When policymakers want to help people with low incomes get a mortgage, they typically offer some kind of subsidy or boost the flexibility of the underwriting guidelines.
This week, the Federal Home Loan Bank of San Francisco will pioneer a radically different approach: It will try to turn more Americans into homeowners—not by giving them a break but, instead, by catalyzing the creation of good jobs in their communities.
“What we’re doing is getting at the root cause” of why buying a house remains out of reach for many families, says Larry Parks, the senior vice president of external, legislative, and regulatory affairs at the bank, a cooperative that gives its member financial institutions inexpensive loans and risk-management tools so that they, in turn, can increase the availability of mortgages and stimulate community development. “We’re changing the thought process.”
New World will disburse money from the fund to nonprofit and for-profit “intermediaries” that promise to spur employment in areas that badly need it. The foundation will identify and select these organizations. They include job-training programs, social enterprises that aim to improve economic opportunities in disadvantaged neighborhoods, and entities that foster employee ownership.
The first payout will be formally announced on Friday: $5 million to the Central Valley Fund, which provides capital to small and midsize businesses, mostly in poorer and…