The Center For Affordable Housing sees clients who keep their savings in coffee cans under their beds. It has other clients whose only reason for entering a bank is to cash their paychecks, said Executive Director Charles T. Jeffries.
Such roadblocks to establishing credit and buying homes are what fueled the center, a non-profit facilitator of affordable housing for low- and moderate-income households, to start a credit union.
The Center for Affordable Housing Federal Credit Union is designed to provide basic financial services. The credit union's goal is to help members develop financial skills needed to buy homes.
The credit union, to open in October, will be located in a 2,890-square-foot office building at 504 Cathedral St. Mr. Jeffries estimates it will have 1,000 members and some $10 million on deposit.
He bases the projected deposits on the $27,000 annual average income of the credit union's prospective members, who also are members of the Center For Affordable Housing. That money would be deposited into the credit union's accounts.
The credit union will have two divisions.
The first will be devoted to personal finance and banking, and basic banking services like checking and savings accounts. Deposits will come from individual members.
The second division will be for mortgage and small-business loans. Deposits will come from banks, foundations and corporations.
The Bank of Baltimore, Signet Bank, NationsBank and Mercantile Bank and Trust Co. are considering assisting the venture.
The Abell and Goldseker foundations have been invited to join.
"The credit union will be the bankers' community bank," said Philip Brown, a financial adviser for Morgan Financial and president of the credit union and the Real Estate Center.
"We perceive this to be a win-win situation for all people involved," Mr. Brown said.
The credit union, Mr. Jeffries explained, "is to be a conduit for the banking community, to create a mechanism by which banks can match their funds with good people."
The risk to banks investing in the credit union is nominal because the money they invest will be deposited in the banks' own accounts. The banks will be able to set rules for loans made with their money.
Members of the new credit union are people who have little or no experience with lending institutions. Twenty-six percent of center clients were not banking prior to coming to the center, despite their $27,000 annual household income and strong employment history.
"A lot of these people have not been exposed to good money management," said Pearl Moulton, a professor emeritus at the University of Maryland's School of Social Work and the credit union's chief financial officer.
"With good money management they would be able to get into homes," she said.
"When you put people in houses, you have to give them the
ability to manage their economic future. The credit union is one of those ways. . . . It will be their financial resource," Mr. Jeffries said.
Mr. Jeffries said the success of the credit union is virtually guaranteed because the Center for Affordable Housing and the banks, through their deposits in the credit union, are operating on common ground.
The banks want to make good loans and the credit union provides people, who have worked with the center, for those loans.
"We are taking people who are now spending 15 percent of their paychecks on money orders, bringing them into the credit union, [and] matching them with the dollars from the bank. It just makes good common sense," he said.
During the credit union's first year, it wants to help more than 200 individuals and families to buy homes, Mr. Jeffries said.
The credit union is the latest Center for Affordable Housing program to help people buy homes.
In August 1991, the center began the Credit History Loan program, which helps clients establish or improve their credit rating. This year, the center introduced Credit Changers, a program for people who are trying to correct credit mistakes.
For more information, call the center at 727-3562.