2024-10-23T08:59:43-05:00 2023-12-31 450250958 Eide Bailly LLP 800 Nicollet Mall Ste 1300 Minneapolis MN 554027033 990 2023-01-01 421353472 Neighborhood Finance Corporation NEIG 5152460010 4908 Franklin Avenue Des Moines IA 503101901 Stephanie Murphy Executive Director 5152460010 2024-10-22 1 0 Deb Nelson CPA P01264758 6122536500 2024-10-22 2023 2024-10-15 13:58:12Z Stephanie Murphy 4908 Franklin Avenue Des Moines IA 50310 11659962 0 X www.neighborhoodfinance.org X 1990 IA Neighborhood Finance Corporation's (NFC) primary mission is neighborhood revitalization, achieved through sustainable homeownership and renovation lending funded by local financial institutions, paired with forgivable loans funded by local governments. As economic and environmental challenges arise, NFC's relevance has only increased. NFC continues to launch new programs to address housing affordability challenges. The additional programs include, the Neighborhood Reinvest down payment assistance program; education, outreach, and down payment assistance for African American homebuyers through Journey to Homeownership; and Energy Advantage to increase resilience and decrease energy costs for homebuyers and homeowners. 14 14 23 41 0 0 4690234 8060077 1859662 2074056 245622 1426845 0 0 6795518 11560978 3001348 3012247 0 0 2154632 2175588 0 0 0 1481006 2021053 6636986 7208888 158532 4352090 94727126 101198135 38543440 40096554 56183686 61101581 X Neighborhood Finance Corporation provides unique lending programs and related services to facilitate neighborhood revitalization in Polk and Linn Counties through partnerships with residents, governments, community-based organizations, financial institutions and the business community. 0 0 1536962 1677771 Loan Origination: Neighborhood revitalization is the key mission of NFC. This is accomplished by providing a loan for repayment as well as a forgivable loan for each qualified transaction. The forgivable loan is at 0% interest with no payments and generally forgiven over 5 years. In addition, purchase and some refinance loans have a second mortgage at a 2% interest rate for 10 years instead of requiring private mortgage insurance for borrowers with less than 20% equity. NFC's loans work together to provide a mortgage that reduces the barriers of downpayment and equity while completing needed renovations of the property.In 2023, NFC closed 165 loans. Clients were served through our purchase, second mortgage, refinance and home improvement loan products as well as Project Reinvest deferred loans, NeighborhoodLIFT loans, and forgivable loans for down payment assistance. The total dollar amount of repayable loans closed in 2023 was $8,568,025. Purchase loan, second mortgage, refinance and home improvement transactions were completed in areas of Polk County and Cedar Rapids that are identified as areas for revitalization. The neighborhoods are typically low to moderate (low-mod) income census tracts. In 2023, 164 primary loans (not including second mortgages, NFC Neighborhood Reinvest, NeighborhoodLIFT , Journey to Homeownership, Energy Advantage Deferred, Polk County Down Payment Assistance, or Polk County Large Renovation loans) were closed, while 119 closed were made to borrowers that were in low-mod income and/or NFC investment area census tract and/or low-mod income for Polk County, Iowa and Cedar Rapids, Iowa. Of these 164 loans, 33 loans were made to borrowers that have low-mod income and are in low-mod income and/or NFC investment area census tracts; 25 were made to borrowers with low-mod income, but not in low-mod income and/or NFC investment area census tracts; 61 loans were made to borrowers in low-mod income and/or NFC investment area census tracts, but do not have low-mod income; the other 45 loans closed were made to borrowers that are not low or moderate income or in a low-mod income and/or NFC investment area census tract. In 2023, 72.6% of loans closed were to either low-mod borrowers, low-mod income and/or NFC investment area census tract or both. In 2023, 86.84% of home purchase loans closed were to first time home buyers.Nearly all residential mortgage loans closed through NFC are to owner occupants. The number of home purchase loans closed in 2023 was 38. NFC closed 18 second mortgages, 123 home improvement loans, 3 refinance loans, 42 Energy Advantage Deferred Loans, 35 Polk County Large Renovation loans (2 of 35 were NFC borrowers), and 177 down payment assistance deferred and forgivable loans (31 NFC down payment loans, 9 Journey to Homeownership (J2H) loans (5 of 9 were NFC borrowers), and 137 Polk County Down Payment Assistance loans (12 of 137 were NFC borrowers)). In 2023, 27% of all loans closed were to communities of color borrowers.NFC launched a down payment program specifically for NFC borrowers in 2019. It is called Neighborhood Reinvest, and provides a $10,500 0% interest 30 year deferred loan to homebuyers earning below 100% of the area median income. Neighborhood Reinvest was created to overcome a primary barrier to homeownership for low and moderate income households. The deferred loan can be used towards down payment and closing costs assistance for eligible homebuyers who purchase a home utilizing NFC financing in NFC 's lending areas in Polk County, Iowa and Cedar Rapids, Iowa. The loan is structured as a 'soft second' mortgage loan that is deferred until there is a cash-out refinance or the home is sold or 30 years, whichever occurs first. In response to the August 10, 2020, derecho in Iowa, NFC worked with local governments and other nonprofits, including East Central Iowa Council of Governments (ECICOG) that received the funding, in Linn County, Iowa to develop the Providing Assistance To Community Homeowners (PATCH) program to provide forgivable loan funds to low and moderate income homeowners that needed storm-related repairs where the cost was not covered by insurance or other funding sources. NFC originated and closed the forgivable loans, and managed the home repairs for a portion of the PATCH homeowners. In 2022, NFC launched the Journey to Homeownership (J2H) program. J2H provides educational tools and resources to support African Americans looking to become homeowners. The core part of the J2H initiative is a down payment assistance program. NFC increased our lending to communities of color from 15% of total borrowers in 2021 to 18% in 2022 to 27% in 2023. This included doubling the percentage of African American households from 5.1% in 2021 to 10.8% in 2022, plus a further increase to 12.1% in 2023. These 2023 increases were due in large part to the new loan products launched by NFC in 2023.In 2023, NFC launched the Polk County Down Payment Assistance Program. The Polk County DPA increases homeownership opportunities for households earning less than 80% of the area median income. The goal is to create sustainable homeownership which results in wealth building, housing stability and stronger neighborhoods. NFC closed 137 Polk County DPA loans in 2023, with 46% going to communities of color.In addition, in 2023, NFC launched the Polk County Large Renovation Gap Funding Program. Homeowners with household incomes below 80% of the Polk County area median income limit are eligible for a deferred loan to go towards repairs to their home. The goal is to create sustainable and safe living conditions for existing homeowners who may not otherwise qualify to make repairs on their own due to income or credit. In 2023, NFC closed 35 Polk County Large Renovation loans.Lastly, in 2023, NFC launched the Energy Advantage program, which offers a deferred loan to NFC borrowers who are adding or replacing energy efficient appliances and/or products in their home. Energy Advantage loans are offered in Cedar Rapids and Polk County, and funded by local governments. NFC closed 42 Energy Advantage loans in 2023. 3305681 3012247 Forgivable Loan: As stated in loan origination description, each transaction that NFC provides to our borrowers includes a forgivable loan for property rehabilitation. The forgivable loan is a 0% interest rate loan for either 5 or 10 years. A 5 year forgivable loan is granted on all single family dwelling transactions. A 10 year forgivable loan is granted on all transactions that are downsizing a multi-family dwelling back to a single family dwelling. There is no repayment required on the forgivable loan as long as the borrower is residing in the home. The forgiven amount is reported to the borrower on Form 1099C each year until the entire amount is forgiven. Since inception, NFC has awarded forgivable loans totaling $59,621,909 through December 31, 2023.In 2023, NFC closed $4,738,942 in forgivable property rehabilitation loans and $153,500 in closing costs forgivable loans.All NFC loans for home purchase are evaluated. In Polk County, this role is provided by a full-time renovation coordinator that is on the NFC staff. In Cedar Rapids, this is provided by a city employee. In both locations, the renovation coordinator makes sure all code violations at the property are addressed through the homeowner's property rehabilitation projects. The renovation coordinator reviews all bids for cost reasonableness and provides authorization for payout once the property rehabilitation project is properly completed and meets the borrower's satisfaction. The renovation coordinator notifies NFC when the project is completed and verifies that it was done in a workman-like manner.Additionally, these property rehabilitation projects improve the value of the homes in these neighborhoods. This can lead to increased values for other homes in these neighborhoods. 441381 396285 At NFC Properties LLC, our goal is to provide safe, affordable, quality housing to owner occupants. In 2023 NFC Properties LLC acquired 9 properties. Of those 9 properties, 0 were an existing homes and 9 were infill lots within the City of Des Moines for new construction in primarily low and moderate income census tracts. During 2023, 13 units in NFC Properties LLC housing inventory completed rehabilitation, and 12 of the inventory units were sold. NFC Properties LLC focuses on energy efficiency by adding high efficiency furnace and A/C, vinyl Low-E windows, and blown cellulose insulation. This helps ensure that the home stays affordable for the future homebuyer. 835363 The Home Buyer Education services are offered in Polk and Linn counties through service agreements with local nonprofit HUD approved housing counseling agencies. These services are offered in an individual, classroom, and online format. NFC refers home buyers for home buyer education and existing homeowners for financial/debt management and budgeting. During 2023, NFC, through our partner organizations, provided home buyer education to 94.74% of home buyers, and budget and credit counseling and education to 9% of existing homeowners. In total, 28.66% of NFC borrowers received education and/or counseling through our partner agencies. Education was completed through HUD approved housing counseling agencies in Des Moines and Cedar Rapids, Iowa, or through HUD approved online platforms.NFC has agreements with the City of Des Moines (the city) and Polk County (the county), wherein the city and the county agreed to contribute money for the specific purpose of funding neighborhood housing revitalization programs. Under the agreements, cumulative contributions by the city and county have totaled $31,537,687 and $31,285,687 respectively, through December 31, 2023. During 2022, the city and the county extended their agreement until June 2027. The city and the county will each contribute at least $1,000,000 annually through the year 2027. NFC Cedar Rapids LLC has an agreement with the City of Cedar Rapids, wherein the City of Cedar Rapids agreed to contribute money for the express purpose of funding neighborhood housing revitalization programs within the City of Cedar Rapids. Under the agreement, cumulative contributions by the City of Cedar Rapids have totaled $5,500,000 through December 31, 2023. The City of Cedar Rapids will contribute at least $500,000 annually through the year 2023.NFC has agreements with the City of West Des Moines, City of Urbandale, and City of Windsor Heights, wherein they each agreed to contribute money for the specific purpose of funding neighborhood housing revitalization programs. Under the agreements, cumulative contributions by the City of West Des Moines have totaled $1,600,000, cumulative contributions by the City of Urbandale have totaled $222,000, and cumulative contributions from the City of Windsor Heights have totaled $75,000. 835363 6119387 1 1 0 0 0 0 0 0 0 0 1 0 1 0 1 1 0 1 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 1222 0 1 23 1 0 0 0 0 0 0 0 0 0 0 0 0 X 14 14 0 0 0 0 0 1 0 1 1 0 1 1 1 1 1 1 1 1 1 1 0 X Mark Alberico 5152460010 4908 Franklin Avenue Des Moines IA 50310 Marsha Kephart - President Iowa State Bank 1.00 X X 0 0 0 Travis Simpson - Vice President Northwest Bank 1.00 X X 0 0 0 Linda Westergaard - Secretary City of Des Moines 1.00 X X 0 0 0 Steve Van Oort - Past President Polk County Board Of Supervisors 1.00 X X 0 0 0 Almardi Abdalla Neighborhood Representative 0.50 X 0 0 0 Chris Johansen City Of Des Moines 0.50 X 0 0 0 Cole McClelland From 102423 Bankers Trust 0.50 X 0 0 0 Danielle Rodriquez From 9123 Neighborhood Representative 0.50 X 0 0 0 Dave Williamson From 072723 Polk County Public Works 0.50 X 0 0 0 Deb Anderson Alternate Polk County Board Of Supervisors 0.50 X 0 0 0 Dedric Doolin From 090123 Neighborhood Representative 0.50 X 0 0 0 Josh Moore From 090123 Cedar Rapids Bank & Trust 0.50 X 0 0 0 Patrick Redding First Interstate Bank 0.50 X 0 0 0 Scott Overland From 090123 City of Cedar Rapids 0.50 X 0 0 0 Theron Hobbs Neighborhood Representative 0.50 X 0 0 0 Stephanie Murphy Executive Director 40.00 X 158626 0 31291 Mark Alberico VP Finance & Admin/Treasurer 40.00 X 123442 0 26790 Terry Gearhart Vice President Lending 40.00 X 95427 0 24361 377495 0 82442 2 0 1 0 Edge Commercial LLC 3155 SE Miehe Drive Ste 2 Grimes IA 50111 Construction 956468 Prime Home Upkeep 1405 Fuller Road West Des Moines IA 50265 Construction 275118 Gruss Construction 3170 Scott Street Woodburn IA 50275 Construction 216048 Superior Siding & Windows 3410 48th Street Des Moines IA 50310 Construction 201495 Lopez J Framing LLC 912 Walker Street Des Moines IA 50316 Construction 201269 7 7553884 506193 8060077 Loan Fees/Svc Chgs 531390 1047340 1047340 Program Svc Interest 531390 630431 630431 Real Estate Development 531390 396285 396285 2074056 920829 920829 605000 98984 506016 506016 506016 11560978 2074056 0 1426845 3012247 3012247 459937 119788 340149 1359377 1173888 185489 52106 28972 23134 165225 158768 6457 138943 102242 36701 20920 7008 13912 56516 56516 5540 5540 56943 33031 23912 63465 9561 53904 25971 476 25495 20860 2172 18688 34180 23092 11088 30858 11165 19693 67500 67500 24345 6307 18038 102784 44164 58620 Programmatic Investment 812421 812421 Loan Operations 259345 259345 Real Estate Owned 222671 222671 Home Buyer Education 8270 8270 208464 16299 192165 7208888 6119387 1089501 0 X 23383383 24290919 360791 0 630160 49030318 54685382 2140198 84184 901672 2056014 20789963 19137238 260999 398422 94727126 101198135 150378 335659 4805115 2250000 2250000 36143062 32705780 38543440 40096554 X 17225070 17661400 38958616 43440181 56183686 61101581 94727126 101198135 4352090 565805 0 X X 0 1 X 1 0 X 8291468 3328359 6157835 4690234 8060077 30527973 8291468 3328359 6157835 4690234 8060077 30527973 30527973 505071 403318 299281 245622 920829 2374121 32902094 10726419 0.92780 0.94770 X RESTRICTED RESTRICTED RESTRICTED RESTRICTED RESTRICTED RESTRICTED RESTRICTED RESTRICTED 1906457 11967 1894490 233741 72217 161524 2056014 Real Estate Development Properties 1464376 F Forgivable Loans 6676843 C Investor Guaranteed Custodial Deposits 10410288 F FHLB Des Moines 56900 C Mortgage Servicing Rights 528831 F 19137238 Loans and Grants in Process 1841604 Interest Payable 33750 Master Loan Participation Agreements 28838355 Loans Receivable Discount 1992071 32705780 X 11560978 0 11560978 0 11560978 7208888 0 7208888 0 7208888 Part X, Line 2: NFC believes it has appropriate support for any tax positions taken affecting its annual filing requirements, and as such, does not have any uncertain tax positions that are material to the consolidated financial statements. NFC would recognize future accrued interest and penalties in income tax expense if such interest and penalties are incurred. Management assesses the Company's income tax positions based upon an evaluation of the facts, circumstances, and information available at the reporting dates. 1 Forgiveness of Debt 1386 3012247 BOOK Part I, Line 2: Explanation: Forgivable Loans: Eligible borrowers may be awarded forgivable loans up to $22,500, depending on the program. The NFC single-family program loans awarded are forgiven 20% per year over the five year life of the loan. The NFC multi-family down sizing program loans awarded are forgiven 10% per year over the ten year life of the loan. As of 2019, NFC began the designed forgiveness of the NeighborhoodLIFT loans. This program is created to advance the recovery in certain geographical areas by funding a down payment assistance loan product designed to encourage home ownership with a focus on low-to-moderate income consumers. These loans are forgiven 20% per year over the five year life of the loan. X X X 0 0 0 0 0 0 0 0 0 Stephanie Murphy Executive Director 158626 0 0 0 0 0 0 0 31291 0 189917 0 0 0 Mark Alberico VP Finance & Admin/Treasurer 123442 0 0 0 0 0 0 0 26790 0 150232 0 0 0 Form 990, Part I, Line 6 Determination Of Volunteer Estimate: Board Of Directors=14; Residential Loan Committee Members=5; Commercial Loan Committee Members=4; Finance/Audit Commitee Members=3; Real Estate Development Committee Members=4; NFC Cedar Rapids Advisory Committee=11. Note that certain volunteers are on more than one committee. These volunteers are only counted once. Form 990, Part IV, Line 12 The organization's GAAP financial statements are audited on an annual basis from independent auditors. The financial statement includes NFC Cedar Rapids LLC and NFC Properties LLC which are both disregarded entities for tax purposes and are included in the form 990. Form 990, Part VI, Section A, line 1a The Executive Committee shall have the authority to transact the business of the Board of Directors between meetings of the Board of Directors, except to the extent, if any, that such authority shall be limited by resolution of the Board of Directors and except also that the Executive Committee shall not have the authority of the Board of Directors to make major policy decisions including, without limitation, amending the Articles of Incorporation, adopting a plan of merger or consolidation, approving the sale, lease or other disposition of all or substantially all of the assets of the Corporation otherwise than in the usual and regular course of its business, approving a voluntary dissolution of the Corporation or a revocation thereof, or amending the Bylaws of the Corporation. The Executive Committee shall consist of the President, Past President, Executive Director, Vice-President and Secretary. The Executive Director does not have voting rights. All other members have voting rights. Form 990, Part VI, Section A, line 7a The Mayor of the City of Des Moines, Iowa appoints director positions 1 and 2. The directors holding director positions 1 and shall be a sitting elected official or a current employee of the City of Des Moines, Iowa. These directors are confirmed by the Des Moines, Iowa City Council. The Des Moines, Iowa City Council has the power to remove the persons holding directors positions 1 and 2 and has the power to appoint a person to complete the current term for director positions 1 an 2 should a vacancy arise due to disqualification, resignation or removal. The Des Moines, Iowa City Council also has the power to appoint first and second alternates who may attend all meetings of the board of directors and who may vote in the absence of the individuals appointed to director positions 1 and 2, with the first alternate having the first alternate voting priority and second alternate having the second alternate voting priority. The Board of Supervisors of Polk County, Iowa appoints director positions 3 and 4. The Board of Supervisors of Polk County, Iowa has the power to remove persons holding director positions 3 and 4 and has the power to appoint a person to complete the current term for director positions 3 and 4 should a vacancy arise due to disqualification, resignation or removal. The Board of Supervisors of Polk County, Iowa shall also have power to appoint first and second alternates who may attend all meetings of board of directors and who may vote in the absence of the individuals appointed to director positions 3 and 4, with the first alternate having the first alternate voting priority and the second alternate having the second alternate voting priority. The Mayor of the City of Cedar Rapids appoints position #5. The director holding director positions 5 and shall be a sitting elected official or a current employee of the City of Cedar Rapids, Iowa. This director is confirmed by the Cedar Rapids, Iowa City Council. The Board of Directors elects director positions 6-17. Form 990, Part VI, Section B, line 11b Neighborhood Finance Corporation's officers, directors, and finance/audit committee receive the Form 990 before the final version is submitted to the IRS. Neighborhood Finance Corporation's management kept the officers, directors, and finance/audit committee informed throughout the process by having our independent third-party tax advisor firm update the finance/audit committee and/or management of the changes to the Form 990 as they became final. This allowed all those involved in the review process time to understand the expectations the Form 990 would require of them. After management worked with our independent third-party tax advisory firm to complete the final draft of the Form 990, the final draft was mailed to each director, officer, and finance/audit committee prior to the October 2024 Board of Directors meeting. This allowed the officers, directors, and finance/audit committee adequate time to read through the draft and come to the Board of Directors meeting with an understanding of what is being filed. The independent third-party tax advisory firm and finance/audit committee meet to discuss the Form 990 prior to the October 2024 Board meeting. The minutes to this meeting are included in the October 2024, Board of Directors meeting. This discussion was documented in the minutes of the October 2024, Board of Directors meeting. Form 990, Part VI, Section B, line 12c Neighborhood Finance Corporation officers, directors, or trustees, and key employees are required to complete our conflict of interest statement annually. All of these statements are received by and maintained by the Neighborhood Finance Corporation's Vice President Finance and Administration. The Executive Director is usually made aware of the Board of Directors members' affiliations and potential conflicts upon election to the Board and throughout their term on the Board. Moreover, as issues are discussed throughout the year, our Board of Directors members voluntarily recuse themselves from voting on issues that may pose a conflict of interest. Form 990, Part VI, Section B, line 15 Neighborhood Finance Corporation engaged Newport Group, an independent third-party firm, to complete a key executive and all non-key executive compensation market analysis in the fourth quarter of 2023. The key executives in this study were the Neighborhood Finance Corporation's Executive Director, Vice President Lending, and Vice President Finance & Administration. This report is used as the key executive compensation benchmark for comparison with future key executive compensation changes. Note each year the Executive Committee of the Board of Directors is responsible for approving all management compensation levels, including the key executives. No change to management compensation is made without Executive Committee approval. The level of increase for employee pay rates is determined by the NFC budget, which is approved by the Board of Directors. The reasonableness of the rate increases is obtained from Newport Group's compensation market analysis 2023 report. Actual increases are performance based within the budgeted amount. All exceptions are approved by the Board of Directors. Documentation of this process is maintained in the Executive Committee meeting minutes. This compensation market analysis is completed every 3 years. Therefore, the next analysis will take place in the fourth quarter of 2026. Form 990, Part VI, Section C, line 19 Neighborhood Finance Corporation makes its governing documents, conflict of interest policy, and financial statements (audited or unaudited) available to the general public upon request and at the discretion of Neighborhood Finance Corporation. Form 990, Part X, Line 2 Savings and Temporary Cash Investments: As of December 31, 2023, no investments have been committed, through NFC board voting actions, to fund forgivable loans and loan loss reserves related to specific loan participation offerings subsequent to year end. Part XII, Line 2C There were no changes in either the oversight process or selection process of the audit committee during the tax year. NFC Properties LLC 4908 Franklin Avenue Des Moines IA 50310 364626868 Rehab Distressed Properties IA 397285 2369669 Neighborhood Finance Corporation NFC Cedar Rapids LLC 1800 First Avenue NE Suite LL1 Cedar Rapids IA 52402 824992170 Residential Lending IA 801255 11591239 Neighborhood Finance Corporation