In West Virginia, an estimated 200,000 rural poor live in substandard housing because they lack access to quality affordable options. Traditionally, low-income housing needs were met through state and federally-subsidized rental units or vouchers to rent private housing or through nonprofits, such as Habitat for Humanity. Nonprofit developers raised private donations to construct homes for low-income families and then offered a no-interest mortgage to the new homeowner. Since their endowment was tied up in these mortgages, the nonprofit had to raise additional funds to start any new projects. The need for housing in this state was so great that neither sector could adequately meet the demand by working independently.
In 1989, the West Virginia Housing Development Fund (WVHDF) and Habitat for Humanity (Mountaineer chapter) first collaborated to address the inefficiencies in the development of low-income housing. As a result, the state created the Low-Income Assisted Mortgage Program (LAMP) Trust, changing the role of the WVHDF into that of an enabler working with nonprofits to strive for homeowner-occupied housing rather than just a provider of subsidy money.
The LAMP creates a secondary market for mortgages for community-based, nonprofits, which provide housing for low-income families with mortgage interest rates as low as 0-3 percent. Instead of tying up resources for 20-30 years in extremely low interest mortgage, nonprofits are now able to sell the mortgage to the LAMP Trust, who uses funds from both private banks and WVHDF to pay the book value of the mortgage with the nonprofit absorbing the remaining portion. The nonprofit then turns around and uses that money to finance the construction of new projects, rather than attempting to raise more capital or waiting until the mortgage is paid off. This innovative trust concept provides an additional layer of security for the local lenders, and allows the nonprofits to sell the payments of the loans, while still retaining the ability to recapture the residual value of subsidies provided to the families. Six-month payment escrows allow a nonprofit time to work with a very low-income family who has missed a house payment due to loss of employment or another unexpected event.
Forty states across the nation have expressed interest in replicating LAMP, demonstrating the program's innovation and success. The WVHDF knows of no other method of developing very low-income owner-occupied family housing that uses state funds at such a low rate. In 1993, the state contributed only $199,000 of the program's $1.033 million budget. Once local lenders realized that the LAMP offered them no hassle, no servicing, low-to-medium investment return with low investment risk, and was also a means of satisfying their Community Reinvestment Act obligations, they embraced the program with a zeal that exceeded the nonprofits' abilities to deliver LAMP loans. As of 1993, only two other local community nonprofits besides Habitat were adequately organized to utilize the LAMP Trust to fund their projects. Mountaineer Habitat for Humanity estimates that without LAMP only 9 houses would have been constructed between 1990 and 1993 but with the implementation of the program, they built 36 homes in this time period.
Perhaps the most inspirational result of LAMP is the powerful partnership between private nonprofit, public low-income housing providers and local lenders, who had never before worked together in such a successful collaboration, to overcome the poverty that plagues their communities.