Community Development Banking News
CDFI Banking: Industry, Policy, and Beyond.
At a hearing earlier this week, the House Financial Services subcommittee on Financial Institutions and Consumer Credit examined nearly a dozen bills that Republicans say would provide regulatory relief to community banks. At the hearing, community bankers told lawmakers they are being pushed out of business by new rules written in the wake of the financial crisis that are better suited for big banks. Democrats on the panel warned against giving banks a “get out of jail free card.” Republican members also took the opportunity to express concerns with the Justice Department's Operation Choke Point, which they say requires banks to target customers that operate businesses which federal regulators do not like, even if they are not illegal.
Housing finance experts Ellen Seidman, Laurie Goodman and Jim Parrott discuss the history of the stalled Johnson-Crapo GSE-reform bill and the likelihood of further action. Although Johnson-Crapo contained an incentive intended to ensure that the system would serve low income borrowers, progressive members of the Senate Banking Committee were uneasy with the impact of increased risk-based pricing and higher capital requirements on the cost of borrowing. Although consensus emerged on many issues, addressing the concerns of the progressives became incompatible with retaining the bill’s bipartisan support. The experts agreed it was unlikely the bill would make any short-term progress, but consider it possible that administrative action could enact some of the bill's provisions.
First Bancshares of Hattiesburg, Miss., has redeemed the preferred stock BCB Holding in Mobile, Ala., issued to the Treasury Department under TARP's Capital Purchase Program (CPP). The First Bancshares bought BCB on July 1 and redeemed the $2.1 million in TARP stock earlier this week. First Bancshares also assumed a $600,000 promissory note to Alostar Bank. The total consideration for BCB also included $1.3 million in cash and 158,000 shares of common stock valued at $2.3 million.
David Reiling, CEO of Sunrise Banks, appeared on Minneapolis' ABC affiliate to discuss the impact of B-Corporations, which have recently become recognized in Minnesota. B-Corporations are able to consider impact metrics alongside profits when making business decisions. Mr. Reiling expects a flood of applications for B-Corp status "Looking at a public benefit corporation, that corporation is going to take into account not only the shareholder but also the employees, its community, the environment, and its customers," Reiling said.
More than 350 students from suburban Chicago's Streamwood High School have dedicated over 2,240 hours this year to the First Eagle Bank Financial Scholars Program. Through the program, First Eagle Bank sponsors student access to EverFi-Financial Literacy, a web based resource that teaches the basics of personal finance. The course covers a variety of topics including credit scores, insurance, student loans, taxes, stocks, 401k’s and other critical concepts.
The CFPB has reached a $10 million settlement with ACE Cash Express, one of the nation’s largest payday lenders, for its illegal debt collection tactics. The CFPB says ACE threatened consumers with extra fees, being reported to credit reporting agencies and criminal prosecution if they didn’t make payments. Some collectors repeatedly called consumers, their offices and even their relatives, disclosing information about their loans. Of the $10 million settlement, $5 million will be paid to consumers in the form of refunds and $5 million will be paid as a penalty to the CFPB. ACE Cash Express is also ordered to end illegal debt collection threats and harassment and to stop pressuring borrowers into taking out repeated loans.
Banks are so becoming desperate for checking customers and fee income that they have returned to an old-school advertising method: prize giveaways. And they seem to be working. Boston-based First Trade Union Bank has opened 230 checking accounts this year by offering consumers a chance to earn $100 in cash bonuses. Boston's Eastern Bank offers new checking account customers in April and May four hours of house cleaning services valued at $165. At East Boston Savings Bank, consumers can get a charcoal barbecue grill or a beach chair. The campaigns are aimed at consumers ready and willing to switch financial institutions -- about 15 percent of the market.
A report by the Cleveland Fed finds that CDFI Fund awards substantially improve institutions' dedication to lending in distressed areas. The study compares the increase in lending at CDFI credit unions that receive grants to the baseline lending level of credit unions that apply but are rejected. The institutions which received CDFI grants increased lending by 3 percent on average. For every dollar awarded, awardees loaned 45 cents to borrowers in the first year and up to $1.60 within three years. The authors note that the CDFI Fund's core program works well because of its institutional independence, direct injection of funds to low-income neighborhoods and its transparent review process.
Urban Partnership Bank has made a $1.6 million commercial real estate loan for casual dining franchise Culver’s to acquire property for their first restaurant in Chicago. Construction of the new restaurant, located near Chicago's Wrigley Field, is expected to be completed prior to opening day of the 2015 baseball season. Justin Obriecht, the Culver’s franchisee who is bringing the burger chain’s first restaurant to the city, wants to add about 2,500 square feet on the property's first floor to make room for the restaurant. He also plans to add two new floors with six apartments to the building, estimating the entire project will cost $4.8 million.
The CDFI Fund is requesting public comment on a new annual reporting form for all certified CDFIs. The objective of the new Annual Certification and Data Collection Report Form is to reduce the burden of the recertification process. It will also require new annual financial and impact data, a change the CDFI Fund hopes will enable them to track the financial health and accomplishments of CDFIs. In particular, the CDFI Fund seeks input on whether the proposed form is suited to its stated objectives; ways of minimizing the burden of the new reporting; ways to enhance the quality, utility and clarity of the metrics; and estimates of the operational costs of providing the information. The deadline for written comments is September 8, 2014.