The Littlest Victims Of the Mortgage Crisis

The long arm of the global financial crisis reached down into Morena Parada's preschool classroom, where a little girl named Joeli Arias-Lopez painted bright green and orange splotches on an oversize easel and pronounced it a house.

The 4-year-old was blissfully unaware that her school, the Child and Family Network Center, stays open in this converted warehouse with a grant from the now-foundering Freddie Mac Foundation. Or that without that money, which was expected last month, her school, filled with bright puzzles, toys, blocks and dedicated teachers, might end the year early or close down altogether.

For 15 years the Freddie Mac Foundation, one of the largest corporate donors in the Washington region, has helped this little preschool, which charges nothing and serves about 150 needy children at six locations in Alexandria and Arlington County, stay afloat. But when the government announced in September that it had taken over the mortgage-finance giant to avert a collapse, officials put all charitable grants on hold, just two days before the preschool's grant was expected to be approved.

Now the preschool is in limbo. No one can tell its officials when or whether their grant, and those of several other area organizations that work primarily to help children and families, will come through.

"Which of these kids do you want to tell can't have an education?" asked Steve Nearman, the preschool's board chairman, watching Joeli paint as other classmates sang "Twinkle, Twinkle, Little Star," played with blocks or traced butterflies with stencils. "They're not widgets. They're children. They're lives. They're the future of our community."

The board is also considering cutting back on social work services it provides to help families become self-sufficient, scaling back English classes for parents or closing the school early, Nearman said. The school year normally ends late in June. Without Freddie Mac's $250,000, or about 14 percent of the school's $1.8 million budget, the school might be lucky to make it to March. And with the economic downturn affecting everyone's bottom line and donation habits, school officials don't count on anyone else to pick up the slack.

Chief Operating Officer Lee Jackson has a stack of bills on his desk. He pays the ones he must, such as the mortgage, utilities and food for the children's meals. The others he "prioritizes."

"People think about the financial crisis, and they think about corporate executives," said Barbara Fox Mason, the preschool's director. "They don't realize how it's affecting people from the other side of the street."

The Freddie Mac money is usually the one donation Mason can depend on. In July, as in previous years, Mason met with a Freddie Mac official to craft the school's grant proposal. Two days later, Freddie Mac called and told her to expect $350,000. Although she had submitted a grant proposal for that amount, to be conservative, Mason budgeted $250,000, which is what the school had received in previous years. "It wasn't irresponsible of us to put in our budget what they typically give us," she said. "They were the rock. No one saw this coming."

In early September, Mason was gathering the documentation required as part of the grant process, including information showing the school's success. (Independent bench marks show the preschool's students, who often start far behind their peers, progress at twice the national average through the year.)

Then, Sept. 9, two days after the federal government announced the Fannie Mae and Freddie Mac takeovers, Mason got a call on her cellphone saying the Sept. 11 board meeting to approve grants had been postponed. And she hasn't heard anything since. "We're under conservatorship, and as the conservator said in September, they're reviewing our charitable investments, both for the company and the foundation," said Shawn Flaherty, spokeswoman for the Freddie Mac Foundation. "Final decisions haven't been made. It's an ongoing process."

With the delay, Mason was forced to ask the City of Alexandria to release about $150,000 earmarked for the preschool now rather than in January. Those funds will keep the lights on through March, Mason said. "Otherwise, we couldn't make it."