Lending a hand With help from Prudential, Habitat for Humanity’s FlexCAP program helps fund affordable housing

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It’s been more than 15 years since Habitat for Humanity International launched one of its most innovative, reliable programs for funding the construction of affordable housing.
And it was with the help of Newark’s own Prudential Financial.The insurance giant is both an original partner and the top investor in the Flexible Capital Access Program, or FlexCAP, in which Habitat borrows against mortgages that its local affiliates have made to low-income families. That creates an infusion of new capital, allowing the nonprofit to forge ahead with additional projects while those mortgages are repaid.

“Our local affiliates like the Newark chapter do great work mobilizing volunteers and bringing in resources and donations to help build the houses,” said Ommeed Sathe, Prudential’s director of social investments. “And what FlexCAP essentially allows them to do is … get those resources back so they can build more houses, bring in more families. You just sort of accelerate that entire cycle — that highly virtuous cycle.”

FlexCAP has raised more than $150 million in low-interest loans since its launch in 1997. Some $32 million of that has come from Prudential, which is among several banks, insurance companies and foundations that make up the program’s investors.

And the Brick City is among 300 local affiliates that have benefited from the program.

Jeffrey Farrell, executive director of Habitat for Humanity Newark, said the affiliate was building about two housing units a year up until 2011. But the organization has since raised its production to seven to eight units annually, he said, thanks to FlexCAP and recent federal funds earmarked for buying and renovating foreclosed properties.

“It’s been a very successful program for us. By building more, we engage many more volunteers,” Farrell said, noting Habitat Newark now averages about 1,400 volunteers annually. “And it also allowed us to create new partnerships here in Newark … so this way we’re engaging the community, specifically to come down and build, and that of course keeps the fabric of community development very strong.”

Those new partners include Newark Community Solutions, the New Jersey Institute of Technology and the G.I. Go Fund for assisting military veterans, Farrell said.

FlexCAP begins with the 20- or 30-year mortgages that local affiliates provide to low-income families in their area, said Greg Skowronski, director of capital markets for Habitat for Humanity International. Those portfolios are leveraged to generate new loans from investors such as Prudential — usually of five or 10 years — that are then spread to chapters across the country.

“The difference is now instead of collecting it, say, for a 30-year mortgage and 360 monthly payments, the affiliate is able to get the equivalent of five or 10 years’ worth of that mortgage back in a lump sum,” he said. “(That) can be effective for acquiring a land parcel, putting infrastructure into a new subdivision and building new homes.”

And the investment is especially attractive because of its safeguards, Skowronski said. Habitat homeowners “have a very low foreclosure rate,” largely because of the strong relationships between local affiliates and the borrowers, even after a sale is completed.

The program also requires that any leveraged mortgage that becomes delinquent for 90 days is substituted with a performing loan, he said. So during the program’s 17-year history, Habitat has never defaulted on an investor note.

That’s helped drive the success of program for which Prudential has been an “instrumental” partner, Skowronski said. And the relationship goes well beyond FlexCAP — Sathe said the company also provides grants to Habitat Newark, while Prudential employees routinely volunteer at project sites in the city and elsewhere.

“So it’s a really nice relationship for us because it allows us really to give back on so many different levels,” Sathe said.