Callwood's visionary HOA versus the subprime catastrophe

Life was a whole lot simpler when Gertrude and Joe Barron bought their first house in Hellertown, Pa., a generation ago.

The couple got a mortgage from a local bank – the same bank where Mr. Barron deposited the paycheque he earned working at the nearby Bethlehem Steel plant. And the couple dutifully made their monthly payments until the house was paid off.

The story might have ended there.

But three years ago, Ms. Barron, 77, by then a widow living on social security, unwittingly stepped into the arcane world of subprime lending, helping to set in motion a chain of events that has rocked financial markets around the world and left few investors untouched.

Until this month, few Canadians knew what “subprime” meant. Fewer still could imagine why they should even care. Common in the United States, these loans are a rarity in Canada, accounting for roughly 5 per cent of all mortgages.

But these risky loans – made at inflated rates to borrowers with inadequate income and spotty credit histories – were all the rage south of the border. Last year, they accounted for 20 per cent of new mortgages, spawning a $1-trillion (U.S.) market.

Now, the subprime market's collapse has become the catalyst for the deflation of the U.S. housing bubble, and a virulent and spreading global credit crunch.

Callwood's Vision - Home Ownership Alternatives.

Four months after her death, the small miracles that June Callwood germinated all over the city continue to blossom.

Here is one that almost nobody knew about until now.

A decade ago, Callwood helped found a non-profit corporation called Home Ownership Alternatives. Its goal was to provide modest-income families with the chance to buy a home of their own. It offered them loans, worth up to 15 per cent of the purchase price, to make a down payment. No repayment of principal or interest was required until they sold the home.

The scheme was the brainchild of Callwood's nephew, Michael Labbé, an urban planner who passionately believed that home ownership could reduce poverty and revitalize threadbare neighbourhoods.

The initiative began quietly. The founders didn't have much seed money and their approach was at odds with mainstream thinking about affordable housing.

But the formula worked.

LINK: The Face Of the Global Credit Crisis

LINK: Callwood's legacy still spreading