house, or become a homeowner, or renovate or rehabilitate a house, if there’s no neighborhood economy, if there’s no city economy, if there are no jobs for people to go to so they can continue to pay their mortgages or their rent, if there is violence and fear, people aren’t going to stay in that neighborhood for very long and those houses are not going to be kept up for very long. There’s no sustainability. You have to create enough elements that there is sustainability for that homeowner or that solid renter over time. To do that, you have to build some community around the house.

CH: One of the concerns that people in the housing movement have is that each foundation seems to have its own agenda. The funding community rarely acts in a strategic way, collectively. Do you think that’s a problem? Do you think that Fannie Mae, given its leadership and resources, is going to play any role in trying to bring some coherence to the foundations’ role?

WS: The regional associations of grantmakers that exist around the country are key mechanisms that we will certainly be active in. And funding collaboratives are also now becoming quite popular as a mechanism to do exactly what you said – which is to be strategic, to talk with each other, to collaborate, to focus the mind and focus the resources. But one has to be careful in doing that, because if all of the funders get together and decide on a strategy, it had better be done with a lot of discussion at the local level and at the grassroots; otherwise we risk doing something that would leave an awful lot of people out in the cold. We would be acting in a fairly god-like position. The Fannie Mae Foundation itself, because of its financial resources and skill resources, can indeed play a role in trying to be very strategic about trying in advance to define what outcomes we’re seeking in our grant-making and test them out to see if we’re getting there.

CH: One of the housing movement’s critiques of foundations is that they frequently will make start-up grants for two or three years, after which you sink or swim. So many of these groups in the housing field are dealing with very low-income communities that have few resources; they don’t have the ongoing stability to sustain themselves, and government funding cutbacks exacerbate that problem. Do you see a need for a shift toward long-term, permanent funding of housing organizations?

WS: There may be long-term funding needs of housing groups, but I’m not sure foundations are going to be the ones to do it. Several things are going to happen in the coming years, because no matter who is in the next Administration or Congress, a fairly profound measure of devolution is going to take place and has taken place. There will be enormous pressure on all parts of both housing and social welfare movements in local communities to come together. We will see CDCs taking on non-housing responsibilities; we will see some CDCs disappearing in favor of more broadly-based kinds of community groups; we will see broadly-based community groups working out collaboratives to become developers, because people are going to have to figure out different ways to put financing and money packages together, and local governments are going to look to people to build the kind of program structure that has sometimes been built at the federal level. I don’t think anybody has spent enough time looking at the capacity of these local groups and organizations to take on what is going to be a truly staggering responsibility. That’s very worrisome. I know that some of the national intermediary groups are looking at ways to go back to basic capacity-building for community organizations and CDCs, because they’ve gotten to one level of sophistication, but there’s need for a giant leap.

CH: Do you have any sense of what the Foundation’s priorities will be, in choosing between national, state-level and local work, between organizing/advocacy vs. development activities?

WS: We’ll make about $19 million in grants this year. That’s up from $14 million last year. In addition, over the last two years, we made some $5 million in housing program-related investments (PRIs), and we project $5 million more this year. Our PRIs are used only for housing. Two-thirds of our grant budget and all of the PRIs go to housing and community development. So we’re pretty focused. We’re also pretty focused on what had begun at Fannie Mae but now is owned by the Foundation, “Showing America a New Way Home,” which not only includes public service outreach advertising but also grant-making support for homeownership education and counseling, housing production, and infrastructure support.

Back when I worked in community organizations, what you always wanted was basic operating support, because you could get grants for everything else. You’d develop a program, but you couldn’t get funding for the operational support. So we do that in some instances. As I said earlier, we work at a significant level through our regional field reps. And we have tried to do a significant amount of funding through national intermediaries, because it leverages more financing for local groups. We’re coming to the end of a three-year plan that existed for the Foundation previously, which ends in 1996. So we’re at a perfect point to take a hard look at how many $5,000 and $10,000 grants we should give away, and how many $250,000 or $1 million grants we should give away. More and more of the grants have become multi-year grants, three-year grants for instance, but we’re going to take a look at all this to make sure that where we’re headed over the next three years matches what people are coping with out there. I would urge people reading this, if they’ve got thoughts and ideas or things they wish foundations were doing in this field, to put it down on a piece of paper and send it because we’re very open at this point in trying to be very responsive and useful to groups and organizations out there. [Shelterforce readers can write her at the Fannie Mae Foundation, 4000 Wisconsin Ave. NW, Wash., DC 20016]

CH: Would that include some emphasis on advocacy – community, housing, or tenant organizing work?

WS: We generally have not done that. We’ve been much more focused on housing production and counseling, and I think we’ll probably keep to that focus.

CH: Fannie Mae is primarily dedicated to homeownership, obviously. Recently, the corporation spent a lot of money, during the New Hampshire primaries and elsewhere, defending the homeowner deduction against the flat taxers. Yet one of the principal and growing critiques from low-income housing advocates is the wide and highly regressive disparity between the indirect subsidy the income tax system gives to homeowners and what is given to poor families through the direct subsidy system. Do you think the Foundation in any way can get involved in helping redirect that imbalance?

WS: The home mortgage deduction is virtually sacrosanct. I believe there is good reason for it to be sacrosanct. I thinkthe fundamental problem, which is how to provide support to low-income people so that they have options and are not cut out of the economic vitality of this country, shouldn’t be solved by taking away the home mortgage deduction, which serves a real purpose. We should not allow ourselves to be forced into a choice between the two. There ought to be a way to do both.

CH: Is there anything else you’d like to pass on to the our readers that we haven’t already covered?

WS: We’re going to be looking at what role we can play as people try to take American cities back. We’re going to be looking at what role we can play with our particular expertise in the niche we fill in housing, community development and homeownership, in what is clearly a much more broadly-based effort at the local level. We’re going to be looking at the role of technology in housing.

We also have to take a look – and our research capacity helps us to do so – at the remaining large obstacles for affordable housing. If it is discriminatory practices, what are they and what role can the Foundation play in moving them? Is it additional training programs to change the face of who provides mortgage loans, or is it other things? If one of the remaining obstacles is how people get credit-rated and what they might be able to do about that – is there a role we can play in that? I’ve asked our research folks to give us a framework as a Foundation as to what the field looks like – what are the largest remaining obstacles, what do we need to get more research knowledge about, and what are we ready to test programmatically to help build the agenda for this Foundation.

CH: Thank you.


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