Community Development Banking News
CDFI Banking: Industry, Policy, and Beyond.
A federal judge has overturned a New York City law that required banks to disclose their investments in local communities. The law was designed to pressure banks by asking for data relating to small-business lending, efforts to prevent foreclosures, affordable housing lending and branches in low-income communities – requirements that went beyond the Community Reinvestment Act. The law applied to 21 banks eligible to hold the city’s municipal deposits. The New York City Banking Commission considered the information when deciding where to park deposits, incenting banks to invest more in underserved neighborhoods. U.S. District Judge Katherine Failla said the act was impermissible as it “[secured] compliance through public shaming of banks.”
The CDFI Fund will co-host a webinar discussing how CDFIs can engage in the emerging field of Pay for Success programs on August 13, 2015 at 4:00 PM EST. Pay for Success programs aim to address social issues such as homelessness, recidivism and educational disparities. Through the Pay for Success platform, private investors such as CDFIs, commercial investors or individuals pay up-front for social services. The government pays investors a return if and only if these services deliver their intended results. Advance registration for the webinar must be completed by August 11. Register for the webinar here.
New York City's Carver Federal Savings Bank highlighted its efforts to expand wealth enhancement opportunities in low income communities in its 2014 Annual Report. Carver is the largest African-American bank in the country. The bank expanded lending in 2014, with an overall 5% growth in loans to $410 million. Carver has helped create 2,597 jobs using $149 million in New Markets Tax Credit allocations. The bank has focused on providing financial services to those who need it most with 90% of loan originators within Carver’s assessment area and a $3.34 million lending total for Minority and Women Business Enterprise.
A CFPB report finds that consumers who closed their mortgage using electronic platforms (eClosing) not only found the electronic process more efficient, but also were better educated about their mortgages than borrowers who used paper forms. The report shows that the electronic tools accessible in the eClosing process have the potential to educate consumers and give them more time to review their documents, resulting in increased comprehension of the mortgage product. The report found that eClosing had a particular advantage over paper forms in providing early document review and integrating educational materials, two key goals of the CFPB's Know Before You Owe mortgage disclosure rule, which will take effect in October.
Finance and Thrift Company of Porterville, California and fellow CDFI bank Pan American Bank of Los Angeles have announced the completion of their merger in an all stock transaction. The combined entity will operate under the Pan American name and be headquartered in Los Angeles. The merger will create a bank with total assets of $155.2 million and total capital of $36.9 million. The bank will maintain a fully bilingual staff and operate six branch offices in Southern California. “The new Pan American Bank reflects our continued commitment to building value for our shareholders and to expanding our services—both in product offerings and locations,” said Robert Hughes, CEO of the combined organization.
Technology could address the economic exclusion experienced by many disabled Americans, FDIC Chairman Martin Gruenberg said at a recent meeting of the National Disability Institute. Gruenberg cited a 2013 FDIC Survey that found one in five unbanked or underbanked households is headed by an individual with disabilities. Half of these households rely on alternative financial services. Gruenberg emphasized the importance of providing banking services to households headed by disabled consumers and encouraged bankers to explore technological solutions for disabled consumers such mobile banking, prepaid cards and direct deposit.
Senate Banking Committee Chairman Richard Shelby (R-Ala.), may hold up President Obama’s nominees for the Federal Reserve Board of Governors over the president’s lack of action in nominating a vice chairman of supervision to the Fed. The vice chairman’s role is to ensure accountability of the central bank’s oversight of the largest financial firms. But the position has stood empty for five years and Hill Republicans say the vacancy prevents Congress from exercising oversight of the Fed. The two Federal Reserve Board of Governors nominees awaiting confirmation are University of Michigan economist Kathryn Dominguez and former Bank of Hawaii Chief Executive Allan Landon.
A bill passed by the Senate last week proposes to reduce bank dividends from the Federal Reserve in order to fund U.S. highways. The plan, which will require House approval before taking effect, finances interstates in part by cutting the Federal Reserve dividend paid to banks with more than $1 billion in assets from 6 percent to 1.5 percent. The bill also provides a six-year outline for spending on roads, bridges and mass transit projects and renews the Export-Import Bank. The Senate Bill faces opposition from the banking sector for its changes to Fed dividends and from Republicans who are critical of the Export-Import Bank.
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.