The Neighborhood Assistance Corporation of America, a Boston-based nonprofit lender, is making waves with its vocal advocacy in favor of reviving a more sustainable version of the subprime mortgage market. The organization's mission is to expand homeownership with mortgages to lower-income borrowers on terms that are both profitable and sustainable. It is half lender, half community organization. Applicants are subject to careful screening and, upon approval, are required to participate in the organization's advocacy efforts. The lender also replaces the typical mortgage insurance with a requirement that borrowers contribute to an emergency fund. This fund is lent out to borrowers facing medical emergencies or a job loss, preventing defaults. The organization's default rate has been low; of the 4,005 loans it made from 2004 to 2006, the peak of the housing boom, only 2.6 percent lost their homes to foreclosure--less than a third the national rate.
A new study of FDIC statistics finds that the number of small banks and their share of US banking assets declined substantially since 2000 while the five largest US banks expanded. Small banks’ share of domestic deposits fell from 40 percent to 23 percent since early 2000 while their share of US banking assets declined from 36 to 19 percent. The five largest banks now hold 44 percent of US banking assets and 40 percent of domestic deposits—up from 23 percent and 19 percent, respectively, in early 2000. Some of the decline among small banks is organic, as market forces encourage combinations in order to spread operational costs over a larger customer base. Increasing regulatory burdens, which absorb a larger percentage of small banks' budgets, also encouraged consolidation. Other banks have simply outgrown their 'small' status. But more than five percent of small banks were found to have failed in the wake of the economic crisis.
This week, February 24-March 1, is America Saves Week. Programming sponsored by the OCC, the Consumer Federation of America and the American Savings Education Council will encourage individuals and families to prepare for the future by saving. "I’m proud of the role that national banks and federal savings associations play in helping Americans build the savings they need to improve their lives" said OCC Comptroller Thomas Curry. Curry encouraged banks to continue their support for America Saves Week by partnering with local organizations to encourage savings through activities such as sponsoring financial literacy programs, implementing school-based savings programs and offering bank-sponsored savings match programs.
Minnesota legislators plan to introduce a bill that will allow companies in the state to form B-corporations, entities that pursue social missions as well as generate profits. One early advocate is David Reiling, CEO of Sunrise Banks and a CDBA director. About 20 states currently allow the charters and Reiling wants to see Minnesota join that group. "Do well and do good," Reiling said of Sunrise Bank's philosophy. "We're living proof that those concepts are not mutually exclusive." Reiling points to the bank's joint venture with Lutheran Social Services, a program that caters to low-income residents on St. Paul's east side. Under the arrangement, Sunrise Banks makes money off its prepaid debit cards, but also provides financial counseling to customers.
Newly released transcripts reveal Fed officials underestimated the severity of economic conditions during the financial crisis. Officials repeatedly fretted about overstimulating the economy, only to realize time and again that they needed to redouble efforts to contain the collapse. Ben Bernanke was clearsighted in warning of the risk of a severe recession, but struggled to persuade his colleagues. Janet Yellen, then president of the Federal Reserve Bank of San Francisco, was even more alarmed. She and Eric Rosengren, president of the Federal Reserve Bank of Boston, were the most forceful advocates for stronger action. The Fed’s understanding of the crisis was clouded by its reliance on indicators that missed sharp changes in conditions. Officials also appeared to be biased toward worrying about the risk of inflation while downplaying the risks of rising unemployment. The transcripts also show, however, that Fed officials responded decisively in the final months of the crisis, heading off an even worse recession.
Arkadelphia, Ark.-based Southern Bancorp Community Partners has announced a new product that encourages local low-income non-traditional students to invest in college education. Their College Completion Matched Savings Program matches $3 for every $1 saved by the program participant. Once they reach their savings goals and complete financial education classes, participants can use the savings to pay for tuition, books or other school fees. “If you’re willing to work hard to achieve your education goal, Southern Bancorp Community Partners is willing to help you reach it,” said Mindy Maupin of Southern Bancorp Community Partners.
The Federal Reserve Bank of San Francisco has compiled a series of articles and essays highlighting the stabilization strategies of nonprofits across the country. The essays emerged from experiences in the Neighborhood Stabilization Innovations Initiative, a project which supported emerging strategies for neighborhood stabilization after the foreclosure crisis. In this review, findings from that initiative are presented on topics including mitigating foreclosure, new models of housing counseling, public-sector entrepreneurialism and fair housing. "The 10 projects funded under the Neighborhood Stabilization Innovations Initiative point to a wide range of workable approaches, spanning many local markets and housing challenges. In each case, the success of the demonstration began with a strong, highly capable nonprofit institution," write contributing authors O'Callaghan and Weech.
CDBA member Virginia Community Capital is currently seeking a loan operations specialist to support their Finance/Operations Team. The Loan Operations Specialist will be responsible all for a variety of duties related to servicing the loan portfolio from the point of loan booking to the payoff and release of the loan. This position works closely with the lending team, recording data on new loans and renewals and is responsible for reconciling all loans related to general ledger accounts. The operations specialist is expected to manage loan file documentation and to conduct FLHB and HMDA reporting.
Over a weeklong stretch last month, all six institutions offering bank payday loans discontinued the product due to pressure from federal banking regulators. The coming months will test how hard those banks are willing to fight for low income borrowers. Whatever banks offer will likely be less profitable than deposit advance. Possible replacement products like secured credit cards may fill some of the void, but many customers who used deposit advances won't qualify for secured loans. Some banks are partnering with nonbanks that already have expertise in small-dollar lending, such as LendUp, an online short-term lending startup. Mixed signals from regulators have hampered the development of new products. The FDIC and OCC issued the guidance that killed the deposit advance, but the Federal Reserve Board declined to sign on. The picture should become clearer later this year when the CFPB releases regulations which will apply both to banks and payday lenders.
Green economy organization Green America has given One PacificCoast Bank, Albina Community Bank and Southern Bancorp A+ grades for their commitment to sustainability and clean energy. Green America praised these banks for avoiding financing coal power plants and mining operations. The organization noted that One PacificCoast, Albina and Southern all have demonstrated investment in sectors that invest in communities and promote sustainability. Green America released the rankings as part of their Take Charge of Your Card campaign, which promotes banks that are committed to environmentally-conscious investing.