A number of years ago Pamela Kunse spotted her dream home in the Vernon neighborhood. Located next door to the residence of old family friends, she frequently gazed at the structure. Built in 1909, it has lots of character, especially the wrap-around porch, the most appealing feature to her.

The house had been vacant for almost 10 years when Pam made her first attempt to purchase in 2000. But she wasn’t able to qualify for an amount large enough on her own. Then, in early 2003, the property was on the market, and in foreclosure, for only $79,000! What a steal! What a mess! The home had been badly damaged two years prior, the subject of a mysterious fire that threatened its stability but not Pam’s determination.

By that time, Pam had convinced her partner, Jamie Vandenberg, and their mountain-climbing companion, Amy Hendrix, to join her in making the purchase. In fact, they were hiking the Appalachian Trail when they decided to pool their resources. They had reached the summit the same day as the fire disaster.

The search for a loan to purchase a fire-damaged structure took a bit of effort. They first went to Albina Community Bank for financing. The bank could not help due to the property’s condition. The loan officer remembered the unique loan products available through the Portland Development Commission (PDC), and the contact was made.

The trio soon learned that they had been referred to the right place. The PDC is the City of Portland’s urban renewal agency. The mission of the PDC is “to bring together resources to achieve Portland’s vision of a diverse, sustainable community with healthy neighborhoods, a vibrant urban core, a strong regional economy and quality jobs for all citizens.” Through its Economic Development and Housing Department, the agency strives to improve and revitalize specific areas of the city, add public improvements to enhance livability, increase property values, stimulate investments, and attract new businesses and quality jobs.

Within the Housing Department is the Neighborhood Housing Program (NHP), a non-traditional mortgage lending center that offers a variety of mortgage products designed to spark and enhance neighborhood revitalization. All NHP products include a repair or renovation component: the HomeStyle Purchase with Renovation loan; the HomeStyle Refinance with Renovation loan; and the PDC Home Repair Loan, a second-mortgage loan for critical repairs. In addition, NHP provides homebuyers assistance programs that include renovation funds, targeted to first-time homebuyers and others interested in purchasing in specific areas of the city.

The group applied for the HomeStyle Purchase with Renovation loan and began the application process with Sherry Lenard, a loan originator/processor. The HomeStyle purchase/renovation product is ideal for this situation because it allowed the applicants to borrow money not only for the purchase of the house but also the funds to do the needed improvements all in the same loan.

The process is simple: Before NHP orders an appraisal, the borrower provides a bid or a detailed list with costs of the planned improvements. That information is given to the appraiser who adds these factors to the evaluation and comes up with an “after-remodeled” value for the property rather than an “as-is” value. Traditional lenders typically will offer a mortgage for the purchase and an additional loan for construction at a higher interest rate. This frequently makes the entire project impossible for most borrowers.

The HomeStyle mortgage loan actually builds equity into the property immediately. The homeowner does not have to wait several years to tap into their equity; it’s already there. In fact, the HomeStyle loan is probably the most affordable way this home could have been purchased in its current condition unless the buyers paid cash.

Another special feature of the HomeStyle product is the construction services provided to the borrower. An experienced Construction Advisor (CA) is assigned to every loan to provide advice and assistance throughout the construction project. The group’s CA is Connie Buckley; she will monitor the renovation process and provide a range of services including helping to prepare job specifications; assisting in selecting qualified contractors to bid the job; consulting in reviewing the bids, contract terms and project requirements; and tracking the work for quality and completeness. The CA also manages the renovation funds in an escrow account, issuing progress payments as work is done as authorized by the borrower.

The final sales price of just over $67,000 included a small mortgage amount and numerous judgments and building code violation liens. In fact, the Bureau of Buildings was within weeks of having the structure torn down due to the number of violations and fines. The loan for approximately $190,000 included over $122,000 for renovations. With an appraisal at $245,000, up to 50% of the appraised amount applied towards improvements.

The loan closed mid-October, and construction is underway. As of the end of January, according to Pam, all the interior demolition is done, walls are framed and sprayed to seal in the smoke odor, and the electrical work is complete. Pam says they expect to finish in April. She also would like to say that she is happy with the work that Rich Dixon has done on the renovation. They opted not to finance up to six months of mortgage payments to cover non-occupancy costs during construction, so all are eager to move in.

The group continues to take advantage of other PDC programs. Shortly after the loan closed, Sherry informed them that the property is located in a designated “Homebuyer Opportunity Area” and eligible for the limited tax abatement program (LTA). They qualifed for the Owner-Occupied Rehabilitation Limited Tax Exemption, created to encourage the rehabilitation of owner-occupied housing in targeted areas of the city. The abatement is limited to identify “distressed areas” and offers tax abatement on the increased tax-assessed value of the home resulting from the improvements. The abatement is good for 10 years. The owners are still obligated to pay property taxes on the current assessed value that was established prior to the improvements.

Pam says they want to restore the property to as close to its original 1909 look as possible. The home features 10’ baseboards, crown molding, and hardwood floors. They have some period furniture, but the kitchen will have modern appliances. They all are enjoying exploring the ReBuilding Center for period door knobs, furniture pulls, and inside doors. Other items of interest include porcelain pedestal sinks and period lighting. “Anything recycled is preferred. It’s a better fit, and it’s cheaper,” says Pam.

The borrowers were just amazed by what they were able to achieve with the PDC loan. “No one else was able to give us a loan package like this,” Pam recalls. “The only way we could have received this kind of loan was through PDC. I’m not sure we would have ever gotten the services we received from PDC from any other lender,” concludes Pam.

Homeownership Program
The Neighborhood Housing Program (NHP) has provided low-interest home repair loans to low- and moderate-income homeowners for over 40 years, financing over 13,400 home improvement projects since that time. Charged with serving the home repair and improvement needs of the community, NHP have played a significant role in improving the overall livability of Portland’s many neighborhoods. If you have a home improvement financing need, want to do renovation at the time of purchase or refinance, or you’re interested in the first -time homebuyer programs, call NHP at the Home Services Hotline, 503-823-3400, or send an email to nhp@pdc.us. NHP is your partner for home repair, improvements, and renovations.