Southern Mutual Financial Services, Inc. (SMFS) is SMHA’s mortgage lending affiliate, a separate 501(c)3 founded in 2000 to help meet the affordable capital needs of rural Louisiana families. Eight local banks asked for and invested in the creation of SMFS to fill the gap between products available in the traditional mortgage market and what low-to-moderate wealth families need to build their assets and family wealth. SMFS is certified by the U. S. Treasury as a Community Development Financial Institution (CDFI).
SMFS’ mortgage product allows 100% financing of purchase price, making home ownership possible for families who have good credit and steady income but do not have the down-payments typically required for a conventional mortgage loan. SMFS also does not require costly Private Mortgage Insurance (PMI) that often drives the monthly payment beyond the reach of many hard-working families.
SMFS created a $100 million secondary market with IBERIABANK – the first of its kind – in which IBERIABANK purchases the mortgage loans made by SMFS, at par and without recourse, using SMFS’ loan policies. This arrangement allows SMFS to continually revolve its limited lending capital to connect low-to-moderate wealth families to over $17 million in affordable mortgage capital.
SMFS also filled a critical niche in the microbusiness loan market following Hurricanes Katrina and Rita in 2005. SMFS provided low-interest hurricane recovery loans to impacted businesses, offering flexible repayment terms. For example, loans to shrimp fishers allowed payments twice a year during the two major harvest seasons.
SMFS’ and other CDFI lenders’ success in providing mortgage capital to low-wealth borrowers has resulted in a transformation of the mortgage lending market, with several traditional mortgage lenders now offering mortgage products specifically designed to meet the needs of low-wealth borrowers. The decreased need for SMFS’ mortgage loan product helps position SMFS to serve as the primary lending partner for SMHA’s Gulf Coast Fisher Loan Fund that supports rural families and businesses along the Gulf Coast.