Newsflash - October 23, 2013
Member News
The Boston Globe
(10-22-13)
Columnist Steven Syre comments on the bankruptcy proceedings of Charles Street AME Church, currently seeking protection from the $5 million in loans it has been unable to repay to OneUnited Bank and other creditors. Syre writes that bankruptcy judge Frank Bailey's decision provides a road map to resolving the dispute by rejecting the church’s reorganization plan, but refusing the bank’s request to dismiss the bankruptcy case entirely. The judge turned down the Charles Street reorganization plan for several reasons, including the fact that its aggressive repayment schedule would keep the church and its congregation dangerously close to the financial edge for the next 20 years. According to Syre, successful resolution will depend on a reduction of debt from OneUnited, the church's willingness to sell some of its three other properties, Charles Street AME’s friends ability to raise money and a larger commitment on the part of the church’s umbrella organization, the First Episcopal District of Philadelphia, to become involved.
City First Foundation
(11-7-13)
The City First Family of Companies will be holding its inaugural finance summit, "The Resurgence of Neighborhoods: Fueling D.C.'s Economic Growth" on November 7, 2013 at the Omni Shoreham Hotel in Washington. The summit will focus on how small businesses, new housing options, increased transportation options and innovative financing are changing neighborhood dynamics, contributing to Washington's population growth and building the city's economic vitality. Speakers will discuss how the success of Washington's highly desirable neighborhoods can be replicated in underserved neighborhoods while avoiding gentrification that jeopardizes equity and cultural diversification. Attendees are encouraged to register here.
Of Interest
CDFI Fund
(10-23-13)
The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced that it received a total of 310 applications in the 2013/2014 round of the New Markets Tax Credit Program (NMTC Program). The Community Development Entities that applied under the 2013/2014 round are headquartered in 43 states, the District of Columbia and Puerto Rico. Applicants requested an aggregate total of $25.8 billion in NMTC allocation authority. The NMTC Program encourages economic development in low-income and distressed communities by making tax credits available to Community Development Entities for targeted investments in eligible areas.
Department of the Treasury
(10-22-13)
A Treasury Department report found marked growth in small business lending among banks and loan funds participating in the Small Business Lending Fund (SBLF). In total, SBLF participants have increased their small business lending by $10.4 billion over a $36.5 billion baseline, and by $1.4 billion over the prior quarter. Increases in small business lending are widespread across SBLF participants, with 92 percent of participants having increased their small business lending over baseline levels. Most participants report that their small business lending has increased substantially, with 86 percent increasing small business lending by 10 percent or more. SBLF banks that refinanced Capital Purchase Program funding have increased business lending by a median of 43.7 percent since their initial receipt of funding from Treasury.
American Banker
(10-22-13)
Boston and Minneapolis are forcing banks to make more loans in low-income neighborhoods, adding to the list of 10 other cities with "responsible banking ordinances" intended to correct what they see as shortcomings in federal rules. Laws passed in those two cities in the past month will require banks that hold municipal deposits to step up their lending activity in economically distressed neighborhoods. The banks will face losing the city as a customer if they don't meet minimum requirements. The ordinances also require banks to provide more data about the loans they make for affordable housing and to small businesses and nonprofits in economically depressed neighborhoods. Community development lenders have expressed optimism about the ordinances' ability to encourage development. "To the extent it [were to drive] other institutions to partner with us, it would make a difference," says Brian Argrett, president and chief executive of Washington's City First Bank of D.C. and CDBA Vice-Chair.
Bloomberg Businessweek
(10-22-13)
EBay Inc. is facing a probe by the Consumer Financial Protection Bureau over their Bill Me Later loan program that allegedly mimics a structure once used by high-interest lenders to evade state rules. The program, a service of EBay's PayPal unit, relies on Salt Lake City, Utah-based Comenity Capital Bank to make loans customers use for online purchases. The loans are then purchased and managed by EBay. Customers can avoid an annual 19.99 percent rate by paying off the loan before the end of a six-month promotional period. But if they pay later, they incur accumulated interest and fees that effectively raise the annual rate. A customer of the service, Kyle Sawyer, charged in a lawsuit that EBay worked with another bank, New York-based CIT Group Inc., to dodge the state’s interest-rate limits. The rates on Bill Me Later loans can exceed 100 percent, according to the suit. “PayPal... bought a program that structured a scheme to launder loans to evade state law,” the plaintiff’s lawyer, Jeff Friedman, said in a 2012 hearing.
Wall Street Journal
(10-19-13)
J.P. Morgan Chase has reached a tentative deal with the Justice Department to pay a record $13 billion to settle a number of outstanding probes of its residential mortgage-backed securities business. The deal doesn't resolve a continuing criminal probe of the bank's conduct, which could result in charges against individuals or the bank itself and possibly increase the penalty tab. The two sides continued to disagree over an admission of wrongdoing that would end the criminal probe and decided instead to resolve the civil allegations related to the mortgage securities. The deal includes $4 billion to settle claims by the Federal Housing Finance Agency that J.P. Morgan misled Fannie Mae and Freddie Mac about the quality of loans it sold them in the run-up to the 2008 financial crisis, another $4 billion in consumer relief and $5 billion in penalties paid by the bank. If completed, the deal would represent the largest settlement the U.S. government has reached with a single company.
Bloomberg Businessweek
(10-17-13)
Several studies investigating the ideal size and location of banks found that small, rural banks make smarter loans. According to the FDIC, in every five-year period since 1991 a lower percentage of loans from community banks has gone bad. Richard Brown, the FDIC’s chief economist, says small banks have a competitive advantage with “nonquantitative” information—knowledge of their customers and the local economy. A 2012 St. Louis Fed paper, Small Business Lending and Social Capital: Are Rural Relationships Different?, found that loans from rural banks to rural borrowers were only 70 percent as likely to default as those from urban banks to urban borrowers. Ken Hale, CEO of the Bank of Montgomery, points to the importance of what economists call social capital: social relationships in small tight-knit communities provide controls on the banks. “You can’t be greedy,” he says. “You can’t be devious. Because I gotta go home every day and see my two neighbors.”
Jobs
On behalf of the U.S. Department of the Treasury's Community Development Financial Institutions Fund (CDFI Fund), F2 Solutions is recruiting a large number of well-qualified individuals to serve as reviewers for the 2013-2014 CDFI New Markets Tax Credit (NMTC) Program application round. The NMTC Program allocates tax credit authority to Community Development Entities which in turn make investments in a variety of businesses and activities in low-income communities across America. Working independently and remotely, reviewers provide critical first-stage evaluation of applications.
Schwab Bank's Community Development division is responsible for fulfilling the Bank's obligations under the federal Community Reinvestment Act, developing and managing programs that help meet the lending, investment and service needs of low- and moderate-income populations and neighborhoods. Within this division, the Senior Community Development Analyst is responsible for portfolio management, underwriting support and special projects, including developing financial analyses to evaluate new products and programs.