Community Development Banking News
CDFI Banking: Industry, Policy, and Beyond.
Spring Bank is supporting the growth of small businesses and startups in the Bronx through a partnership with the Business Outreach Center, a CDFI-certified small-business development organization. In the summer of 2014, Spring Bank wrote a letter of credit to help the Business Outreach Center secure the lease for the Bronx Business Incubator, a new space for entrepreneurs to conduct business, engage in workshops and network with peers. “[A] majority of small businesses get their first loans from community banks," said Demetris Giannoulias, founder and chairman of Spring Bank. "It's fun to meet people and hear them talk passionately about something that they're working on and to be able to be a part of it. That's the great thing about being a banker."
A new study by the National Federation of Community Development Credit Unions examines the financial needs of very low income consumers. Many very low income consumers interviewed for the report contrasted the simplicity of dealing in cash to the surprise fees and delayed payments they experienced at financial institutions. They expressed a fear of institutions in general and a general sense that they “didn’t belong there.” The report stresses the importance of relationships and guidance in serving very low income consumers. It also cautioned against product promotion, which is often perceived as a sales pitch and can undermine trust in a banking relationship.
OneUnited Bank and the African American Film Critics Association last week presented “Money on My Mind: Film & TV Industry,” a celebrity panel discussing behind-the-scenes career opportunities in the television and film industry for African-Americans. Panelists at the Los Angeles event also discussed the recent increase in black films that have been both green-lit and experienced box office success. OneUnited Bank hopes the event will advance its goal of building long-term wealth in the black community. “It is amazing how many unsung careers there are in the business of entertainment outside of being an actor," said President and COO of OneUnited Bank Teri Williams. “The bank is steadfast in its commitment to helping urban communities find any and all growth opportunities.”
David Reiling, chairman and CEO of St. Paul-based Sunrise Banks spoke at a roundtable on equity crowdfunding with the Minneapolis/St. Paul Business Journal. "I view [equity crowdfunding] differently than a contrary type of view where this is just a competitor... [T]he fact is that when you look at it from complementary view, these small and medium businesses do not have the same type of access to capital that large ones do. And that’s a glaring need... From a banker’s point of view, you have to take an optimistic view of this and figure out how you can be relevant in this space. We need to adopt some methodology around crowdfunding where we might see a lower return for the bank, but a higher return in terms of community building and social purpose."
A new proposal by the CFPB could allow community banks and credit unions to make "qualified mortgages" more easily. Under current rules, lenders with less than $2 billion in assets and fewer than 500 first-lien loans originations per year can attain QM status if loans are held in portfolio, even if a loan's debt-to-income ratio exceeds QM's normal limit of 43%. The proposal would expand that advantage to more banks by raising the origination limit to 2,000 loans. It would also exclude loans that a bank keeps in its portfolio from the amount that counts against the limit. In addition, any institution not in an urban area would be recognized as "rural." CDFI banks will continue to be fully exempt from the ATR-QM rule.
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.