Affordable housing is a good investment for Indiana banks because it:

• Stimulates new construction, retail and service businesses at the community level

• Stabilizes families and leads to asset building and new retail relationships

• Will be vital to the future of mortgage loans in Indiana

Growing Communities Equal New Banking Opportunities
Housing projects create construction and other jobs, which leads to a need for even more housing in the area. It spurs additional, associated needs--and the creation of start-up businesses to meet them. Wholesale banker Patricia Gamble-Moore agrees.

"Most of the financial institutions that we lend to are small- and medium-sized. Affordable housing and the related community development is healthy for those institutions," Gamble-Moore says. "The gas stations, coffee shops, restaurants--all of this development at the community level is good for our member institutions," she says.

Gamble-Moore is the vice president and community investment officer at Federal Home Loan Bank, a wholesale bank in Indianapolis that serves a market of over 430 lending institutions in Indiana and Michigan. A 20-year banking veteran, Gamble-Moore says the bank is required to give 10 percent of its annual net income to affordable housing annually. It's an estimated $12 to $14 million that provides real growth for the bank's member institutions.

Job Growth and Community Development
The future of economic growth in Indiana will likely be waged on a smaller scale than in the past. Gone are the days of large manufacturers creating hundreds of new jobs at a time. In their place will be smaller, locally-owned start-up companies that create jobs with growth potential. "Little by little, 'job by job' is where you're going to get your growth. These may be $25,000 and $35,000 jobs, but they're stable jobs that create taxpayers and homeowners."

The Next Wave of Mortgage Loans
Though lenders might prefer customers applying for bigger mortgages, they ignore those seeking smaller ones at their own risk. "People with a higher credit rating can go anywhere for a loan," she says. "The new customers are right on the verge of qualifying for moderately-priced homes.  That's where the next group of customers will come from."

Columbus Lender Recognizes the Potential
John Spray is the vice president of Home Federal Bank in Columbus, Indiana. Spray, who oversees the bank's mortgage lending programs, says helping low-income or credit-challenged buyers may be more difficult, but he sees it as an investment that pays off via new customers he might not otherwise have.

"These loans give me a chance to provide truly great customer service, which people remember," Spray says. "The word gets around in a small town. They tell their friends about it, and when they want to buy a house, they come to us."

The loans make sense for Home Federal in other ways, too. Though the dollar amount may be smaller, Spray says the volume still adds up. Like Federal Home Loan Bank, Spray's bank is required by law to lend money to address affordable housing needs. In fact, the bank is graded on its efforts. From a business perspective, a low grade simply doesn't make sense.