By Madelyn Lazorchak, Senior Communications Writer
02/03/2025

Ashley Hagen and her husband raise cattle and small crops on a farm they purchased through a “contract for deed" in rural South Dakota. Their land included a small home, where they lived with their three sons. “We kept plastic on the windows and even then, you could feel the breeze,” Hagen says. “The foundation was crumbling.”

Then, they heard about a Governor’s House Program, a state-run program to develop quality, energy-efficient homes, manufactured homes for buyers with limited income and assets. They applied for a loan through a conventional lender, but didn’t like the final terms so they went looking elsewhere. They tried a local bank, but the required 20% down payment was out of reach for their family of five. As cattle farmers, “we’re only really paid once a year,” explains Hagen, who also works outside of the farm. 

Finally, she remembered a local organization she’d checked out once before: GROW South Dakota, a NeighborWorks network organization with a focus on housing, business and community. She went in to see if they could recommend a lender or help them with a guarantee. “And they said, ‘We can lend you the money directly.’ It completely cut out the middleman,” she says. “And it turned out to be a good thing for our family.”

The Hagen's new home.

With their mortgage commitment in hand, the Hagens signed the purchase agreement for the Governor’s House, which was delivered and installed on their farm.  Now they have space for their family —  three bedrooms and two bathrooms. There are no drafts coming from the windows or the doors. “We’re very happy,” Hagen says. Their house has the true feeling of home.

For 25 years, GROW SD’s community development financial institution (CDFI) in Sisseton, has been providing 1st mortgage loans to would-be homeowners like the Hagens who may not meet the traditional underwriting criteria of  a conventional lender, but borrowers who are a good risk, nonetheless. 

Lori Moen, GROW South Dakota’s Chief Operating Officer, explains that the goal of the 1st mortgage loan program is to help borrowers achieve their dreams of homeownership while also improving their applicant profile. They improve their credit and also begin accumulating equity in their homes, preparing them to refinance with a competitively priced traditional bank loan in the future if they so choose. “Most applicants will meet conventional lending requirements in five to seven years,” Moen says. Others may take the full 10-year life of the GROW SD loan. When the mortgage is repaid, those funds replenish the capital which becomes available for the next borrower.”

For GROW SD, betting on those borrowers is paying off. The default rate is less than 2%.

The success of the program is rooted in the relationship the NeighborWorks nonprofit builds with the customers from the beginning, Moen says. “We are the loan officers and the housing counselors and the budget coordinators and the servicers.” That means that if we see there’s a possible concern, staff can meet with the client right away to work on a solution. Because GROW SD is also a community action agency, the nonprofit has access to varied resources that can help families, that may be undergoing challenges. For example, they can direct the client to resources for help paying a utility bill, which can make room in their budget to assist with paying the mortgage. Says Moen, “It’s counseling in a deeper form” than the servicing most conventional banks provide.

In rural areas like South Dakota, Moen says, CDFIs play a significant role. “We are here to meet the needs of the people because we know the needs of the people. We are living in the same environment they’re living in.” 

The Hagens at Christmas.

When your clients see you in the grocery store or at church or a community function, she adds, “it’s easier for them to come to the table to talk. If they’re having trouble, it’s easier for them to talk about the options that are available.”

CDFIs play an important role across the rest of the country as well, creating access to capital and filling a gap for those who may not qualify for a traditional loan but who are still solid financial risks. As of January 2025, NeighborWorks' network of nearly 250 affordable housing and community development nonprofits includes 78 CDFIs offering a range of specialized residential, consume rand commercial loans to meet the needs of their communities.

These CDFIs “bring much-needed resources, housing solutions and community revitalization efforts that benefit individuals and families with low income and low-income communities,” says NeighborWorks’ Laurie O’Brien, senior director, lending. To support network CDFIs, NeighborWorks offers technical assistance and capacity services, helping them to attract capital and hone their business model to effectively serve their communities.  

Moen says her organization receives a number of loan referrals from other lenders – where the applicant may check several boxes but not all of the boxes required for a traditional loan. “We look with the same lens, but with a little more flexibility,” she says. They have a loan committee to review the applicants’ criteria for obtaining a loan. “We have counselors to discuss budgets, determine with them if homeownership is in their best interest and plan for potential sticker-shock that could come from moving from a rent payment to a mortgage payment.  We can address uncertainties and prepare them for future expectations.” 

Local families know who GROW SD is and what the organization does, she says, but it’s important to keep telling their story so that people across the state can learn about their organization and the opportunities it creates. Wealth-building is a core goal of GROW SD, and homeownership is one of the objectives within that mission. 

“Generational wealth building is key, and homeownership is a way to reduce poverty and increase wealth,” Moen says. “You need to have a place to live. If you can build wealth by owning where you live, what better opportunity is there to accomplish two objectives within one action? If we can help people become homeowners, it builds more than just wealth. It builds stability.  It builds community.”

Those who go through the program learn about other programs from GROW SD, including small business services. “They may be able to take advantage of small business loans as well,” Moen says. “That’s part of the mission: to get them started.”

Brenda Waage, senior loan officer for GROW SD, says the organization has made 250 1st mortgage loans, with a goal of 10 to 15 loans a year, based on capital availability. They also help, when funding is available, with down payment assistance for income-eligible clients seeking traditional loans. “Clients often don’t have the savings,” she explains. “And prices of houses are going up all the time.”

When clients come in, Waage says, “they are so excited, probably because they just found out what we can do to help them. We do everything we can.” 

Moen says NeighborWorks has helped make programs like this possible by providing capital and training, especially in the regulations that govern lending and CDFIs. “It’s been invaluable,” she says.