SUN Initiative Note Offering II

This is the second debt offering from BCC based on the Stabilizing Urban Neighborhoods (SUN) Initiative strategy launched in 2009. For information on the first offering, select SUN Initiative Note Offering I from the list of additional fund/product profiles on ImpactBase at right below.

Concerned about the disproportionate impact of foreclosures on low-income communities BCC launched the SUN Initiative, a foreclosure relief program that stops the displacement of families and the neighborhood-destabilizing effects of vacancy and abandonment by acquiring foreclosed properties before evictions occur. SUN then resells those properties at current market values to their current occupants with fixed rate mortgages they can afford.

Federal Reserve Chairman Ben Bernanke has highlighted the SUN Initiative as an “innovative strategy” and a model for how “local communities are meeting the challenges of tough times in troubled communities.” Since late 2009, BCC has provided over $48 million in financing to help over 300 Massachusetts residents remain in their homes, reducing average mortgage principal and monthly housing payments by more than 40%.

Now SUN is seeking to sell the revenue stream from the performing mortgage notes to recapitalize the initiative, to support additional lending, and to pave the way for expansion of the model nationwide.

Financial description

Boston Community Capital is proposing a $25 million loan with a ten-year term and a 5% interest-only coupon backed by the revenue stream from a $25 million pool of mortgages to SUN Initiative borrowers. The SUN Initiative purchases foreclosed properties at current market values before evictions have occurred and resells those properties to the current homeowners with 30-year, fixed rate mortgages. Through July 2012, SUN has helped over 250 Massachusetts households remain in their homes, reducing average principal balance and monthly mortgage payments by over 40%.
While BCC would need the right to partially pay down the outstanding principal as mortgages are refinanced, BCC would also be prepared to use best efforts to replace those refinanced mortgages with new mortgages so that the payment stream remains as constant as possible. BCC has modeled losses in the pool at a rate of 5%, but it is also prepared to stand behind that assumption by assuming the first 20% of losses in the pool.
BCC has prepared a package for potential investors including detailed loan-level information on the mortgage loans contained in the $25 million pool, BCC's financial model together with its related assumptions, and a proposed structure for the transaction.