When two executives at Woodforest National Bank noticed a dearth of affordable housing options in southeast Texas, they decided to do something about it, partnering with several housing and community groups to launch an innovative mortgage lending product aimed at underserved clients.
By Aileen McDonough
Woodforest National Bank
The Woodlands, Texas
Although Woodforest National Bank is not a mortgage lender, it’s making an impact on affordable housing with award-winning, innovative programs that keep community needs front and center.
In February 2022, the $9 billion-asset community bank in The Woodlands, Texas, established a collaboration with Housing Partnership Fund (HPF), a community development financial institution (CDFI) and the financing arm of the Housing Partnership Network (HPN) to combat the affordable housing crisis through a new loan program, HPF FlexCap.
“Generational wealth typically starts with home ownership. The largest purchase families make is typically their home.”
Doug Schaeffer, Woodforest National Bank
This groundbreaking program accomplishes three objectives: it enhances borrower credit; enables HPF to provide high-leveraged bridge loans so members can access naturally occurring affordable housing (NOAH) properties; and buys time for project sponsors to establish these properties as sustainable, affordable housing, now and into the future.
A generational wealth builder
Fast urban growth often leads to neighborhood gentrification, often pricing out longtime residents and lower-income families. In these communities, affordable housing is therefore necessary to preserve the diversity and inclusivity of communities, while enabling families to build long-term economic stability.
“Generational wealth typically starts with home ownership,” says Doug Schaeffer, Woodforest National Bank’s executive vice president and executive director, CRA. “The largest purchase families make is typically their home.”
Daniel Galindo, senior vice president and director for community development and strategy, adds, “The home becomes the asset that gets people to the next level in life, whether it be education or funding a business. It supports many life endeavors.”
Combating the affordable housing crisis has been a critical goal for Woodforest since 2015. “We worked with the Texas Department of Housing and Community Affairs to jumpstart its down payment assistance program,” recalls Schaeffer. “We were able to keep them from having to raise higher cost debt through the bond markets, and they went from last in mortgage origination to first. Our first program generated 160 first-time homeowners, all in low- and moderate-income areas. When we saw banks joining us, we realized there are a lot of ways to solve this problem.”
According to Galindo, the key was removing barriers to homeownership. “We look at all the tools we have, and we approach this so we can get the tough things done to make a direct impact and a difference,” he says. “We work to identify what’s keeping people from becoming a homeowner, so they can start building some equity, especially with prices skyrocketing as we’ve seen in the past two to five years.”
This initiative is only one of the programs that reflect Woodforest’s ongoing commitment to affordable, inclusive housing. Earlier this year, the community bank was an anchor investor of patient capital in community housing access through the Austin Housing Conservancy Fund (AHC), a private equity fund owned and managed by the nonprofit Affordable Central Texas. The mission of AHC is to retain naturally occurring affordable housing (NOAH) for essential workers in Austin, Texas, an area that was recognized in May 2021 as the fastest-growing metropolitan area in the United States.
AHC ensures the availability of affordable housing, revitalizing properties for first responders, nurses, teachers and other middle-income workers who make up a crucial part of the greater Austin community.
“Woodforest Bank was a catalytic investor in the Austin Housing Conservancy Fund that helped to bring the fund out of the pandemic and lead other banks to invest with us,” says David Steinwedell, CEO and founder of Affordable Central Texas. “The bank recognized the dramatically growing need for affordable housing in greater Austin and through its leadership, has helped the fund to more than double in size in six months.”
Affordable housing shouldn’t be siloed out. That’s why HPF FlexCap also supports another innovative solution: additional affordable housing and workforce housing stock by mission-based developers, which creates an opportunity not only for economically sustainable housing development but for true community building.
“We’re really proud of that program, because we can scale, and it acts as equity mezzanine debt,” Galindo says. “And we don’t know of any other bank that is currently doing it yet, but I think they will in the future, because there’s a huge opportunity there, not just from an economics perspective, but from an impact perspective.
“We can’t stay separate,” he adds. “That’s not the intent. Mixed-income development creates a lot of power for homebuyers of every socioeconomic status, if you will, to blend into one community. It’s about bringing people from all walks of life together to coexist and thrive together.”
Affordable housing: Just the beginning
By looking at the needs of each community and seeing the patterns and trends, Woodforest National Bank is looking to solve the affordable housing crisis holistically. Its award-winning program, the Woodforest Foundry, connects entrepreneurs with mentors and resources to empower local businesses to actively participate in community revitalization.
“We’re looking at all the tools in our toolkit, from opportunity zones to job creation,” says Schaeffer. “We’ve got so many initiatives, but it is all community-centric, all local. It’s being responsive to the needs and taking the tools we built—and those we’ll continue to build—to help underinvested communities lift up.”
Aileen McDonough is a writer in Rhode Island.