Essays on People, Place & Purpose

Investing in What Works for America's Communities

Getting to Scale: The Need for a New Model in Housing and Community Development

by Sister Lillian Murphy and Janet Falk


When the elements above are combined, a new model emerges to move to scale and address today’s acute problems. One such example is the Mortgage Resolution Fund (MRF), a public-private partnership established to preserve affordable homeownership by keeping in their homes those families at risk of foreclosure. MRF purchases nonperforming mortgages from banks and loan servicers at a discount, modifies the mortgages to align with the properties’ current market values and the families’ abilities to pay, provides intensive educational and debt management support, and eventually recapitalizes the mortgages. MRF is a joint venture of the Enterprise Foundation, the Housing Partnership Network, the National Community Stabilization Trust, and Mercy Housing.

MRF is funded at the enterprise level by the Hardest Hit Funds program, which was established in 2010 to provide targeted aid to families in states hit hard by the economic and housing market downturn. Funds were distributed to 19 state housing agencies on the basis of high unemployment rates or steep home price declines. Each state determines how to use the money it receives, for example, for mortgage payment assistance, principal reduction, elimination of second lien loans, or assistance for those moving to more affordable places to live. Allowing states to determine how best to implement their goals permits flexibility and innovation.

In addition to the partnership among its four members, MRF has leveraged private-sector capacity. It has service agreements with several private firms for mortgage due diligence and valuation, which enable it to negotiate with global capital market desks that specialize in nonperforming mortgages. MRF also works with a large special servicer with a responsibility to work in conjunction with local housing counselors, as well as a debt manager that services the loans and supports mortgage reperformance. These partnerships have permitted MRF to get to scale quickly.

Although it is still in its early stages (its first fund closed in November 2011 and the first pool of mortgages was purchased in March 2012), MRF is an example of how four national nonprofit organizations can join forces to form an innovative new venture that will have an impact on a major national housing problem at a scale large enough to be meaningful. At the same time, MRF has enabled each of its component organizations to diversify into new territory. If it is successful, MRF will provide income to these organizations, which will increase their sustainability.


The future of community development depends on developing new responses to the current problems of poverty, income inequality, and lack of affordable housing. In an era of deficits and government cutbacks, organizations must get to scale to become sustainable.

All sectors of the housing industry will have to step up in several ways. The public sector must become more flexible in its regulations and provide funding at the enterprise level on the basis of outcomes rather than just compliance. Private financial institutions will have to provide funds at lower costs (particularly equity) and be willing to tolerate greater risk. Intermediaries and foundations must seek out creative and nontraditional solutions and then fund them. Developer organizations must create partnerships that will enhance their strengths, and then these organizations must be accountable for the outcomes. The challenge is for everyone to think outside of the box.


  1. Elina Bravve et al., Out of Reach 2012 (Washington, DC: National Low Income Housing Coalition).
  2. Ibid, p. 2.
  3. Area median income is determined at the county level and is published periodically by the U.S. Department of Housing and Urban Development.

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Investing in What Works for America’s Communities is a joint project of the Federal Reserve Bank of San Francisco and the Low Income Investment Fund.

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