You're black. You're sitting in your office trying to make a go of your one-man business. You've only been making it on a shoe-string for a couple of years, hoping for a break, but it's tough. Starting from scratch in business you need contacts you can call for information and introductions, but this comes only with more time or money than you have to offer. Also, to do business at the level you would like takes heavy financial backing. Many business programs require a participant to show a substantial net worth

before he can do business. It's a good safeguard against the fly-by-night operator, but it also keeps the small businessman-even when he can prove he's sound and reputable-from ever getting into the big leagues. So you sit there in your little office, looking past the ledgers you have to keep yourself, and staring blankly out the window.

This is the common story of most small businessmen, but it verges on being almost an iron-clad rule for minority businessmen. From any view, it looks overwhelmingly frustrating.

FNMA Breaks Cycle

One attempt to help break this kind of cycle was inaugurated recently by the Federal National Mortgage Association (FNMA). After reviewing the plight of minority small business, FNMA began creating Mortgage Opportunities, Inc., (M.O., Inc.), a program described by The American Banker as "the first nationwide effort to bring minorities into the mortgage banking business."

The problems of minority businessmen were brought to the immediate attention of FNMA by a letter from a young black businessman. He wanted to know if he and others like him could receive FNMA's assistance in establishing a business to finance housing in minority communities. "A businessman," he wrote, "has to show a net worth of $100,000 in order to become an FHA fully approved mortgagee, but under a

John Murchison (right) inquires about the new decorations of the home he has helped provide under the auspices of Mortgage Opportunities, Inc.

seldom-exercised FHA regulation, if I could arrange a 'correspondent' relationship with FNMA, I could qualify with $5,000 net worth."

His idea sounded worthwhile to Frank W.

Pence, FNMA Vice President-Mortgage Operations. He and his staff undertook the project of determining how FNMA could help.

The longer they considered it, the more convinced they became that FNMA should not only fulfill the role of supervising lender to the man who wrote the letter but that the association should initiate a new program and establish a correspondent relationship with members of minority groups all over the country-blacks, Puerto Ricans, Mexican-Americans, and American Indians.

Program Develops

After developing and refining a program plan, the proposal for a FNMA Loan Correspondent Program was presented to the Board of Directors for its consideration. The Board approved it and directed Pence to begin a search for a program director. Buxton W. Cooke, a black businessman with extensive financial and real estate business experience, was recruited to head the program.

He immediately began selecting a pilot group of 10 loan correspondents who would originate inner-city mortgage loans for sale to FNMA and thereby channel mortgage investment funds into metropolitan areas populated by minority groups. FNMA decided to appoint two correspondents in each of its five regions to assure wide geographical coverage.

When FNMA announced that it was ready to review applicants for these appointments, more than 150 applications were received. Of the 10 individuals selected for the pilot group, eight have already been announced and are in the mortgage banking business: Fred Allen, Essex and Union Morgtage Company, Linden, N.J.; Alfonso Arechiga, Progress Mortgage Corporation, Castro Valley, Calif.; Lee Black, Housing Opportunity Mortgage Enterprise, Inc., Miami, Fla.; Marion Jordan, Empire Mortgage and Investment Company, Inc., Kansas City, Kan.; John Murchison, Jr., Inter-City Mortgage Corporation, Washington, D.C.; Lawrence A. Westley, Supreme Mortgage and Realty Company, Memphis, Tenn.; Jerome Williams, Active Mortgage and Escrow Company, Seattle, Wash.; and Marcus Woodson, United Mortgage Corporation, Detroit, Mich.

The beneficial impact of this program is indicated by the fact that before the project was begun there were only eight minority mortgage bankers in the United States. In the process of reviewing the applications for correspondent positions, three minority businessmen who applied were found to be eligible for FHA-approved mortgagee status in their own right, and they have since qualified as independent mortgage bankers.

The 10 FNMA correspondents, together with the three firms assisted by FNMA, represented a 150 percent increase in minority representation in mortgage banking as a direct result of the new program. As of the end of 1970, seven of these

John Murchison (right) and a new homeowner look over a Washington, D.C., house sold under the FNMA Loan Correspondent program.

correspondents had applied for and been issued $7.5 million in FNMA mortgage purchase commitments. Many of these mortgages were for lowand moderate-income families and would not have been originated without the special skills, understanding, and diligence of the loan correspondents. At this rate of growth, the program should generate a total of about $25 million in

1971.

Nonprofit Funding Conduit

Early in 1970, Mortgage Opportunities, Inc., a nonprofit corporation, was established with a $100,000 grant from FNMA to serve this loan correspondent program as a funding conduit for grants or loans from interested organizations. Subsequently, the Ford Foundation made a $500,000 loan to Mortgage Opportunities, Inc., to further finance the program operations. These funds are used by Mortgage Opportunities, Inc., to purchase preferred stock in the correspondent firms to strengthen their equity position. Then as these firms become financially self-sustaining they will repurchase this preferred stock to retire the original loans.

The caliber and enthusiasm of minority businessmen in the program is represented by Marion Jordan, the correspondent in Kansas City, who was named as an "Outstanding Man of the Year" by the local Jaycees. Another, Alfonso Arechiga of Castro Valley, received the first Mortgage Opportunities, Inc., disbursement of $50,000, and subsequently had his local line of credit from the Bank of America raised from $300,000 to $750,000.

FNMA considers the program a flourishing success. The performance of the correspondents has exceeded even FNMA's high expectations. FNMA anticipates that several of them in the near future will reach the stage where they can qualify in their own right as FHA fully approved mortgagees, thereby outgrowing their need for FNMA sponsorship as loan correspondents.

Oakley Hunter, President of FNMA, told the United Mortgage Bankers Association of America, "Now we would like to encourage other large lending institutions to follow our lead on a substantial scale. We will be glad to share the benefits of our experience in this program with any and all institutions that want to consider initiating such a program of their own."

editor's notebook

The first non-subsidized sale of a HUD-owned property to a residents' cooperative has been completed in Washington, D.C. The 78-unit Barnaby Gardens was acquired by HUD in 1968 following default and was extensively rehabilitated. The Foundation for Cooperative Housing (FCH) submitted an offer to purchase the property on behalf of a cooperative corporation to be formed by the residents. The sale involved no subsidy, and the carrying charges for residents purchasing shares in the complex do not exceed the current market rental rate.

Housing aid from HUD was sought by 8% more colleges during fiscal 1971 than during 1970. Requests for assistance rose to 291 from 269 the previous year. Applications show a strong trend toward apartment-style projects for single students and a marked increase in the number of units for married students. Last year HUD supported $337 million of student housing.

A relationship between apartment design and crime was found in studies of New York City apartment house felonies, misdemeanors, and other offenses. Crime rate per 1,000 population climbed from 40 at six stories to 77 at seven stories, attributable to absence of elevators in lower buildings. Projects with more than 1,000 apartments are much more likely to have a high crime rate than smaller ones. Analysis by building location of crimes committed in 20 housing projects last year showed that 25% occurred on the grounds. Apartments were the second most vulnerable areas. Layout of elevator areas, type of access control to entrance, basement and garage areas, and lobby and corridor lighting were found to be crucial to building security. The U.S. Government Printing Office will publish findings of the studies by Professor Oscar Newman of New York University, "Defensible Space: Architectural Design for Crime Prevention."

Owners of low-rise apartment buildings with more than 24 units experienced the greatest percentage increase in net operating income during 1970, according to a report by the Institute of Real Estate Management. IREM reported that income for the year for low-rise apartment buildings of more than 24 units was up 24% compared to 9% for low-rise buildings of 12-24 units, 8% for gardentype buildings, and 0.8% for elevator-type, high-rise buildings. IREM also reported that operating expenses for all types of apartment buildings were up 6%, with largest increases for payrolls, maintenance and repairs, and utilities.

HAPPY NEW YEAR!

Multifamily construction which has been concentrated on both coasts has invaded the Midwest in strength. The National Association of Home Builders estimates of apartment construction puts Detroit in first place (up 44% from last year) followed by Kansas City, San Diego, and Minneapolis. Decreased multifamily activity is expected in San Jose, Phoenix, Dallas, and San Francisco.

HUD public housing questionnaire finds that about 15% of maintenance, operations, and replacement expenses are due to vandalism-perhaps $22 per unit yearly.

Historic preservation projects in renewal areas have received commitments of more than $16 million in Federal and local public funds, a recent HUD survey showed. This committed money includes funds for planning and execution of 36 historic conservation projects in the renewal areas of 32 cities. HUD will make grants of at least $3 million this fiscal year for its Historic Preservation Program, three times last year's total.

HUD Secretary George Romney announced the appointment of Robert A. Kelly as a Special Assistant to deal with economic affairs of concern to the Department.

One HUD official, Douglas C. Brooks, Director of Program Planning in the Atlanta Regional Office, was among 15 winners of 1971 Presidential Management and Improvement Awards, a form of recognition initiated in 1970 by President Nixon to emphasize his concern with better management and economy in government.

Ray Carrasco, HUD Los Angeles Area Director, received an award from the Southwest council of La Raza, a Mexican-American organization operating in California, Colorado, Arizona, Texas, and New Mexico, for his efforts "to provide decent housing for all minorities, particularly the Mexican-Americans in the Southwest and Indians in New Mexico."

HUD Challenge is planning a readership survey for early 1972. We want to know what you think of the contents of the magazine and what you would prefer or suggest as material for the future. Since the magazine was started more than two years ago, our readership has increased to approximately 20,000. The survey will come to you as a separate mailing with free return postage. In reading the next few issues please take the time to consider your reactions to the various articles, thus when you receive the questionnaire you will be able to respond meaningfully. With your cooperation the magazine staff and the Department will be able to be responsive to your needs.