A Win-Win-Win: Investing Foundation Resources in Chapter Housing Loans Allison Rickels, Executive Director/CEO FarmHouse Foundation John Christopher, Attorney & Partner Fraternal Law Partners Jim Tobin, Immediate Past Chairman

Chapter Housing Loan Program (CHLP) Overview Having donors invest in the Foundation’s endowment funds in support of the Foundation’s Chapter Housing Loan Program (CHLP) and their respective chapter offers a tax‐deduction for donors, a competitive mortgage loan for the Association, and income in perpetuity for vital educational programs needed in support of FarmHouse undergraduates in the future. ~ Established in 2012 ~

Mission Alignment CHLP directly aligns with the Foundation’s strategic plan and Live. Learn. Lead. – The Campaign for FarmHouse. One key objective states: “The FarmHouse Foundation will provide funding to foster the growth of FarmHouse Fraternity through the provision of competitive living/learning housing.”

Purpose of CHLP is 3-Fold 1) Assist chapters and their respective local Associations in building, renovating and/or maintaining safe, affordable chapter houses 2) Offer additional opportunities for donors to support chapter housing above and beyond the educational portion 3) Invest the Foundation’s endowment assets in chapter housing as a diversified investment strategy

Involved Players Trustees who created CHLP CHLP Review Committee Foundation Executive Director/CEO Fraternity Board & Executive Director Investment advisors & Trust Company – Financial Counselors & Midwest Trust Attorneys – Fraternal Law Partners – Utilized Alumni & Trustees – pro-bono work Accountant – Mike Northup, CPA Local banks & title companies

Loan Terms Loan Amount: $50,000 to $500,000 Purpose: for purchase of an existing house, new construction, repair/remodeling and/or refinancing. Term: up to 10 years Amortization Schedule: up to 25 years Interest Rate: 50 basis points over the 15-year fixed mortgage rate quoted by the Wall Street Journal, or a minimum of 4.5 percent whichever is greater Collateral: first or second mortgage lien Loan to Value: not to exceed 80% of appraised value of property and renovations or construction Lending preference: co-participant with a local bank Refinance: renewal not automatic but can be refinance when term concludes Pre-payment: no penalty for early payments

Duty of Care IRS and State Law Implications Housing grants versus loans Board responsibility Internal Procedures

CHLP Review Committee Members appointed by Foundation Board of Trustees Alumni with experience in banking, finance, real estate, lending and/or experience managing an Association Comprised of at least 3 alumni, plus a Trustee liaison Committee elects one member to serve as Chair

Loan Vetting Process – CHLP Review Committee Vet each CHLP application and relevant supporting documents International Fraternity provides an assessment about the chapter and association The Staff creates webpage with application materials & summary overview The Committee has 1-2 conference calls to discuss application, talk with Association about their loan request and project, then collectively vet and determine a recommendation Provide a formal written recommendation to the Trustees for their review and vote at a following board meeting

Application Webpage http://farmhouse.org/foundation/chlp_nebraska.htm

Partnering with Banks Co-participation Pro-rata participation Interest rate differences Construction lending Credibility & Competition

Closing Process Legal counsel Working with a local bank Sole lender process Working with a local attorney hired by Association Title company involvement All closing costs paid by Association

Servicing Loan Managed by Midwest Trust Wire transfer from fixed income assets of endowment to Association Financial Counselors/Midwest Trust reports earned interest as part of endowment investments Monthly ACH payment by Association to Midwest Trust Midwest Trust tracks monthly P&I payment schedule Accountant tracks P&I payment schedule Monthly reimbursement to building fund for any interest difference between bank and Foundation Year-in-review by Auditor

Learning Lessons Managing expectations Legal best practices Developing processes and procedures Staff capacity Update investment policy As spin-off, created separate loan policy to borrow funds from a building fund instead of grant Provide Annual Report to involved players

Outcomes Service 3 loans for $2.35 million Approved 1 loan to be made in 2019 Vetted 3 loans that secured better rate with bank Anticipate 6 applications in next 1-3 years Received $1 million endowment gift to loan principal During Live. Learn. Lead. – The Campaign for FarmHouse, 46 new endowment funds established totaling $5.3 million in new pledges & gifts, adding more funds available for lending Honored with 2016 NICF Best New Development Idea

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