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Hibernia Helps Two Families Custom-Build Algiers Homes with Individual Development Accounts

Hibernia Helps Two Families Custom-Build Algiers Homes with Individual Development Accounts

Business Editors

NEW ORLEANS–(BUSINESS WIRE)–Feb. 20, 2001

Nearly $500,000 now available through Greater N.O. IDA Collaborative

to help buyers get first home, education or start business

LeBoeuf Street in Algiers has two new houses and homeowners thanks to an innovative program undertaken by Hibernia National Bank (NYSE:HIB), which custom-built the homes – a first in the area – to help the families afford better properties.

The homes are an example of how low- to moderate-income households can use Individual Development Accounts (IDAs) to help cover down-payment and closing costs on a first home. Hibernia also announced today that nearly $500,000 is now available through the Greater New Orleans IDA Collaborative so low- to moderate-income residents can buy a first home, start a business or pursue higher education. More than 140 households are expected to enroll in this program.

New Orleans Mayor Marc H. Morial praised the grassroots partnership among businesses, higher education and community organizations that has made this IDA initiative possible. Hibernia and Tulane University have spearheaded the collaborative, which joins more than 50 organizations in an effort to encourage lower-income individuals to achieve financial stability.

IDAs are matched savings accounts designed to help low- to moderate-income individuals build assets, with most seeking to obtain a first home. Hibernia was the first bank in the state to offer the accounts.

The new owners of the LeBoeuf Street homes, Lisa Burnett and Iran Anderson, each saved $1,000 in an IDA. The Federal Home Loan Bank of Dallas matched that at a 2-1 ratio, contributing $2,000 towards the $3,000 total. The homeowners got involved through the Neighborhood Development Foundation of New Orleans (NDF), where they completed “Building Better Blocks,” an 18-month program in financial literacy, home-ownership, budgeting and saving, according to Rosalyn Peychaud, executive director of NDF. The NDF designed the program specifically for IDA participants.

Program participants can set aside up to $1,000 in IDA savings. Through the collaborative, more than $490,000 is now available to match an individual’s savings at a 4-1 ratio, contributing up to $4,000 for each home-buyer, says Nancy Montoya, Hibernia’s community outreach director.

Participants in various IDA programs must meet income and asset requirements and be enrolled in a not-for-profit member’s program that provides oversight, counseling and advice on their specific asset goals. They must contribute a specific dollar amount or percentage of gross income every month to the IDA and receive counseling on credit and debt management.

Income requirements vary according to the funding source. Under the collaborative’s Federal Home Loan Bank of Dallas program for home-ownership, income cannot exceed 60% of the area’s median, which is $16,980 for an individual and $24,240 for a family of four. Income requirements vary for another pool available to the collaborative, where the U.S. Department of Health and Human Services has matched $155,000 raised in private donations since October 2000, Montoya says. Donors include Hibernia, BellSouth, United Bank, JCC Holding, the Booth Bricker Fund, Entergy and the New Orleans Jobs Initiative.

The rising cost of available housing stock led Hibernia to seek innovative approaches with IDAs, and for the Burnett and Anderson families, that meant building rather than buying.

“With the price of housing climbing so quickly, it’s been difficult for low- to moderate-income buyers to find affordable homes that don’t need significant repair,” says Willie Spears, president of Hibernia Community Development Corp. (CDC), a not-for-profit subsidiary of Hibernia. “That’s why we decided to look at building.”

Hibernia CDC financed and oversaw construction, purchasing the land and hiring Golden Hammer Construction Co. to build the Burnett home at 401 LeBoeuf St. and the Andersons’ house at 411 LeBoeuf St. The city provided “soft-second” mortgages, deferred loans that are forgiven if the buyer stays in the home for 10 years.

“They definitely got more housing bang for the buck than if they had bought an existing home,” Spears says, because of pricing advantages and the ability to customize the homes. Building allows the homebuyer more personalized options, such as customized children’s rooms, porches, laundry facilities or furnishings.

Both of the homes were priced in the $80,000 range, have three bedrooms and two full baths, and were completed in January. Both acts-of-sale were closed Jan. 31.

The purpose of IDAs is to create wealth through asset-accumulation rather than the income-distribution plans that are the focus of most government assistance programs. “IDAs aren’t a giveaway program,” Montoya says. “They enable low-income individuals to earn assets that will give them a better future.”

According to the not-for-profit Corporation for Enterprise Development (CFED), one-half of American households have less than $1,000 in net financial assets. One-third of American households have zero or negative net financial assets, and African-Americans comprise 60% of this group.

Asset-building programs have existed in the United States for generations, but they have usually been targeted at the middle class. Montoya cites examples dating back to land-grant schemes of the Old West and continuing through the GI Bill, homestead exemptions, individual retirement accounts and 401(k) plans.

Studies also have shown that benefits of homeownership extend to local communities socially as well as economically, Montoya says.

As the success of the IDA program and demand for its services have grown since the program’s inception in 1998, Hibernia has been instrumental in developing and promoting the collaborative, a partnership of service providers, funders and not-for-profit organizations. The not-for-profits work with individuals to establish asset goals, provide financial literacy training and track participants’ progress.

So far, 29 states, not including Louisiana, and the District of Columbia have passed legislation to support IDAs, according to the CFED. In New Orleans, dozens of people have opened accounts since the program began in 1998.

For information on the IDA program and enrollment, the public may call Nancy Montoya, Hibernia’s community outreach director, at 504/533-3029.

Hibernia, a Fortune 1000 company, has $16.7 billion in assets and 263 locations in 34 Louisiana parishes, 16 Texas counties and two Mississippi counties. Hibernia is the leader in Louisiana with 23.3% of deposits and in its Texas market area with 10.7%. Hibernia Corporation’s common stock (HIB) is listed on the New York Stock Exchange. News releases, product and service information, and other useful data are available at www.hibernia.com. Requests for information about products and services can be e-mailed to mailus@hibernia.com.

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