Help a neighbor, make a little money

The Baltimore Sun

In these days of financial instability, housing development seems like the last place you'd want to invest your money.

Calvert Foundation begs to differ.

The Bethesda nonprofit has investment vehicles for affordable housing, a niche of the market it says is holding up well despite all the turmoil. And you don't have to be a Rockefeller to get involved.

For $1,000, investors can purchase its Community Investment Note, which lends money in part to nonprofit housing developers working on affordable for-sale and rental projects, or buy into its new Habitat for Humanity Investment Program, which lends funds to the global housing charity. (The minimums for both drop to $100 if purchased through an online company called MicroPlace,

The foundation describes the notes as fixed-income investments that are a bit like bonds and a bit like certificates of deposit.

You might wonder why the risk should be any different than it was for big banks toppled by "subprime" loans gone bad. Shari Berenbach, president and chief executive of Calvert Foundation, says it's simple: "We've never used all these exotic instruments. We're not having all these problems."

Habitat homeowners, for instance, don't buy with no-documentation, adjustable-rate, negative-amortization loans. Instead, they get an interest-free mortgage from Habitat. They're also expected to help build their house to put some sweat equity into the deal.

"It's easy for people to want to blame the people with lower household incomes as being the source of the problem," Berenbach says. "We're able to show [that] those people can be very good credit risks if they're given appropriate products and treated fairly."

Unlike a CD, these notes are not federally insured. But Berenbach says they're conservative investments because Calvert Foundation isn't highly leveraged. It has total losses of about $300,000 but a loan-loss reserve of $4 million, she says.

Corporations and foundations stand behind the foundation with $30 million more to give investors confidence that they'll get their money back.

So what's the catch? Don't count on big returns. The interest rate for the Habitat notes is a maximum of 2 percent. (A note-purchaser can choose 2 percent or opt for a lesser amount - this is "socially responsible" investing, after all.)

The Community Investment Note allows you to choose an interest rate of up to 3 percent. The maturities range from 1 to 10 years, depending on your preference.

Another big, local affordable-housing player, Enterprise Community Partners, takes small donations rather than small investments.

But the Columbia nonprofit says it is considering a pilot program based loosely on the Calvert Foundation model.

Calvert Foundation hopes small investors will jump on board because the credit crunch, which is drying up capital nationwide, has narrowed options for affordable-housing developers and lower-income families alike.

"Now more than ever, there's really a need for average people to be helping average people," Berenbach says.

This is Jamie Smith Hopkins' last column until she returns from maternity leave.

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