Marilyn Phillips is ready to talk business.
Though a little harried after running late this morning, she’s got her all-important binder — a three-inch thick black notebook stuffed with bank statements, loan options and meeting notices — open on the table in front of her, and easily slides into a discussion with housing advocates about credit scores and the condo she hopes to buy.
It’s a huge plus that she’s so organized. Phillips, a Ward 8 resident who qualifies as very low income, is hoping to buy the property just around the corner from her current apartment in Anacostia. While the unit is inexpensive by D.C.’s standards, it’s still going to be a stretch for her and her husband, Kelvin Jeffries. As is the case for many would-be low-income homeowners in the city, buying the condo would come only as the result of years of planning, cleaning up their credit, saving every penny and cobbling together funding from a variety of sources.
In their attempt to buy the condo, Phillips and Jeffries will be making use of several tools provided by local nonprofit organizations and the D.C. government, which prioritizes homeownership for lower-income Washingtonians.
In this dismal economy, many homeowners of all income levels have found themselves falling behind on their mortgages. But Phillips says she’s working now to avoid those problems. “We’re already maintaining good credit, so it won’t be hard,” she says. “Keeping the house and the mortgage paid won’t be a problem at all because owning is going to be cheaper for us than renting.”
For years, Phillips, 55, and Jeffries, 49, survived fine as renters: Together since 1981, the couple worked modest jobs — she as a legal assistant, he as a cook — that paid the rent.
But in 2006, Phillips was diagnosed with breast cancer; three years later, the cancer had metastasized and she was told she had an inoperable tumor on her spine. After a 3 1 / 2-month stay in a hospital that included major surgery and rehabilitation, Phillips was released in a wheelchair. These days, she’s able to walk freely, but the upper section of her back is numb and the tumor is still there. In lieu of working, she collects monthly Social Security disability payments.
All along, she and Jeffries had the idea of owning a home in the backs of their minds. “Seven years ago, I was working in a law firm,” Phillips says, “and there was a legal secretary there who bought a home through Manna. I left that job, but I always had it in the back of my mind: Manna. Manna will get me a home.”
Manna is one of the city’s most active homeownership organizations. Since 1982, the group has built or renovated almost 1,000 housing units for low-income people and helped many others obtain mortgages. But it’s arguably best known for its Homebuyers Club, which prepares participants for homeownership through one-on-one discussions with staff and a series of regularly scheduled support groups.
The Homebuyers Club has helped more than 400 poor families buy houses since 1986 — not a lot, mainly because it often takes years for the applicants to resolve their credit issues so they can make the purchase and many simply drop out, staff members say. Still, program director Willamena Samuels acknowledges that the organization’s follow-up efforts are limited. While staff send out mailings to stay in touch with buyers and comb public records to check for foreclosures, the organization has no real way of determining when someone is having trouble making payments.
The Homebuyers Club is where Phillips landed once she decided to seriously pursue homeownership. In January, she met with Frank Demarais, manager of Manna’s in-house mortgage brokerage, to talk about her financial situation. Then she began attending meetings. “I love the Homebuyers Club,” Phillips says. “I learned so much — about credit, about debt.”
She learned, for example, that she might be able to clear up an outstanding tax bill with Maryland that had lingered for years — and she did, by explaining the situation and writing a letter of apology. And she found out that the car she and Jeffries had just bought would make it harder for them to get a mortgage, so the couple is planning on refinancing the loan soon.
The one-on-one with Demarais, in turn, illustrated to Phillips that there was, indeed, a home she and Jeffries could afford. The Buxton, which is being renovated by Manna with financing help from the District, includes a number of two-bedroom units, set aside for people with disabilities, that sell for $95,000. Phillips said that seemed manageable for the couple, who make less than $43,000 a year.
Despite the slow recovery of the housing market, Demaris says he tells low-income people there are many opportunities for them to become homeowners.
“This is a phenomenal window in affordability, pretty much in the history of the District,” he says. It’s not just buildings such as the Buxton that were built with subsidized funds. Interest rates are incredibly low, and housing prices in many parts of the city are still way off their 2006 peak, he says.
A review of real-estate Web sites, such as Trulia, shows a variety of move-in ready single-family homes in Wards 7 and 8 for less than $200,000. Manna is trying to get the word out that, for many people, owning can be cheaper than renting.
Many of those low-income buyers may seek help from a city-led program called the Home Purchase Assistance Program (HPAP). Providing no-interest down-payment loans of up to $40,000 and another $4,000 for closing costs, all of which can be deferred for five years, HPAP has made loans of more than $200 million to more than 11,500 borrowers since 1976, including almost 250 last year. To qualify, borrowers must have clean credit and submit to homebuyer education and a rigorous underwriting process.
Still, the program is not without problems.
A Washington Post investigation in January showed that nearly 20 percent of HPAP recipients were late on their payments, a default rate at least triple the overall default rate in the Washington area. Moreover, the report said that nearly 50 of those homeowners had received foreclosure notices in recent years and 50 others were hit with liens from their homeowner associations or utilities.
While pointing out that the number of foreclosures among HPAP recipients has remained below 2 percent, housing advocates such as Demarais concede that communication between borrowers and the loans’ servicer may not have been consistent. Manna staff say they are pledging to stay in better contact with buyers in the future so as to alert them when HPAP payments come due.
Meanwhile, D.C.’s Department of Housing and Community Development, which runs the HPAP program, is receiving technical assistance from the U.S. Department of Housing and Urban Development to evaluate whether the program’s underwriting standards were too flexible and should be modified. In a 2010 report, HUD’s inspector general criticized the city for subsidizing higher-priced homes beyond the buyers’ means.
Some homeowners, however, say they are grateful for the programs.
“I went through Manna, I did the Homebuyers Club, I got HPAP, did the whole nine yards. It’s been wonderful,” says Bernice Joseph, who has owned her Northwest home since 2001. “I didn’t have super credit, not horrible, but not good enough to go to a bank. They put me on a budget: I didn’t know what a budget was. It’s not hard stuff; it’s discipline, and that’s what I needed in my life.”
“I did the Homebuyers Club,” says Linda Mack, 59, a bus driver for Gallaudet University, who bought a home in the Trinidad neighborhood in 2008. “It helped tremendously: I got information I never knew. They helped me get my credit straightened out, told me what to do, and I did it. Told me how much to save and I saved it. I moved in during the housing crisis — all those people losing homes and I’m getting a home.”
Phillips and Jeffries said they will be taking advantage of the HPAP program. That, plus a regular first mortgage obtained through Manna and a program with the online financial services company E-Trade that provides a one-to-one match of savings up to $10,000, would help the couple cover the purchase price of the condo.
Already, Phillips and Jeffries are learning to count every single potential cost. “It’s important to understand which payments can or will change,” Demarais says. “We carefully track them to make sure there’s no surprises.”
With condo fees and taxes included, and HPAP payments kicking in after five years, Phillips and Jeffries would be paying no more than $800 for the first 15 years — better than their current monthly rent of $900.
Getting to that point requires substantial scrimping and saving. Phillips and Jeffries are working on paying off credit cards while simultaneously saving $500 per month for the E-Trade program and budgeting for other homeownership-related costs. “There’s no frills in my expenses,” Phillips says. “Sometimes, I say, ‘Let’s just sit in the dark,’ so we keep utility bills down.”
Despite the difficulties, the challenge seems to have fired up Phillips. Toting her binder, she proselytizes about homeownership to anyone who’ll listen, and she has testified on housing issues before the D.C. Council.
Impressed with her focus and motivation, Manna is sending her to an advocacy conference in Florida next month, where she’ll take classes on grass-roots leadership. And when the Buxton finally opens — sometime around fall 2013 — Phillips says she is hoping to serve on the homeowners’ association and maybe even become part of a neighborhood group.
But first she and Jeffries have to get in there. “I am not going to let that unit go to a backup person,” Phillips says.
Amanda Abrams is a freelance writer.