Housing and Economic Development Agency Removing Barriers to Homeownership in Wisconsin

About this Project:

The Wisconsin Housing and Economic Development Authority (WHEDA) was established in 1972 through state legislation to provide financing for affordable housing.

A $5 million loan from the Robert Wood Johnson Foundation (RWJF) will support the WHEDA Way Home program, which helps first-time homebuyers with low incomes access mortgage loans using flexible credit score and income criteria. Buyers will also receive downpayment assistance and homeownership counseling through other WHEDA programs.

This investment is part of RWJF’s strategy to create a more equitable community development finance system through municipal finance, which aims to shift the $4 trillion market to support funding for public infrastructure across states and neighborhoods that are often overlooked. It is the first of RWJF’s municipal investments and aims to demonstrate how philanthropy can provide early, innovative investments that capital markets can replicate.

Learn more at Home Buyers | WHEDA.

Challenge

Homeownership rates are uneven across the United States—particularly for people with low incomes and people of color. This is due, in part, to downpayment and credit requirements, as well as discrimination in appraisals and lending. While some would-be homebuyers can receive or borrow a downpayment from family or friends, those with lower incomes more often cannot do so because of a lack of inherited intergenerational wealth. To further complicate these matters, government agencies use automated underwriting systems (AUS) to determine loan approvals. The continuing use of AUS puts computer algorithms—which are often based on historically biased data—in charge of deciding who might qualify.

Wisconsin is no exception to those inequities.

Solution

Homeownership helps create the physical, economic, and social conditions for health and wellbeing. That includes intergenerational wealth, which can be used for retirement, to pay for kids’ college, or to start a business.

State Housing Finance Agencies like WHEDA play a key role in making homeownership more accessible by offering affordable housing loan programs.

Rather than solely relying on an automated AUS approval or denial, WHEDA prefers to evaluate each loan application on its own merits and unique circumstances in determining the likelihood of the borrower repaying their mortgage debt. For example, the WHEDA Way Home program looks beyond credit scores—which are often misleading about a person’s credit worthiness, as they don’t reflect positive factors like a strong rental payment history.

RWJF’s investment will allow the program to launch in key regions, including Milwaukee and Kenosha, targeting those who have a strong credit history, but don’t meet traditional credit requirements.

In the Spotlight

An unexpected rent increase, a life event such as death or divorce, an uninsured medical debt, or job insecurity can create a devastating domino effect that can quickly derail efforts to secure a home mortgage. The WHEDA Way Home program offers a lifeline to potential homeowners who can demonstrate a reliable income and payment history that puts them back on track in ways that traditional scoring tools can’t capture quickly or thoroughly.

“This program absolutely helps people who wouldn’t have a solution otherwise,” said Robert Stafslien, director of Single Family Lending at WHEDA. “So much security, stability, and relief are realized when our borrowers have an affordable place to call home.”

To date, $2 million has been invested to secure 11 loans, with the hope of expanding the program to more applicants and lending partners.

WHEDA Seeks These Outcomes

• Illustrate that character-based mortgage lending can support residents who have faced systemic barriers to homeownership, building wealth and improving health.
• Originate loans to over 100 families through this investment and, if successful, scale the program through bonds or other funding sources that will capitalize program expansion. If the investment demonstrates strong loan performance while addressing homeownership gaps, there is strong potential for replication across Wisconsin and by other Housing Finance Agencies.