“Ethical Lenders” Employ a Tried and True Method: Long-term, Fixed-rate Loans

This report from ABC News focuses on Neighborhood Housing Services of Chicago, a nonprofit and part of a growing list of organizations that embrace the identity of “ethical lender,” working with low-income borrowers amid an unnerving financial crisis.

What’s so ethical about them? Simple: long-term, fixed rate loans, fundamental economic responsibility, crafting a mortgage that allows the borrower to live within his or her means. Basic, sound common sense.

According to the ABC report, Neighborhood Housing Services has lent more than $2 million in the past few years, with financing coming from private investors and banks. The organization has reported a mind-boggling 98 percent on-time pay rate from its borrowers.

The ethical lending movement, according to the article, began with a group of nuns who invested a portion of their retirement savings to provide loans to the working poor.

From the article:

Sister Corinne Florek, fund coordinator for the Mercy Partnership Fund, which has invested in several nonprofit housing developers, says she has witnessed the success of ethical lending. “When I invest in you, we are now in a relationship with each other, because I’m asking you to pay that back, so now your good and my good are linked,” Florek said.

Nuns forgoing retirement funds to help low-income homeowners to keep foreclosure at bay is a great lead, but it hardly ends there. Check out Opportunity Finance Network, a network of private financial intermediaries identifying and investing in opportunities to benefit low-income and low-wealth people in the U.S.

The Network, according to their Web site, in addition to offering counseling and refinancing options, “originated more than $19.8 billion in financing in non-conforming urban, rural, and Native communities through 2007. This has generated or maintained 191,381 jobs; 43,050 businesses and microenterprises; 577,736 housing units; and, 9,552 community facility projects.”

Matthew Brian Hersh served as senior editor at Shelterforce from March 2008 to October 2012. He studied English at Rutgers University and has spent his professional career in journalism, policy, and politics.


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