MANKATO — Owners of low-to-mid-priced homes looking to do a fix-up or even an expansion will be targeted through a partnership between a local bank and the city of Mankato.
Profinium Bank asked the city to partner in a loan program aimed at owner-occupied single-family homes with an assessed value of $200,000 or less and built before 1995. City staff asked the City Council to approve the pilot project because it meets a council goal of preserving affordable housing.
“What’s attractive in staff’s opinion regarding this program is that it is open to people above low-to-moderate income,” Community Development Director Paul Vogel told the council, acting in its capacity as the Economic Development Authority.
The EDA already has a program aimed at lower income homeowners in Mankato’s older neighborhoods. But that program is both more generous and more restrictive.
The existing rehabilitation program has limited funding and is available only to residents in those certain neighborhoods, mainly in the valley and in the oldest hilltop neighborhoods. Applicants need to earn no more than 80% of the median family income in the area, and only certain types of basic remodeling and replacement are permitted.
The advantage of that program is that the loans are forgiven after 10 years if the borrower doesn’t sell the home.
The Profinium Home Improvement Program will offer 10-year loans with an interest rate of 4.99% to 5.9%, slightly below market rates, according to a report to the council. There’s no income limit on who is eligible — just the requirement that the homes be at least a quarter-century old and valued at less than $200,000.
Jeremiah Gaul, a mortgage lender with Profinium, said the program was modeled after one offered by United Community Bank in Perham. And Gaul said the company plans to make the same offer across the Minnesota River.
“We will be starting this same program in North Mankato,” he said.
The cities’ role will be to do home inspections once an applicant passes a credit check — inspections aimed at finding building code or structural fixes that would need to be folded into the home-improvement project.
Vogel said the program will at least give people an option for needed home upgrades — or even an expansion — even if they aren’t in the income range or targeted neighborhoods for the existing low-income housing rehab program.
Council member Jessica Hatanpa opposed the city’s involvement, saying it constituted endorsement and promotion of one private business in a competitive financial marketplace.
“Is there any other business that we do that for?” Hatanpa asked.
Vogel said there isn’t. But if another bank sets up an identical program at similar or lower rates, it will be added to the list of options offered to people looking for help fixing up their homes.
“There’s no exclusivity in this,” he said. “If somebody else comes to us with another offer, then we’ll add it to this.”
Council member Karen Foreman said she would welcome other banks but didn’t expect a flood of them to follow suit.
“It’s a very high-risk loan,” Foreman said. “Not everybody’s going to want to do it.”
She noted that the bank, in return for the risk, can use the program as evidence of its civic-mindedness and as a chance to add account-holders.
“What you achieve in this is some of your community service and an opportunity to add to your customer base,” Foreman said.
The council agreed to try the partnership, requiring a follow-up report on the results after one year.