Proloan / Union Loan Program

Loans may have homeowners reading the union label
By RICK BARRETT
of the Journal Sentinel Staff
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When it comes to residential construction, organized labor has more than a
foot in the door with a loan program that offers mortgage money in return
for a chance to demonstrate skills.
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Home Purchase
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Mike and Nancy Steffes used the Proloan program for their Franklin home. The
program offers lower interest rates while asking homeowners to make an
effort to hire union contractors.
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The Proloan program invests union members' pension money in mortgages for
new home construction, with consumers benefiting from interest rates that
are locked in up to nine months while their homes are being built.
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The only catch is buyers or builders must make a "good-faith effort" to use
union carpenters and other skilled trades union workers.
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It's a way for organized labor to make money with pension funds, show off
its skills, and demonstrate that it can be competitive with the non-union
work force, said Greg Sefcik, director of organizing for the Milwaukee and
Southeast Wisconsin Regional Council of Carpenters.
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The Proloan program is part of the Builders Fixed Income Fund, a $240
million institutional mutual fund organized in 1997. The fund traces its
history to a mortgage investment program started in the 1970s by the
Carpenters District Council of Greater St. Louis.
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Proloan has operated in St. Louis for 20 years, where approximately 85% of
new homes are built with unionized labor, but is less than 2 years old in
the Milwaukee area, including Waukesha, Ozaukee, Washington, Racine and
Kenosha counties.
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Milwaukee is second only to St. Louis in the number of loans made under the
program - about 50 totaling $10 million.
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The money can only be used for new construction. With carpenters and other
skilled trades people putting their pension money into mortgages that fund
such work, they are "feeding their own" livelihoods, said Mike Stewart with
Proloan in St. Louis.
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About six Milwaukee-area builders are using Proloan, which is administered
through about four local banks and mortgage brokers.
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"I was ecstatic to use the program because my brother is a union carpenter,"
said Eric Leahmann, a Waukesha West High School social studies teacher who
recently financed a new home through Proloan.
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In the spring, Leahmann locked in a 6.8% interest rate on a 30-year
mortgage. But under the program, he was allowed to "float down" the rate one
time to 6.3% before closing on the loan in June.
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That aspect of the program appealed to Mike Steffes, who locked in a 6.75%
interest rate in March while his home was being built in Franklin, but was
able to get the rate reduced to 6.125% before his loan closed earlier this
summer.
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Lower payment
The rate cut reduced Steffes' monthly mortgage payment by $72, from $1,135
to $1,063, on a $175,000 30-year loan.
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Steffes is an accountant for JFK Builders in Milwaukee, a Proloan
participant. He said it was important that he get a guaranteed interest rate
before deciding to build a two-story, three-bedroom, 2,383-square-foot home
with a three-car garage.
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"My wife and I figured our family finances based on that interest rate," he
said.
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"At the time we locked in the rate, everything we heard was that rates would
be going up in the summer. So we were glad to have the security" of 6.75%
with the option of going down when rates fell.
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Currently, $300,000 is the maximum amount that someone building a new home
can borrow under Proloan. Program participants are eligible for $2,000 cash
if their contractors use at least several union sub-contractors. That money
is not part of the loan and can be used for any purpose, said Jeff
Cummisford, senior vice president of Amerihome Mortgage in Brookfield, one
of the program's participants.
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Proloan has been good for area contractors, said Jim Burg, president of JFK
Builders, a builder that provides carpenters to other contractors in
addition to building its own homes.
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"We have done at least 20 additional houses as a result of the program,"
Burg said.
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The wage for a journeyman carpenter in the Milwaukee area is $26.25 per
hour, plus benefits, and it takes roughly 200 carpenter labor hours to frame
a 2,000-square-foot home, according to union officials.
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The use of union carpenters, electricians, plumbers and other skilled trades
people is preferred for Proloan construction, but the requirement isn't
etched in stone, said Al Sterner, field administrator for the Milwaukee-area
program and a retired M&I Bank branch president.
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'No quota'
"If general contractors make a good-faith effort to find union
sub-contractors, that works for us," Sterner said. "There is no rigid
quota."
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A contractor might use the program once without union labor, according to
Sterner.
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"But if it becomes apparent they aren't trying to hire union workers, we
shut the spigot off," he said.
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Sterner said that earlier in his banking career he didn't have a favorable
impression of labor unions - adding that he felt they lacked financial
savvy.
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But his perception has changed, partly because of Proloan.
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"It's a creative way for unions to invest in their work, and it's based on
sound economics," he said.
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In St. Louis, Proloan has been used to finance several thousand homes and
has resulted in more than 2 million labor hours for the building trades,
according to union officials. Similar figures aren't yet available for the
Milwaukee area.
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But the program is not about promoting union labor for union's sake. Rather
it's about convincing homeowners that union workers deliver a better
product, said Sefcik, of the Milwaukee and Southeast Wisconsin Regional
Council of Carpenters.
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"A lot of buyers aren't driven by the lowest price," he said. "And the
prices on our contractors' homes could be a little higher, but they could
also be lower. There are a lot of variables