Tag Archive for: favorite mistakes

Trust AND Verify

Rural Voices - Spring 2015This story appears in the 2015 Spring Edition of Rural Voices

A seemingly small oversight can become a big problem quickly

by Wilbur Cave

We recently found ourselves in a very awkward position because we failed to verify the household income of a family wanting to continue to rent a property that we purchased using HOME funding. Normally, household income is one of the very first things done to determine eligibility for U.S. Department of Housing and Urban Development (HUD) HOME-funded projects. For some unexplained reason, the income was not verified, but a commitment was made to the family to continue renting the property after it was acquired and rehabbed. The family has been renting the property for 14 years prior to our purchase and rehab.

So how did this situation evolve? The family came to Allendale County ALIVE, Inc. seeking housing counseling because the landlord indicated that the property was going to be put up for sale. Having lived in the house for more than a decade, the family did not want to move because they had become attached to the house and the neighborhood. When the family approached us about housing counseling, we were looking for a property to acquire and rehab. The family knew that they needed some time before they could purchase the property and was concerned that the house might be sold while they were preparing for purchase. We were seeking a property to purchase if it could be acquired and rehabbed within our $35,000 limit. The family encouraged us to contact the owner to see if something could be worked out. We contacted the owner and he agreed to sell the house at a price that would work within our HOME limit. In the excitement of trying to ensure that the family could continue to live in the property that they had lived in many years, we forgot to verify their income.

The failure to verify income became evident when the rehab was completed and we had to qualify the family and, of course, they were over the household income limit. Although legally, we could require them to move, we felt an obligation to work with them to find a compatible rental property since it was our fault that we didn’t conduct the proper verification prior to committing to continuing to rent the house to them.

For those who wonder how it is that we were able to acquire and rehab a property for $35,000, the answer lies in the fact that Allendale County, SC has the 10th highest rate of poverty among all counties in the United States. Along with the many negative factors that are often present with a high rate of poverty, low property value is also common. Even with low property values in our community, the supply of homes that can be acquired and rehabbed at the HOME limits are few and far between. Nevertheless, we have been fortunate to find properties.

How did we resolve our problem? We decided that we had to find a compatible property for the family to rent. But this was going to be difficult because there was nothing available at that moment. However, a short time later, we identified four properties that the owner would be willing to work with ALIVE to acquire. One of the four properties was just the right size to accommodate the family, and the house was located in a nice neighborhood. The house needed a minimum amount of work to be move-in ready andthat is rural and has a high rate of poverty.

Had it not been for the availability of the property at the right time and the willingness of the owner to work with ALIVE, we would be in a difficult situation, and would have likely had to return the $35,000 back to the Participating Jurisdiction. Little things can trip you up and cause significant problems that can be very difficult to solve. We are thankful that we prevented an ugly circumstance, not to mention the possible damage that could have been done to our organization’s reputation that has taken 16 years to cultivate and develop.

Wilbur Cave is the Executive Director of Allendale County Alive in Allendale, SC.

Underestimating Bureaucracy in Bureaus

Rural Voices - Spring 2015This story appears in the 2015 Spring Edition of Rural Voices

Cutting through red tape on tribal lands comes with unique pitfalls

by Marvin Ginn

As a community development officer with a regional bank, I worked to begin mortgage lending on Tribal Trust Lands. I thought the process would be very similar to ‘fee simple’ lending and started getting clients approved for the mortgage. Well, this went downhill really quickly. I determined that we would need mortgage codes in place for this process.

When you are dealing with Tribal Sovereignty, there are many issues that can come up. A mortgage code must be in place and accepted by the different branches of the federal government in order for mortgage lenders to have any type of recourse. These codes lay out the policies and procedures for leases, eviction, lean priority and foreclosure.

What I had not considered is that many of our tribal leaders did not understand that this process would never endanger lands belonging to the tribe. Two different tribes made this process difficult for me. One of the tribes required 100 percent approval from the tribal council before the code could be passed. This approval process involved presentations over several years to the council before we could secure the necessary votes. The challenge was the elders’ mistrust of the system and fears they might lose their land to these mortgage lenders. I spent many long days at the tribe getting this done.

I thought the process would be very similar to ‘fee simple’ lending and started getting clients approved for the mortgage. Well, this went downhill really quickly.

The other tribe provided a similar challenge, but I was working directly with a tribal member who had already been approved for a loan, rather than a full council. It still took us three years to get the codes in place before we started building. To this day, there are still a few tribes that do not have mortgage codes in place.

This issue was further complicated by separate documentation for the home sites. We were mainly dealing with HUD, and we had a lease that covered their requirements. Little did I know, the HUD lease documentation was not sufficient for USDA or VA administered loans.

We then had to write leases that included the concerns of each department of the government. Yet another complication were National Environmental Policy Act (NEPA) requirements. Again, we encountered the challenge of different reporting formats for each department of the government. Today, things have changed and the process is more streamlined. But improvements are still needed.

We worked with HUD, USDA, VA and the Bureau of Indian Affairs (BIA) to adopt the same format on the NEPA documents. Most of our leases are accepted by each department, but we still have challenges with wording in some of the leases. I can now close a loan within six to nine months which is far better than my first one which took me three years. I know this still sounds like an incredibly long time, but we are making progress and the effect of having affordable housing in Indian country is positive.

Marvin Ginn is Executive Director of Native Community Finance (NCF). NCF provides financial education, community oriented affordable loans, VITA/TCE tax site, IDA program, and mortgage assistance services. NCF is one of three certified Native Community Development FinancialInstitutions in New Mexico.

Always Improving, One Misstep at a Time

Rural Voices - Spring 2015This story appears in the 2015 Spring Edition of Rural Voices

“I have not failed. I have just found ten thousand ways that won’t work.” Thomas Edison was no stranger to failures, but he took a healthy approach to mistakes.

By Nick Mitchell-Bennett and Kathy Tyler

Strange as it may sound, we like making mistakes. Often we learn more from mistakes than doing it right the first time. Since we must be risk-takers we have ample opportunity to fail. We must take risks to help those we serve gain access to affordable housing, affordable financing, education, or any of the hundreds of things we do in our work. Like Thomas Edison, we’ve learned not to be afraid of mistakes but to enjoy the teaching moments they offer. The trick is learning the best alternative for the next try (since some of us cannot afford Edison’s 10,000 ways that won’t work)!

We made plenty of mistakes together when we formed the Texas 502 Packaging Collaborative . We watched other groups in other states create these partnerships and we wanted to replicate the partnership in Texas to increase the number of USDA Section 502 Homeownership loans and increase revenue for participating organizations.

Our two organizations, Community Development Corporation of Brownsville (CDCB) and Motivation, Education and Training, Inc. (MET), have strong track records. Collectively we build and finance hundreds of homes each year, develop multi-family projects, and improve migrant farmworker housing. We educate youth and farmworkers, and launch them into new professions. We run a real estate company and Head Start programs collectively.

So when we set out to form the 502 Collaborative, we assumed it would be an easy, natural next step. We assumed wrong.

Too many moving parts influenced by a range of decision makers not in our control meant projects more at-risk for what might go wrong.

Although partnerships can be fraught with difficulties, we have had some success and the Texas 502 Collaboration survives today. But we continue to struggle getting the scale we want and need.

After stumbling through this for a few years, we can name mistakes and summarize lessons learned in three points:

  • Get the right partners.
  • Build relationships with those partners.
  • Do what you do best with the time you have.
Get the Right Partners

Our first mistake was selecting too few of the right organizations. We did not do enough homework to vet the organizations we selected. We thought we had the right groups, but we were wrong. We needed high-production groups, no matter their size. We needed organizations that understood how to find clients, had staff with the skill set to package loans, and that could manage risk. We needed organizations with understanding and willingness to add loan packaging as a core business. Too many were attracted to the possibility of generating income without understanding the staffing and work required to deliver the 502 package.

We convinced state leaders about the efficacy of the collaboration. We even successfully advocated for $500,000 from the Texas Department of Housing and Community Affairs to reduce the 502 mortgages. But again, our homework was incomplete. We were not able to absorb the funding within its limited timeframe. Even worse, the USDA Section 502 funding that year came inconsistently through Congressional Continuing Resolution stops and starts, hurting our planned timeframe. Too many moving parts influenced by a range of decision makers not in our control meant projects more at-risk for what might go wrong. In our case, the dollars lined up, but the timing and partnerships did not.

Build the Relationships With Those Partners

After recruiting, training, and forming the Collaborative, we failed at fully communicating to the partners the next steps we needed to take for this collaboration to succeed. We tried to move too quickly! We held a successful 502 training, and then we went back to our daily work. The groups in the Collaborative needed more training. It was our responsibility to really help these organizations commit the time and money needed to package USDA loans. Nick went back to CDCB, making sure its staff were fruitful packagers. Kathy, having led the recruitment, returned her attention back to farmworker housing at MET. We handed over the collaboration to others’ leadership for implementation far too early. Initially we did not even notice that there were no successful packagers other than CDCB. We would have noticed if we had taken the time to listen to the groups and hear what more was needed for them to be comfortable with the packaging work.

Do What You Do Best With the Time You Have

In the nonprofit world, over-reaching is a common mistake. We tend to take on too much too often. Too often we think our organizations can do it all. This 502 Collaborative project meant recruiting groups, organizing trainings, raising funds, working with USDA and the state housing agency. In short, we underestimated the time we needed to invest. We should have brought others to the team earlier with time and dedication to see this through to the end. We had each set aside enough time to get the project started, but not enough time to get it to move smoothly and see it through.

Texas Community Capital still successfully runs the program. The two of us – the dreamers and instigators creating the Texas 502 Collaborative – failed to invest the time and attention to strengthen the Collaborative during its early stages. There were plenty of obstacles to come – uneven federal funding over the years, retirements and staff changes at every level and within every organization, and changing USDA regulations. A stronger framework would have helped.

Mistakes happen; we fail; but we need to learn and embrace these failures – then move on. A sign of physical fitness is how quickly one’s heart rate returns to its resting rate after stress. A sign of organizational fitness might be how quickly we learn from our mistakes and apply it to our next shot at success.

Kathy Tyler has worked in the affordable housing development and finance field for more than 35 years, in neighborhood, urban, rural, and farmworker settings. Currently and for this last decade she directs farmworker housing programs for Motivation Education & Training Inc. She still makes many mistakes. Nick Mitchell-Bennett has spent the past 25 years building and financing affordable housing trying to make as few mistakes as possible.

Farmworker Housing Travails from Pennsylvania

Rural Voices - Spring 2015This story appears in the 2015 Spring Edition of Rural Voices

PathStone stayed the course through a ten-year predevelopment process and emerged a stronger real estate developer.

by John Wiltse

Adams County, Pennsylvania, is famous for the Gettysburg battlefields but less well-known outside the immediate vicinity as a major fruit-growing region with a large migrant and seasonal farmworker population. Since 1978, PathStone Corporation, based in Rochester, NY, has been providing critical housing and human services to Adams County farmworkers.

PathStone provided technical assistance to the Adams County Housing Authority for the development of the 12-unit McIntosh Court Apartments, the first off-farm labor housing community in Pennsylvania, which was completed in 1989. We also administered an on-farm housing rehab program in Adams and Berks Counties and developed several other multifamily projects which served both farmworkers and other low income families in the area.Jonathan Court Groundbreaking

In 1995, buoyed by the successful completion of the first USDA Section 514/516 farm labor housing projects in New Jersey, New York, Ohio and Pennsylvania, PathStone began pre-development work for Jonathan Court. The development is the first-ever Federally funded off-farm migrant housing complex in PathStone’s service area, located down the road from McIntosh Court among the peach and apple orchards of south central Pennsylvania.

This organization was managed by volunteers with no paid staff and no housing development experience whatsoever.

At the time, PathStone was under contract with USDA Rural Development (RD) to provide technical assistance to other non-profits to assist them in developing farm labor housing projects. We secured a commitment from a local faith-based organization, Fruitbelt Ministries, to serve as sponsor/owner of the project, and we helped them modify their organizational structure to conform to the “broad-based membership organization” structure required by RD at the time. This organization was managed by volunteers with no paid staff and no housing development experience whatsoever.

First Lesson Learned: Don’t Try This At Home!

PathStone learned through this and a farmworker housing project located in New Jersey that the development and ownership of a multi-family housing complex is best left to organizations with paid staff trained (or at least in training) to undertake these responsibilities and with affordable housing as a central part of their organizational history and mission.

In the case of the Jonathan Court project, PathStone wound up taking over development of the project due to changes in priorities for Fruitbelt Ministries. In a similar situation in New Jersey, PathStone staff became the de facto staff for the volunteer-run nonprofit membership organization we established to own the first and only 514/516 project in that state.

Our lessons learned here are that change can come very slowly.

The project site for Jonathan Court was an assemblage of three lots, plus two additional parcels with existing family apartments. The existing apartments were going to be part of the project initially, but were later excluded from the deal. There was public water and sewer available and a building boom was going on in the area, so the landowner had no interest in signing our proposed option agreement. After several months of fruitless negotiations, Fruitbelt Ministries borrowed $136,000 from a national nonprofit organization through their revolving loan fund and bought the land. The lender insisted that PathStone guarantee the loan, so it’s not hard to see how we wound up in the driver’s seat on this deal!


For the next eight years or so, this project proceeded down a long and winding development path. PathStone had four different Pennsylvania housing directors over this period and inconsistent project management direction from the Rochester headquarters. The Pennsylvania State Executive Director provided skilled leadership for all PathStone human service programs in the state in addition to housing development, but did not have specific real estate development training or expertise.

Second Lesson Learned:

Make sure housing development staff are directed and supported by experienced housing developers and provide consistent supervision and training, especially through key staff transitions.

Immediately after purchasing the site, we started to receive monthly bills for reservation of sewer capacity from the Possum Valley Sewage Authority. The lack of as-of-right sewer access was overlooked in the due diligence process and wound up adding about $120,000 to the project cost. Another expensive lesson learned!

Getting through the local approvals process proved to be more involved than anticipated, stretching out over two years. Each time we thought we were close to securing the necessary approvals, the local planning board would come forward with a new requirement, report or study that needed to be completed, each of which required the expenditure of additional time and money. We erred in not getting the full scope of the planning board review requirements up front, in writing (though some of these requirements did, in fact, change during the pre-development process).

Working with RD was also challenging, to say the least. RD interpretations of the design guidelines and requirements changed several times during the protracted pre-development stage, necessitating at least three sets of architectural drawings and many months
of additional architectural and engineering work.

In October 1998, the USDA multi-family housing statute was amended to allow owners of off-farm migrant housing projects financed under its Labor Housing Program (Section 514/516) to use RD Rental Assistance funds to provide an annual operating assistance grant to the project (instead of providing individual rental assistance to each household). PathStone decided to take advantage of this new opportunity and the operating budget was revised to show the projected operating assistance in lieu of traditional RA.

In June 2003, five years after the operating assistance change was made to the statute, the National Office of RD finally released a Proposed Rule for the implementation of this change. Although the operating assistance mechanism was put into place by several RD-financed migrant projects in other states, RD in Pennsylvania was unable to process our requests for this subsidy funding.


As of this writing, PathStone has amassed operating deficits of over $300,000 from Jonathan Court over the past 10 years and RD has yet to release any operating assistance. Thankfully, RD staff have recently joined in negotiations with PathStone and we hope
to have a resolution to the past due operating assistance by the time this is printed. Our lessons learned here are that change can come very slowly. at RD and that each RD State Office operates with a high degree of autonomy. PathStone had been aware of both of these facts, but Jonathan Court put a very painful price tag on these lessons!

The Good News:

The 14 apartments in the Jonathan Court project have continued to provide decent, safe housing for hundreds of farmworkers and their families over the past 10 years. The housing is operated in close coordination with the PathStone farmworker services office just down the road and our residents are often enrolled in job training programs and are receiving other supportive services. Their children are often served by the Migrant Head Start Center also operated by PathStone.

Which Brings Us to One Final Lesson Learned:

Include supportive services staff on the development team from the beginning.

Our farmworker service staff just down the road from the site could have been much more involved in the project throughout the process if they had been fully engaged by the real estate development staff.

We have been able to carry the operating deficit as a receivable on our books all these years with advances from our unrelated property management reserves. We have made many changes to the way we manage the development of multi-family housing as a result of the mistakes made on Jonathan Court but, as any experienced developer will tell you, every deal presents a fresh set of challenges and opportunities to learn from new mistakes. Our real estate developers in each state now report to the Senior VP for Housing in Rochester and are supported by a strong internal team. The PathStone Asset Management Committee (composed of the President & CEO, CFO, Senior VP for Housing and Senior VP for Property Management) also provides a level of oversight of our development projects that wasn’t in place for Jonathan Court.

John Wiltse is the Senior Operations Director at PathStone Corporation in Rochester, New York. John cut his teeth on rural community development work at the Cranks Creek Survival Center in Harlan County, KY, as a college intern and has worked in the field for 24 years with PathStone.

"My House Is Backwards!"

Rural Voices - Spring 2015This story appears in the 2015 Spring Edition of Rural Voices

The Housing Development Alliance takes a calm but straightforward approach to mistakes: admit them, fix them, and learn from them in hopes of not making the same mistake twice.

by Scott McReynolds

Last fall the Housing Development Alliance celebrated our 20th Anniversary and our 200th new home with a double house raising.  In the midst of this controlled chaos, an overzealous volunteer nailed some studs on the wrong side of the layout mark. While the volunteer wasn’t great at reading layout marks, he could swing a hammer; so by the time the mistake was discover he had most of the wall framed. The volunteer was embarrassed and concerned that he had wasted time and materials. I watched as the Housing Development Alliance carpenter showed the volunteer how to knock the wall apart and pull the nails. The carpenter then showed him how to read the layout marks. As the volunteer, who was still embarrassed, apologized yet again, the Housing Development Alliance carpenter said, “Don’t worry about it.  The only person who doesn’t make mistakes is the person who doesn’t do anything.” Hearing this, the volunteer finally relaxed and went on to have a great day. I even saw him explaining layout marks to another volunteer later in the day.

Who’s to blame doesn’t really matter; the fact is we had a flawed procedure that allowed this mistake to happen.

There is a lot of wisdom in that carpenter’s statement.  If you do something, especially new things, you are going to make mistakes. It’s inevitable. Don’t worry about it. In fact, if you aren’t making mistakes, you probably are not pushing yourself or your organization hard enough. As the Executive Director of the Housing Development Alliance, I certainly don’t encourage mistakes, but I do try to embrace them when they happen. So the question isn’t if you will make mistakes, but the question is how you and your organization handle them. Playing the blame game, pointing fingers at others, jumping up and down on someone’s desk, yelling, and the like aren’t useful responses and do nothing to help you avoid making similar mistakes in the future.

At the Housing Development Alliance we take a relatively calm and direct approach to mistakes. We admit them, we fix them, and we learn from them in the hope of not making the same mistake twice.  Since the only thing better than learning from your own mistakes is learning from someone else’s, here are two examples of mistakes and the lessons we have learned from them.

Lesson 1 – My House Is Backwards


We had just finished framing the exterior walls on Mickey’s house when she called me; “My house is backwards, the door is on the wrong side.” I called the construction supervisor who swung by the site to check it out. He called me back and said it was built just like the plans. Then I checked with our assistant director who works with customers on house plans. He gave me a copy of the plans she had picked out. Turns out the two sets of plans were mirror images. One had the door on the right; one had the door on the left. Mickey had changed her mind several times during the process and somehow or another, our staff had gotten out of sync. To this day, I still don’t know “who’s to blame.”  Did the assistant director forget to let the construction supervisor know about a change?  Did the construction supervisor forget that the assistant director had told him to change it one more time? Or was it something completely different like an email that got lost in cyberspace? Who’s to blame doesn’t really matter; the fact is we had a flawed procedure that allowed this mistake to happen.

We realized that the process is confusing and that people often hear what they want to hear.

The first thing we did was fix the problem. We got lucky that 1) Mickey noticed the problem before the roof was framed (otherwise we would have had to pull trusses off) and 2) that the house was a rectangle. So the fix was pretty simple, we just cut out a few studs, and moved some windows and doors. The second thing we did was to figure out how to make sure it never happened again. Our solution was to improve our preconstruction conference. We made several changes. First, we now have the homeowners sign the final plan.  When possible, we do this at the site so the client can easily visualize where the house will sit, where the doors/windows will be, where the driveway will be, and such. The construction supervisor ensures that the signed plan is what gets built. We also explain to the customer that from this point forward, their point of contact is the construction supervisor and only he has the authority to approve any changes to the plan and that any changes must be made in writing.  I am happy to report that, 150 plus houses later, we have not made this mistake again.

Lesson 2 – Make Sure They Hear What You Say

I was conducting a final inspection on a USDA Rural Development (RD) Section 504-funded home rehabilitation with the local USDA staff. The inspection was going great — the homeowner loved the work and couldn’t be happier. Then the RD staff asked the homeowner to sign the check to pay us.  That’s when the homeowner said, “But they’re not done yet. They haven’t done the back bedroom floor.”  The RD staff and I both pulled out the scope of work attached to the contract. To my relief (or so I thought), the scope didn’t mention the back bedroom floor.  The USDA staff member explained to the homeowner that it was not part of the contract. That’s when the homeowner got upset, “But I needed that fixed. They measured it; they made a drawing of the room. We even talked about what floor covering I wanted. This isn’t fair!”

I knew instantly what the problem was. Many home repair clients request more work than they can afford. We estimate all the repairs a homeowner requests, then work with them to establish the final scope of work. We look at the homeowner’s wants, but also prioritize based on importance of the repair. In this case, the roof work had been prioritized over the floor repair. It doesn’t make sense to fix a floor only to have water from a leaky roof drip all over it. But somehow in the process, the homeowner didn’t understand that the bedroom floor wasn’t going to get fixed.  I’m sure at the loan closing, we reviewed the scope of work with the homeowner. And yes, the homeowner should have realized that the back bedroom wasn’t on the scope of work. So we could have just chalked this up to a customer not paying attention. But placing blame on the customer isn’t the best approach for improving word-of- mouth marketing.

We realized that the process is confusing and that people often hear what they want to hear. Furthermore, the loan closing takes place in the RD office where it’s harder for the homeowner to visualize the repairs. To prevent a recurrence of the mistake, we bought a big red stamp and added an extra walk through. A day or two before we start a rehab, one of our staff members visits the home and does a thorough walkthrough of the scope of work with the homeowner. They review each scope of work item and explain what is going to be repaired and how w
e are going to repair.   Then we stamp the scope of work with a red stamp that explains that only the work on the write up will be completed. Furthermore, the stamp explicitly says that no other work – even work previously talked about, estimated, or measured – will be completed. This process has proved very useful and has helped us avoid several similar misunderstandings with other homeowners.

Red Stamp

So next time you make a mistake, remember, “Don’t worry about it. The only person who doesn’t make mistakes is the person who doesn’t do anything.” The best we can do is to learn from our mistakes so we don’t repeat them.

Scott McReynolds the Housing Development Alliance, has worked in the rehabilitation and construction of affordable housing in Eastern Kentucky since 1992. Since 1996, the Housing Development Alliance has completed over 200 homeownership units, completed over 500 repairs for low income homeowners, and developed 36 rental units. Scott serves on the board of the Federation of Appalachian Housing Enterprises, the National Rural Housing Coalition, the Appalachian Arts Alliance and the Community Foundation of Hazard and Perry County, KY.