1977 Mid-Year Report & Report of Annual Meeting

Federal National Mortgage Association – Special Report on the Resurgence of the Cities

Success of Munger Place is Highlighted (pp. 18-20)

FNMA in special report identifies Munger Place as the neighborhood of their first inner-city demonstration lending program.

…While FNMA’s St. Louis program has received the most publicity, its efforts to promote and facilitate revitalization in other cities and towns across the nation are no less important. Formally, announced last January, the corporation’s nationwide affirmative lending program was actually already under way when, in the fall of 1976, a local bank in Dallas, Texas sought FNMA’s support for its efforts to make restoration of an historically significant neighborhood financially possible.

Extending Local Resources

The 20-block area, Munger Place, consists of about 175 single-family homes built in the early 1920s and is the nation’s largest intact community of Prairie Style architecture. The local bank wanted to make a $2 million commitment to that community for the acquisition and rehabilitation of homes, 80% of which were then absentee-owned and most of which were severely deteriorated. The institution did not, however, feel it could provide that kind of support without FNMA’s pledge to purchase some of the loans it originated.

FNMA agreed and the program got under way. Nine months later, in June 1977, the ratio of absentee-owners had dropped to 60 percent and 60 houses were undergoing some kind of rehabilitation. Three other financial institutions – a savings and loan, a commercial bank and a mortgage banker – have become involved in the area and others are expressing interest. It is estimated that as a result of the program, under which the average dollar amount of loans submitted to FNMA has been $25,000, more than one-half of the homes in the area will have been restored within the near future.

Through the efforts of community groups and residents to obtain back-zoning for the area, the future of Munger Place as a stable single-family residential neighborhood is being made further secure. In the 1950s, when blight had taken a firm hold, a large portion of Old East Dallas was rezoned multifamily, leading to the conversion of most of the large, old homes into apartments or rooming houses. The city has been requested by local citizens to rezone the area single-family. The racial mixture of white, Mexican-American and black families has also been maintained throughout the transition from deterioration to revitalization.

Renovation’s Ripple Effects

The success of this joint venture between FNMA and the local bank in Munger Place is obvious and visible: entire blocks have undergone restoration and more and more of the homes are owned by individual families who live in them, rather than by absentee landlords. But the beneficial impact of the program does not stop at the community’s boundaries. As a direct result of Munger’s success, the local bank and FNMA have extended their commitment to the surrounding community of 2,000 structures where the bank has agreed to make another $5 million in home mortgage financing available and FNMA has committed to purchase loans. Munger Place Extended, as it is called, consists of a variety of housing stock, including small frame bungalows, two story houses, and brick multifamily units.

Elsewhere in Dallas, FNMA approached two lenders to encourage them to originate loans in the Winnetka Heights area, where most of the approximately 400 single-family homes are one- and two-family frame structures and where some rehabilitation was also needed. Not long thereafter, one of those lenders submitted a loan to FNMA on a home in that neighborhood. Although a definite trend toward owner-occupancy had been evident in the area over the last two years — absentee ownership has decreased from 50% to 30% — financing terms available prior to FNMA’s commitment to Winnetka Heights had provided for a maximum of 80 percent loan-to-value ratio and a 20-year term. Now 95 percent loans with 30-year terms are offered.

Although FNMA has been involved in the area for only a short time, a real estate agent who lives in Winnetka has reported that real estate listings have almost doubled during the period and that there is a marked increase in interested buyers. In addition, some of the longtime residents are beginning to upgrade their properties.

The ripple effects of renovation in Munger have reached even beyond the city of Dallas. On hearing of FNMA’s revitalization efforts in Munger, a Houston area lender called the corporation’s Southwestern Regional Office to inquire whether the same type of program could be implemented in this city. Although Houston is best known as a modern and growing metropolis – a boom town – it, too, has deteriorating areas. Since the city has no zoning and deed restrictions have expired in its older neighborhoods, some of the larger homes have been converted to multifamily use. As a result of the lender’s initial contact and FNMA’s aggressive follow-up with that institution and others in Houston, the corporation has committed assistance to two neighborhoods, in both of which single-family homes have recently begun to undergo rehabilitation. The demand for such homes, though, has exceeded the supply of financing. The involvement of FNMA should both provide institutions already making loans in the areas with additional liquidity and prompt additional lenders to become active in the areas.