A good reputation can vanish overnight, which is why Habitat for Humanity of Hills-borough County made a smart decision by announcing it would seek to buy back 12 mortgages it sold to a Tampa company with a history of flipping properties. The arrangement was entirely out of keeping with Habitat’s half-century of work in helping low-income residents buy their own homes. But Habitat made the right decision only because it made the wrong one in the first place. The local agency should reassure donors and the public that it won’t forsake its mission again.
Like most lenders, Habitat often sells its mortgages to raise money for more houses. But a recent sale of 12 mortgages by Habitat’s Hillsborough affiliate raised concerns because instead of selling the mortgages to a bank or other regulated financial institution, as is usually the case, Habitat sold them to Southeast Property Acquisitions, which has a history of buying and flipping foreclosed homes.
On Monday — a day after the Tampa Bay Times’ Susan Taylor Martin reported that Southeast already had tried to get at least one affected homeowner to deed over her property in lieu of foreclosure — Habitat International and the local affiliate declared the transaction at odds with the nonprofit’s policy. Hills-borough Habitat apologized, and CEO Tina Swain said that, at the local board’s direction, the agency would seek to "repurchase these mortgages immediately." But the affiliate still needs to say why the mortgages were sold to Southeast.
Beyond selling the mortgages to Southeast, the Times reported that the Hillsborough affiliate did not follow notification procedures outlined by the Consumer Financial Protection Bureau, a federal watchdog agency created in the wake of the 2008 housing crash. Generally, borrowers are to be notified at least 15 days before their note is transferred to a new loan servicer. But the 12 Habitat homeowners received letters saying their mortgages had been sold to Southeast on June 29 — letters that were dated that very same day and yet not received until several days later. The delay meant one homeowner sent her July payment to Habitat instead of Southeast, causing her to fall behind in payments to her new servicer from the start.
Habitat has also refused to explain how Southeast obtained the loans. Swain first told the Times: "Somebody who was connected to the Habitat affiliate knew someone and somebody knew someone. You know how that goes." Board Chairman Anthony Brooks told the Times editorial board Tuesday Southeast got involved through a contact Brooks had with a Realtor. Brooks refused to name the Realtor, or explain why the mortgages were treated so unusually. At least one other private investor was considered for the deal, officials said. The board is expected to meet today. In her statement announcing the buyback, Swain insisted the sale was "legal."
Nobody said it wasn’t. The question is why the affiliate departed from Habitat policy and then reversed course after the backlash, all the while refusing to offer a clear public explanation of how it came about.
Habitat has a gilded brand name thanks to its cadre of volunteers and mission of combining the ideals of self-sufficiency and home ownership. Today it operates in 1,400 U.S. communities and 70 countries, and estimates it has helped more than 13 million people get "safe, decent and affordable shelter." The local agencies — five exist in the Tampa Bay area — are largely independent, with their own boards of directors and staff. It is vital these agencies preserve the Habitat image, and to do so, they need to appreciate the obligation for transparency. Hillsborough’s affiliate mishandled this case, and the stress it caused to those homeowners was needless and unfair.