Community Development Banking News
CDFI Banking: Industry, Policy, and Beyond.
A federal judge shut down two online payday lenders operating under the umbrella of the Hydra Group after the CFPB and FTC said they extracted more than $36 million from customers who never agreed to loans. The operations bought personal data about people who were researching loans at other websites, deposited unsolicited money in their accounts and debited finance charges that exceeded the amount of the deposits. When some consumers tried to stop their banks from debiting the money, the companies produced fake loan documents testifying to the debt. The lenders made mostly unsolicited loans totaling $125.3 million while extracting $161.9 million from bank accounts.
A new analysis of Home Mortgage Disclosure Act data by the Urban Institute shows that the current tight credit environment has disproportionately affected African American and Hispanic households. African American and Hispanic borrowers took out a greater share of mortgages as housing prices neared their peak, the worst time to take out a loan. Then, as prices began to drop, tightened credit standards left many unable to obtain or refinance a loan. From 2005 to 2012, the share of loans made to African American and Hispanic households dropped from 23 percent to 12 percent, locking many borrowers out of homeownership and creating an obstacle to building wealth.
The Consumer Financial Protection Bureau has proposed bringing the financing units of the big automakers under federal supervision for the first time, a move that would let the agency examine the lending arms of Toyota, Ford and Honda. The bureau has grown concerned that some car buyers are being steered into expensive loans when they qualify for cheaper ones and being misled about the terms and benefits of add-on products. The proposed rule would extend the bureau’s current oversight of bank auto lenders to cover 38 auto finance companies that make, acquire or refinance 10,000 or more loans or leases a year. The firms provided financing to about 6.8 million consumers last year.
A new startup, TrueAccord, hopes to bring debt collection into the internet age. The company, which recently attracted $5 million in venture capital funding, uses behavioral analysis make debt collections less intimidating. TrueAccord tailors its campaigns to debtors, building a profile of the consumer and figure out the right course of action to collect on a debt. "I've been sitting here listening to breakup songs and eating ice cream because I feel like you're avoiding me," says one message targeted at millennials, who enjoy ironic humor according to TrueAccord’s data. TrueAccord uses email alongside phone calls and letters, and also allows users to negotiate terms through a web portal – unusual in an industry where regulations have caused collectors to shy away from online communication.
Brandon, Miss.-based Community Bancshares continues to run far ahead of the state’s other banks in the amount of money loaned to businesses through the Small Business Administration. The bank has led the pack since 2010. From Oct. 1 through Aug. 31, Community Bancshares made 80 businesses more than $47 million in SBA loans. The company is one of only a handful of Mississippi banks the SBA designates as “Preferred Lending Partners,” authorizing the banks to approve SBA loans without the lengthy reviews normally required. “You know they know this stuff very well and can go ahead and approve them,” said Gary Reed, deputy director of SBA’s Mississippi District office in Jackson, Miss.
Hildene Capital Management, a New York distressed-debt hedge fund, has threatened Portland, Ore.’s Albina Community Bancorp with involuntary bankruptcy if it defaults on its trust-preferred debt. Albina has been deferring interest on its trust-preferreds for five years and will soon default on about $6 million in debt and accrued interest if it doesn't pay. Complicating matters, Albina is currently under regulatory orders barring them from paying trust-preferred creditors. Last year, Albina sold a 90% stake in its bank to Beneficial State Bancorp in Oakland, Calif. by issuing new stock at the bank level, thus bypassing the debt-burdened holding company. The unusual recapitalization saved the bank, but it could expose the parent company to further legal challenges.
Reversing an industry trend of decreased rural lending, Southern Bancorp's 2013 annual report shows lending growth to $742 million, including 562 small business loans and microloans. Among customers profiled is Robert Heard, founder of Trumann, Ark.-based cabinet manufacturer Tru-Cab. As a young man, Heard worked at the Singer sewing machine factory by day and in his garage cabinet workshop by night. With Southern's help, Heard left Singer to open a Tru-Cab, a small shop which soon prospered. In the 1980's, the Singer factory closed and the building was vacant for years. Now, with financing from Southern, Heard is returning to the Singer factory -- which is the new manufacturing headquarters for Tru-Cab.
With help from Virginia Community Capital, Khans Builders & Contractors has converted a historic building in Roanoke, Va. into a 90-apartment mixed income space. VCC provided construction financing, in partnership with HomeTown Bank and Community Bankers’ Bank and with permanent financing from The Virginia Housing Development Authority. This is a dream come true for Faisal Khan. For years, he had driven past the once-vibrant Ponce de Leon hotel and imagined ways to revitalize the building. The Khans paid great attention to detail to restore original architectural elements, including mosaics, crown molding, and parts of the original marquee. "[W]e really started discovering the historic fabric that has been untouched for 40 years," said Khan.
Virginia Community Capital has successfully raised and self-funded $10 million to capitalize the Virginia Fresh Food Loan Fund, a milestone in VCC's Clinton Global Initiative America commitment to facilitate healthy food enterprises in urban and rural communities throughout Virginia. The fund offers small businesses technical assistance and lending opportunities to encourage the sale of market healthy items and foster the expansion of food hubs in rural communities. VCC has already deployed $600,000 from the fund to projects increasing access to healthy foods. “According to the USDA Food Atlas, 17% of Virginia residents lack access to healthy, local, and fresh foods. The [fund] is designed to help these residents have access to these foods,” said Jane Henderson, President/CEO of VCC and CDBA Chair.
The CDFI Fund is recruiting reviewers with considerable community economic development finance expertise for the 2014 round of the NMTC Program. Working in teams, but reading each application independently, reviewers will evaluate NMTC applications using the CDFI Fund’s review criteria and rate the application's business strategy and community outcomes sections. The entire process will be web-based. Due to conflict of interest concerns, employees of organizations applying for the 2014 NMTC round and employees of organizations which intend to receive loans or investments from organizations that have applied in the 2014 round may not participate. To apply to be a reviewer, sign up here.