The $47 million disappointment

Sunday, January 3, 2010 at 11:45pm

Eddie Latimer speaks passionately of home ownership as a social and economic silver bullet. As CEO of Nashville’s Affordable Housing Resources — which, as its name implies, works to develop housing for low-income Nashvillians — he has built more than 1,000 single-family homes and helped more than 10,000 Nashvillians buy through counseling and lending assistance.

But he hasn’t been spared the harsh realities of economic and credit crisis. Latimer is a man for whom the best of intentions recently have seen the worst of outcomes — in the form of the failed $47 million 5th and Main project now in foreclosure.

It all started when the avuncular Latimer saw changing demographic factors in Nashville earlier this decade as a chance to broaden AHR’s horizons beyond its traditional market. The typical AHR client was (and still is) a single parent with two school-aged children making less than $30,000. But Nashville was becoming a destination for young professionals who were waiting longer to start families, delaying the need and desire for homes with yards. Graduates gravitated to the booming Athens of the South, home to dozens of colleges and universities. Meanwhile, Metro government started to focus on the importance of neighborhoods, and civic leaders pointed to a stretch of Main Street near the interstate as a gateway to East Nashville.

Latimer and AHR saw a chance at something big. At the corner of Main and Fifth streets, within sight of LP Field and just blocks from the hip bars and restaurants of Five Points, a sleek, modern condo development — 5th and Main — began construction in 2007 with nearly 120 condo units upstairs and 10 town homes along with restaurant and retail space below.

But then, the bottom fell out.

Describing it as a “perfect storm” of trying to open up a fledgling market in East Nashville while the housing market as a whole fell apart, Latimer talks openly about the project circling the drain, going into receivership in February 2009 with Wachovia/Wells Fargo taking over the debt. At the time, only five units had been sold.

As he talks about 5th and Main, which was much ballyhooed as the new face of East Nashville, an exasperated look washes over the 58-year-old Latimer.

“It was hard. The thing that was so challenging is we were never allowed to succeed. [Before the foreclosure] the bank took away our ability to close units, so we’re stuck with all this debt and yet we have all this debt and … no way to sell off the asset to pay [it]. We had 50 or 60 contracts, and 30 were good. Out of that 20 gap, we may have gotten five, and all those people walked. There was one guy who had hundreds of thousands invested … he won’t ever sell that unit for what he was willing to buy it for,” Latimer said.

The problems kept mounting for the project — the Federal Housing Administration stopped backing loans there, and some of the retailers and restaurants planned got cold feet.

The future of the grand 5th and Main experiment remains in doubt. The hard part was supposed to be building it, but once that was finished, too few “sold” signs mean the edgy-looking building, once seen as the perfect introduction to a neighborhood on the rise, is mostly an empty shell. And the target audience — young single professionals — is buying on the other side of the river in The Gulch’s hip high-rise condos or renting small houses in East Nashville.

As disappointing as it’s been both personally and professionally for Latimer, who envisioned the project as a chance for a new audience of people to understand what affordable home ownership was like, the troubles at 5th and Main are just as disheartening to neighbors.

The Edgefield Neighborhood Association, unlike some other groups faced with bordering an affordable project, backed what was heralded as a boost to Nashville’s second-poorest census tract. The association saw it as the right project in the right place to give the neighborhood new life.

“Main Street can be an amazing gateway, and 5th and Main wasn’t a bad project,” said Kenny Byrd, the neighborhood association’s president. “It was supposed to be the good beginning. Main Street needs to transform.”

Mike Jameson, the East Nashville Metro councilman, said he’s afraid the troubles with the project may damage the reputation of one of Nashville’s fast-growing communities.

“My only concern is about what sort of signal this might send about East Nashville, but what’s happened isn’t unique to that neighborhood,” Jameson said.

Local developer Dan Heller said a project of 5th and Main’s significance just wasn’t timed or sized right.

“5th and Main seems a bit out of sync in terms of scale and timing right now,” he said. “It’s a mammoth-sized project compared to the surrounding buildings that could make it a good anchor for future development, but the economy is so shaky right now I suspect it’ll be sitting by itself for several years to come.”

‘A $100,000 home is a $100,000 home’

Still, Latimer believes in the power of property.

“Homeownership is really important because that’s how people build equity. … That’s how people enter the economic mainstream,” he said.

For two decades, Latimer and AHR have fought for affordable housing for the city’s working poor, partnering with governmental agencies and local businesses to build inexpensive homes for people who previously saw their only options as renting or public housing.

As Latimer likes to say, “A $100,000 home is a $100,000 home” no matter who builds it, who sells it or who buys it. Though 5th and Main’s fate has been an enormous blow, he’s had many successes. AHR’s real estate development arm, The Home Company, has built successful projects across Davidson County. Cognizant of their surroundings, the developments match the architecture and character of their neighborhoods — for example, Inglewood’s Lanier Park is built in bungalow style, a new take on the cottages that have lined the East Nashville neighborhood’s streets for decades. And AHR has been recognized for its work — the Row 8.9 development won national awards and became a model for attractive affordable housing after it opened in 2002.

But for Latimer, it’s not awards and recognition — and certainly not money — that drives him. The man who moved to Nashville in the late 1970s to serve as a chaplain at Vanderbilt likens his involvement with the affordable-housing movement to a religious vocation.

“We’re mission-driven. Some people are money-driven, some people are cause-driven, some people are mission-driven. For me, it’s a calling,” he said.

In a way, Latimer is uniquely suited for something like the affordable-housing movement. He has a bachelor’s degree in business administration from Auburn and studied theology at Regent College in British Columbia. An understanding of business and religious history actually serve him well in his calling.

An Old Testament scholar, he was fascinated by the Year of Jubilee. According to Jewish law, land was to be returned to its original owners every 49 years, and indentured servants were freed. It was essentially a year of slate cleaning.

“What comes out of that is that land is critical — it keeps the rich and the poor from being like this,” he said, stretching his hands far apart. “Land gives people a chance to build equity, to start a business, to go to college or to send their kids to college. It gives you an ability to develop and grow.”

A $91,000 blessing

For decades, that’s been the American dream: Save up, buy a home, take care of it and reap the benefits — not just economic ones like equity, but personal benefits such as pride of place.

Dimple Simpson is but one AHR success story. Simpson, who works in a cafeteria for Metro schools, had lived in Section 8 housing for 16 years and was facing eviction earlier this decade because the owner of her rental property wanted to move back in.

But Simpson longed to be a homeowner and went through AHR’s homebuyer education program, opening the door to home ownership through a Department of Housing and Urban Development program.

“The timing was just right for me,” said Simpson, who bought her property for $91,000. “I had gone to other agencies trying to get into home buying, and they took me through a lot of red tape. Affordable Housing was just a blessing.”

With AHR’s help, she found a new home in Hope Gardens, the north Nashville neighborhood she grew up in, became active in the neighborhood association and saw her three children’s grades improve.

Simpson, like so many others, benefited from owning the solid ground beneath her and the walls around her.

Credit score as ‘voodoo thing’

But for every Dimple Simpson, there is a hard luck case of foreclosure or inability to buy. Latimer blames the rise of the credit score. Starting in the 1980s, credit cards became the primary way Americans built credit. And in this decade, the boom times gave rise to sub-prime mortgages and other predatory and exotic lending practices.

Loans at one time were based on income. Banks would lend based on 30 percent of salary — a person making $2,000 each month could reasonably be expected to afford a mortgage payment of $600. It was easy, it was efficient and it worked. But the credit score changed all that. A complicated formula of payment history, credit usage, types of credit and other factors are calculated and weighted to prove the creditworthiness of a loan candidate. Originally designed to determine the eligibility for a credit card, the scores are now a prime factor in determining mortgage availability and interest rates.

“The credit score is some kind of voodoo thing,” Latimer said. “It was devised in order to cut back on labor.”

Latimer sees something nefarious in these three-digit measurements, whose algorithms are somewhat mysterious. He suspects factors like income, ZIP code and education level are factored in, resulting in de facto red-lining.

Latimer earnestly describes the credit score and its effects as among the toughest adversaries he’s had to fight to put people in homes.

And then there are the living, breathing obstacles. Some people don’t think they live in “affordable” neighborhoods and get acute cases of NIMBYism when AHR and groups like it eye nearby land for their projects. To the uninformed, “affordable housing” means “public housing,” and longtime residents worry that an influx of such homes will drive down property values or otherwise diminish their neighborhoods.

Life after foreclosure

But despite this — the problems with credit-score-based lending, the rise and fall of predatory lenders, the failure of what was seen as AHR’s crowning project — Latimer still fights on.

The 5th and Main foreclosure was a blow, though not a fatal one. As a nonprofit, AHR relies on state and federal money in addition to private donations. Latimer says the company is still continuing its work to get people and property connected in a positive way. AHR’s Waller Fund, designed to provide down-payment and closing-cost assistance, continues to be popular — so popular, in fact, that AHR has a temporary moratorium on applicants. In the meantime, AHR is keeping an eye on the rise of the so-called “hidden homeless.”

“These are people who can’t get a home loan because of a foreclosure and can’t get a lease because of their credit score because of a foreclosure, so they are living at home or with their sister,” Latimer said. “That’s a whole new market looking for an alternative.”

He points to pictures in AHR’s unassuming office near Eighth Avenue. He tells stories of single mothers who never thought they’d have a yard who now have a garden. He talks of previously depressed areas now brimming with life.

“We’ve had an experience where someone plants flowers. The next year you come back and four people have flowers, and the next year everybody has flowers. It’s just amazing how the people who live in the neighborhood a long time need new eyes to refresh it,” he said.

Latimer thinks the market has yet to hit bottom, but he knows it will recover and he’s unwavering in his mission.

“When you put people in a good environment, they rise up and really do better. Kids who are the children of homeowners do a lot better in school than the children of renters.

That’s how I ended up in homeownership. It gets people up into the mainstream. You need help. It’s interesting how many people live in 37215 [Forest Hills] and got help from their parents to buy their first home. How are the inner-city people going to get help? Maybe the nonprofit can be the help. We’ll give you a downpayment loan and you can pay it back at $50 a month,” he said.

After three decades in the Music City — 20 years of it working for affordable housing — Latimer keeps working for the Jubilee. It may not be as grand as the Torah described, a great unwinding of injustice and unfairness, but he’s a patient man.

“This is the work I’m supposed to be doing.”

11 Comments on this post:

By: richgoose on 1/4/10 at 3:52

A family making 2,000 dollars a month cannot afford a $600.00 house payment . They are kidding themselves. The rule of thumb that a family or a lender should use is the house payment cannot exceed five times your monthly income, In this case a person or family with a 600.00 house payment would require 3,000 dollars a month income.

You can make it as complicated as you want but that is the bottom line in reality.

By: nvestnbna on 1/4/10 at 5:14

Yes, I agree on the "perfect storm", but also think the banks raped this project. Stopping closings, deprived the project of any momentum put a pall over it that can't be overstated. I drove by yesterday and was wondering what was going on. AHR is an outstanding organization and it's a shame they got more than a black eye on this one. I guess the guys in Charlotte with their TARP money and 5th and Main Asset are the financial beneficiaries on this one.

By: govskeptic on 1/4/10 at 7:23

You can't blame this on Credit Scores or whinning. Affordable
housing can be achieved, but not the way Metro planning gives
out tax credits to Condo developers as a ruse for affordability.
Many dowtown and nearby Condos have gotten tax credit(Dollars
that the taxpayers forgo receiving)in the name of "Affordable
Housing" only to see a few priced at $190,000 for a one
bedroom, while the remainder sell for $350,000 plus. 5th &
main should have sold at least 50% before they broke ground
in order to know what the market was. Too bad, too sad.
Many people will sign the documents, but far fewer will pay
the monthly mortgage at least for a continuing time period.

By: Kosh III on 1/4/10 at 7:55

How much do these places cost? I visited the 5 and Main website, no prices. --------------Like govskeptic, I doubt they are "affordable."

By: NewYorker1 on 1/4/10 at 9:08

Hummmm... interesting. I may look into buying two units. One for me for when I go to the Titan's games or when I have visitors in town and then one to rent out.

By: lg2006 on 1/4/10 at 9:32

These places were WAY over priced for what you were getting. I appreciate the effort to build up the East Side but it should have been more appropriate for the times. The parking is NOT SAFE for East Nashville right now, not to mention very inconvenient. Also most East Nashville residents have dogs, and that is not an ideal place for a pet owner to live. Just never seemed very well thought out.

By: jwk6179 on 1/4/10 at 10:01

And how MANY NASHVILLIANS really want to live DOWNTOWN? I have lived in the Nashville area for almost 24 years and I have never WANTED to live DownTown. These so-called "Affordable Housing" units that all these developers are talking about about, just WHO are they "AFFORABLE" for? Just a few years ago, one of the developers was bragging about his "Affordable Housing Developement" was ideal for Young Single Mothers with a starting price of $235,000. That's not even affordable for most families.

By: ChrisL on 1/4/10 at 11:28

I have to ask. How is a parking garage with security and video surveillance any less safe than the rest of the parking in Nashville?

By: Kosh III on 1/4/10 at 2:36

"And how MANY NASHVILLIANS really want to live DOWNTOWN?"------------------Exactly. I once lived in downtown in a major city, I was more than happy to move awaw. Noise, traffic, noise, drunks peeing on the front door, noise, and did I mention that it was noisy?

By: boyson on 1/5/10 at 10:54

Mr. Latimer can make 5th & Main work given a little more time. E J Boyson

By: WickedTribe on 1/5/10 at 7:02

They aren't affordable at all unless their prices have plummeted since the foreclosure, and that wouldn't have been by design. When they were originally trying to sell condos in that building, they were priced $250k and up. That's no where near affordable.

But they're not alone, every "affordable" housing project in Nashville is a $190k+ joke.