News
Kat Taylor, CEO of Beneficial State Bank, has been selected to become one of six Social Impact Fellows at Berkeley's Haas School of Business. The six fellows will serve as mentors to students, speak on panels, attend special events and provide their expertise to programs, centers and the faculty. "These fellows share one thing in common: they are changing the world with their deep and meaningful work connected to social impact and we are honored to welcome them to Haas,” said Laura Tyson, director of the Institute for Business and Social Impact at Haas. In addition to her work at Beneficial, Taylor is the founding director of the TomKat Ranch Educational Foundation, an organization dedicated to sustainable food production.
The CDFI Fund has announced a series of workshops to prepare CDFIs and other prospective program participants for the upcoming CDFI Bond Guarantee Program application round. The workshops will provide details on the program and the various ways to participate, including information on the review and evaluation of applications. The first session, for existing and potential qualified issuers, is scheduled for February 26 at 9:00 AM. The second, for interested program participants and potential eligible CDFI applicants, is scheduled for February 27. Registration is required and will be honored on a first come first serve basis. Registration for both sessions closes at 5 p.m. EST on February 20, 2015.
For the first time, the FDIC has publicly released guidelines for how examiners should instruct banks to cut off accounts for risky customers suspected of violating the law, a major point of contention in the controversy over the Justice Department's "Operation Choke Point" probe. FDIC staff are required to use a formal, written process in cases where examiners find banks aren't managing the risks of account activity. All recommendations for termination of deposit accounts must be approved in writing by an FDIC regional director. The guidelines come after months of criticism from Republican lawmakers, who allege regulators have been too aggressive in pressing banks to avoid controversial customers such as payday lenders and gun dealers.
A new SIGTARP report reveals that private investors like hedge funds and others have stepped in and scooped up about 70% of Treasury's auctioned TARP investments in small banks. As the new owners of the bank’s shares, the funds can profit by reselling them back to the bank at a premium. For instance, one winning bidder won the shares for $3 million less than taxpayers had originally paid. Eight months later, the same bidder sold the shares back to the bank at a $1.6 million profit. Treasury has taken steps to work with community banks to restructure the TARP investments -- including restructured investments in 35 community banks and helping 28 community banks refinance into the lower-cost Community Development Capital Initiative program, which supports lending in underserved communities.
The Federal Housing Administration has launched a risk-sharing pilot program designed to encourage CDFIs to finance the rehabilitation of smaller multifamily apartments. Normally, small apartment owners may get a loan from Fannie Mae, Freddie Mac, the U.S. Department of Agriculture or a community bank, but the transactional costs can make the loans expensive. Under the new pilot, FHA and HUD would insure loans offered by CDFIs, lowering the costs for borrowers and encouraging CDFIs to finance more multifamily projects. The lender will share the insurance risk with FHA, covering 50% of any losses. In exchange, the lender receives greater flexibility on underwriting terms and compliance.
Mel Watt, director of the Federal Housing Finance Agency, defended his efforts to expand credit access at a hearing of the House Financial Services Committee. Republican lawmakers objected to the FHFA’s decision to allow the GSEs to guarantee mortgages with as little as a 3 percent downpayment. They also blasted a decision to delay an increase to the fees Fannie and Freddie charge to guarantee mortgages — the increase was designed to reduce the presence of GSEs in the housing market. And they complained about the FHFA’s decision to end a six-year suspension of payments into affordable housing trust funds. “These are not risky loans,” Watts pushed back. “We have made that assessment based on research, not based on politics.”
A report by the CFPB delves into peoples' financial lives with a focus on how they understand and achieve financial well-being. The investigation is part of a broader effort on the part of the CFPB to establish best practices for financial literacy training. Using findings from qualitiative interviews, the CFPB found four broad behaviors that contribute to financial well-being: managing money, research/knowledgeseeking, planning/goal-setting, and follow-through. The report concludes that financial literacy programs must seek to go beyond increasing consumers’ knowledge of financial facts, helping consumers develop the skills, experience and familiarity and self-confidence to meaningfully engage in those behaviors that will help increase their financial well-being.
The Federal Reserve has released a report and recommendations intended to speed up the US payments system. The proposed changes would move payments to near real-time, a big change from the current ACH system which can take several days. Fed staff said that the Federal Reserve might consider taking a more direct role if the private sector can’t offer the services alone. But the report is also careful to stress that any Fed action would be closely coordinated with big banks, which have opposed changing the payment system because of concerns over costs. The report states that although the business case of banks investing in real-time payments appears neutral to slightly negative in the near term, it could create substantial benefits for banks, including new fee-based services.
Melanie Stern, Spring Bank's Director of Community Lending, appeared on radio show Gotham Connections to discuss Spring Bank's new Borrow and Save program: "Borrow and Save takes the traditional payday model and turns it on its head... It's a small amount of credit up to $1,500 that has a unique twist--that 25% of the loan is kept in a savings account. The goal there is to help people build savings, give people an opportunity to build their credit profile and also to break the habit of repeat lending... On the consumer side, to date, we've had to write off one loan in the amount of $600. So the notion that people of modest means cannot be good borrowers -- we're hoping to put the lie to that."
Chicago-based CDFI Bank Seaway Bank & Trust has been slapped with a consent order by the FDIC and the Illinois Division of Banking. The order requires the bank to hold elevated capital levels, strengthen management, halt dividend payments to investors and beef up controls to detect money-laundering and other criminal activity by customers. The order, which the bank consented to without admitting or denying charges of unsafe or unsound banking practices, requires Seaway to boost its “Tier 1” capital to 8 percent of its assets within 60 days. The bank would need to raise nearly $8 million to hit that benchmark. The order will also bar Seaway from seeking acquisitions or paying dividends to its investors.