5 Tucson Credit Unions Join Forces For Affordable Housing

Few challenges have commanded more sustained attention than affordable housing, drawing focus from lawmakers, financial institutions, and the public and nonprofit sectors alike.

Last year, fewer than 30% of Americans who planned to purchase a home followed through with it, according to NerdWallet’s annual homebuying survey released in January. The 71% that reported delaying their homeownership dreams largely cited their inability to afford homes on their local market.

Tucson, AZ, is no exception to this worsening trend. There, a consortium of credit unions, their trade association, housing organizations, and local leaders worked together to debate and test different solutions, ultimately launching the Tucson Welcome Home Program last October.

“It’s getting more and more infeasible for first-time homebuyers to enter the market,” says Adam Coggshall, chief credit officer at Pima Federal Credit Union ($1.5B, Tucson, AZ). “Home values are increasing with rapidly rising rates. It’s a double whammy. I believe from 2020 to 2022, year-over-year rent increases were above 20%. That’s not sustainable. Everybody’s getting priced out.”

Championed by Pima, Vantage West Credit Union, Tucson Federal Credit Union, Hughes Federal Credit Union, and Pyramid Credit Union, Tucson Welcome Home aims to serve households who have strong payment histories and can reasonably afford a mortgage payment but are effectively locked out of ownership by down payments or monthly insurance costs.

A Framework To Break Down Barriers

Danielle Bridges, senior vice president of mortgage lending and capital markets at Vantage West Credit Union ($3.4B, Tucson, AZ), says participating credit unions made an intentional decision early on to lean into what they do best: lending.

She recalls the group asking what it would look like if they took the kind of risk in mortgage that they do in auto and focus on removing the most persistent barriers to homeownership while maintaining responsible underwriting.

“We’re seeing our members pay rent for 10 years perfectly yet can’t afford that down payment,” says Ashley Kemp, vice president of lending and solutions at Tucson Federal Credit Union ($875.5M, Tucson, AZ). “I’m comfortable taking a risk with someone who’s been paying that higher rent amount, especially when the mortgage payments are pretty similar.”

To help alleviate the risk even more, the program lifts best practices from down payment assistance programs that tackle affordability; for example, by requiring participants to complete a homeownership education class.

“We structured it to mirror a DPA program requirement because it’s the same sort of spirit,” says Bridges at Vantage West. “We want to ensure these borrowers are educated on what their options are — not only for this loan but also for future refinancing and homebuying. But unlike DPA, we were able to find a cheaper option for the class, so it’s not quite as expensive but still is valuable.”

The program caps eligibility at 140% of area median income, a broader threshold than many affordability programs to better reflect market realities.

“We did that to segment a group of borrowers that could responsibly afford a home but were still in that demographic where it’s a hurdle to find property that met their DTI threshold for the right price point,” Bridges says.

At the product level, the program offers up to 100% loan-to-value financing with no mortgage insurance. Rather than accommodating for risk through higher pricing, the originating credit unions align rates with traditional 30-year mortgages.

Operationally, participating credit unions stress-tested the program before launch by breaking into smaller working groups and asking subject-matter experts to scrutinize potential pressure points. That approach was critical to the program’s early success.

“The experts got together and knocked out potential challenges,” says Kemp at Tucson FCU. “It’s important to have those experts on the front lines try to tear it apart so we can make sure it’s successful.”

Cooperation Lifts Borrowers

A notable differentiator between Tucson Welcome Home and other DPA programs is how the credit unions collaborate with one another.

“Tucson’s a pretty small community in the grand scheme of things,” says Dustin Powell, CEO at Pyramid Credit Union ($248.0M, Tucson, AZ). “We support a lot of the same organizations, the same businesses, the same members. The collaborative spirit was already there, so it felt natural to say, ‘Let’s tackle something so big and important in our community.’”

From the outset, participating credit unions aligned around a clear, shared goal of addressing housing affordability with a solution each institution was equipped to execute. In this case, Pima, Tucson, and Vantage West serve as originating lenders while Hughes Federal Credit Union ($2.6B, Tucson, AZ) and Pyramid act as referring partners.

“As the smaller credit union of the group, it’s great to be able to turn our members over to a community we know is going to look out for their best interests,” says Dustin Powell, Pyramid’s CEO. “That’s been really valuable to us.”

That sense of community collaboration extends into funding. To establish a loan loss reserve, the five credit unions tapped a grant provided by the GoWest Foundation. The reserve doesn’t cover the full balance of the loans, but it does provide enough protection to give institutions the confidence to branch out in their lending without placing undue strain on individual balance sheets.

The reserve supports financing for approximately 62 households, representing roughly $18 million in lending. To ensure fairness and manage shared risk, the group sets clear guardrails, including a cap of 15 loans per originating credit union, preventing any one institution from drawing disproportionately on the reserve and keeping what participants described as a “level playing field.”

Cooperation with respect for balance is part of what makes the collaboration work, leaders say. Early performance has reinforced that confidence, with credit union leaders reporting the program has no losses to date.

Future Expansion And Scalability

Tucson Welcome Home is posting impressive performance while reaching the borrowers it was designed to serve.

“A lot of these members have stable employment and strong rental history, but they’re stuck,” says Coggshall at Pima. “They just need a bit of a nudge.”

That nudge translates into tangible, life-changing outcomes. Bridges at Vantage West recounts an interaction with one early participant, a fast-food restaurant manager earning approximately $33,000 a year but with no other debt.

“He talked about the color of paint he picked out and how fun it was to get to paint something he owned,” she says. “That was the embodiment of everything we set out to do when we structured the program.”

Encouraged by early results, participating credit unions are already looking ahead. Conversations are underway with institutions in Phoenix, with the potential to expand the model beyond Tucson and eventually take it statewide.

Longer term, the vision is even broader. Bridges says the goal is to prove the model is sustainable enough to stand on its own without relying on grant support and to demonstrate that credit unions can scale responsible 100% financing.

“Someday we hope we can just lend to our members that need 100% if we’re able to structure a program that identifies them,” Bridges says. “This could be a program that lots of credit unions and other institutions take on.”