News
The Federal Reserve on Wednesday left its key interest rate near zero but signaled it remains on course to raise interest rates in September or later this year, citing progress in the U.S. job market. The Fed said that, although the labor market had improved, there is lingering concern about low inflation. Central to the Fed’s thinking is how it perceives its progress in achieving its “dual mandate” of maximum employment and inflation near 2 percent. The Fed has said it will raise rates when it has seen improvement in the job market and becomes “reasonably confident” inflation is on course to return to 2 percent. The benchmark federal funds rate has been near zero since December 2008, or 2,417 straight days. The central bank has three scheduled policy meetings left to change the rate, Sept. 16-17 being the next one.
United Bank has announced the creation of a $12 million loan pool designed to encourage economic development across Alabama and the Florida Panhandle. The pool is designed to assist companies with growth and expansion with loans that range from $250,000 to more than $3 million. Using capital created from New Market Tax Credits, borrowers receive up to 25 percent of their funds at zero interest as an economic development incentive. Transactions involving New Market Tax Credits often are not practical for projects less than $5 million, but the loan pool allows United Bank to make smaller loans without the additional cost. The initiative has already assisted at least five local companies with new equipment financing and debt restructuring totaling more than $9 million.
Washington, D.C.-based Industrial Bank has released its 2014 annual report, marking the bank's 80th year in operation. In 2014, Industrial Bank's commercial and commercial real estate loans increased by 8.5% to an all-time record of $256 million. The bank expanded its support for local businesses as an SBA Preferred Lender status and held a conference for businesses pursuing government contracts. The bank also became involved in insurance by initiating a new partnership with New York Life Insurance Company to provide estate planning services to customers. Industrial Bank is currently in the midst of a capital raise which has resulted in the highest capital levels in the Bank’s history.
CapNexus, an online community development finance matching system, is helping CDFI banks make their Bank Enterprise Awards (BEA) applications more competitive. The BEA Program rewards banks that support community development -- in part by giving the highest funding priority for banks' CDFI support activities, including placing deposits in CDFI-certified credit unions. The new service, created in partnership with CDBA and the National Federation of Community Development Credit Unions, automatically matches banks seeking to place deposits with CDFI credit unions looking for deposits. Sign up to place or receive a BEA eligible deposit here.
City First Bank of D.C.'s 2014 Annual Report details the bank's continued growth and success in taking advantage of the New Markets Tax Credit (NMTC) Program. The bank received its sixth NMTC Program allocation in the amount of $48 million. Among the projects City First has financed using the program is the DC Prep Public Charter School, which was able to renovate and expand one of its campuses in a low-income section of Washington, D.C. The project created 211 additional seats, boosting the total student population to 711, 90% of whom are low income students who qualify for free and reduced cost lunches. Overall, City First providing more than $82 million in affordable capital and technical assistance to nonprofits and businesses -- a 25% increase over last year.
A GAO report finds that new qualified mortgage (QM) and qualified residential mortgage (QRM) regulations are unlikely to fundamentally alter lending because most loans originated in recent years largely conformed with QM criteria. The QM regulations, which address lenders’ responsibilities to determine a borrower’s ability to repay a loan, set forth standards that include prohibitions on risky loan features and limits on points and fees. GAO predicts limited effects on the availability of mortgages for most borrowers and that any cost increases for borrowers, lenders and investors would mostly stem from litigation and compliance issues. The report noted that, although initial effects are expected to be limited, it is currently unable to predict long-term outcomes.
The Small Business Administration's flagship 7(a) lending program is likely to resume operating this week after briefly putting new guarantees on hold. Record demand had pushed the program to its $18.75 billion funding limit before both chambers of Congress voted to add nearly $5 billion in additional funding authority. The weeklong shutdown could underscore the program's bipartisan support — or give its critics more ammunition to argue that it is too vulnerable to politics. Under 7(a), the SBA provides guarantees of up to 85% on small-business commercial loans. This year is looking to be the most successful in the history of the program, with gross loan guarantees poised to break the $20 billion threshold in fiscal 2015.
In an interview with Ebony Magazine, OneUnited Bank President Terri Williams discusses the importance of Black banks in their communities and her bank's innovative outreach strategy: "This is not my bank. It’s our community’s bank. My goal is to ensure OneUnited Bank changes the nature of urban banking. We strive to offer banking services and promote financial literacy in our unique way... When our customers walk into OneUnited, they feel like they’re home. Yet we have the same online banking, mobile banking, bill pay and funds transfer services that large banks offer, and we offer better interest rates... Black banks are relevant because we care more about urban communities and understand them better than other banks."
The FY2016 Financial Services and General Government Appropriations Bill has been approved by the Senate Appropriations Committee. The bill cuts funding for the CDFI Fund by $9.5 million from FY 2015 levels to $221 million. Following dedicated outreach from CDBA members, the bill includes $21 million for the Bank Enterprise Award (BEA) Program – an increase from $18 million in 2015. The bill also increases funding for the FA Program to $161.9 million, up $9.5 million from FY2015. Native Initiatives remain stable at $15 million. The reduction in the top line number primarily resulted from a reduction in funding for the Healthy Foods Financing Initiative, which was eliminated in both the House and Senate bills.
The City First Foundation, an affiliate of City First Bank of D.C., will hold its second annual Community Development Finance Summit Thursday, November 5, 2015. The yearly conference focuses on commercial revitalization and housing opportunities in Washington, D.C. This year, the central topic is “Equitable Economic Development East of the River.” The summit will bring together the District’s key community development stakeholders and thought leaders to discuss the primary challenges and opportunities impacting Washington, DC’s neighborhoods east of the Anacostia River. The agenda will include discussion of industry best practices, trends in public policy and innovative trends in financial inclusion. Register for the event here.