News
A new report examines the relationship between rapid growth of nonperforming loan servicing costs and tight mortgage credit standards. In 2013, the annual cost of servicing a nonperforming loan was 15 times that of servicing a performing loan—$2,357 versus $156. In addition, the cost of servicing nonperforming loans has risen almost twice as fast as performing loans -- from $482 in 2008 to $2,357 in 2013, a 489 percent increase. As a result, servicers charge riskier borrowers higher, sometimes unaffordable, rates. The report cites Fannie and Freddie's compensatory fees charged on tardy foreclosures, inconsistent Federal Housing Administration foreclosure timelines and vague property preservation and conveyance standards as causes of the growing costs.
Community Bank of the Bay is bucking the trend of fewer branches, moving its Danville, California office to a larger location and adding a loan office in San Mateo. The bank was initially advised by its financial backers that a branch wasn't needed as banks increasingly opt for online- and mobile-banking options. But along the way, they had a change of heart. "A branch is a bit of a security blanket. There are those 'emergency times' when you need to run into a bank," said CEO Bill Keller, citing the need to get a cashier's check or explore loan options to complete a deal. The bank hopes the move will foster its close connection to the Danville community. "To me that's the real value of the CDFI designation," Keller said. "It clearly articulates what we're all about."
Sunrise Banks fought to buy American Bank of St. Paul in federal bankruptcy court Tuesday. American Bank's holding company, American Bancorporation, filed Chapter 11 bankruptcy in May after creditors said they were owed $48 million due to missed payments on investor securities. American Bancorporation subsequently auctioned both its subsidiaries, American Bank and community development organization AmeriNational Community Services Inc. (ACS). The auctions generated a $17 million offer from Deerwood Bank for the bank's assets and a $15.2 million offer for ACS from investment firm OSP Group. But Sunrise Banks wants the court to consider its combined bid. Sunrise argues their bid is $100,000 less than the winning bids, but would be cheaper than two separate deals and more likely to win approval from regulators.
CBW (formerly The Citizens Bank of Weir) has been rebuilt to offer high-tech services not available at even the largest banks. Former Google employee Suresh Ramamurthi and his wife, Suchitra Padmanabhan, bought the tiny bank in 2009. Working with a team of software engineers, they have used it as a testing ground for a range of innovative financial services. Most promising is an instant payment system similar to wire payments — but much cheaper. The transfers rely on a custom built back-end that instantly rates the risk of transactions using 20 to 40 factors, including a customer’s transaction history and location. The fees from this service and others dwarfs the money that CBW makes in Weir; in the last quarter, the bank earned $60,000 from its loans and $720,000 from the rest of its business.
Albina Community Bank provided financing for a new 4-story, 57-unit apartment building in Portland, Oregon's Kenton neighborhood. The new building is a transit oriented development project with solar electric panels on the roof and bike parking on the first floor. The building was designed to reflect the historic nature of Oakland's Kenton neighborhood and will feature art and architectural features created by local businesses. “This project aligns perfectly with our mission and focus as a [CDFI]. We look forward to supporting this new development in the Kenton community,” said Cheryl Cebula, president and CEO of Albina Community Bank.
A new study finds strong revenue growth among payday lenders, auto lenders and other providers of alternative financial services to underserved customers. The financially underserved market revenues increased from $96 billion in 2012 to $103 billion in 2013, based on consumer usage volume of $1.3 trillion in financial products and services. Among the products examined, revenue growth was highest among subprime auto leases, prepaid cards and title loans. The results are a continuation of revenue growth trends in the industry, which has seen an average annual growth rate of 6% since 2009. The market is projected to have grown by 4.6% in 2014 to reach a total revenue of $107 billion.
The House last night narrowly passed the FY 2015 "CRomnibus" bill, a $1.1 trillon funding bill that will keep the government open through the end of the Federal FY 2015 (September 30, 2015). The Senate subsequently passed a stopgap measure which will continue to fund the agencies for two days while senators debate the legislation. The omnibus bill provides $230.5 million for the CDFI Fund, an increase over FY 2014 at $224.9 million. BEA Program funding will remain at $18 million. The bill includes $152.4 million for the financial and technical assistance programs, $15 million for Native American technical assistance, $22 million for the Healthy Food Financing Initiative and $23.1 million for administrative expenses. Total loan principal for the Bond Guarantee program will be limited to $750 million.
Fannie Mae and Freddie Mac will start making payments that could total hundreds of millions of dollars annually into a fund for affordable housing. Under the new policy announced by Federal Housing Finance Agency Director Melvin L. Watt, the GSEs will set aside a portion of their revenue for the National Affordable Housing Trust Fund. The fund is the only source of U.S. housing money earmarked for the lowest-income families and has been empty since Congress created it in 2008. Watt’s predecessors said the precarious financial condition of the companies prevented them from making payments. Now, “[c]ircumstances have changed” and the suspension of payments into the fund “is no longer justified,” Watt said.
New CDFI Fund Director Annie Donovan urged further progress in serving distressed communities in her first director's message. "We have built a strong foundation. Yet, despite all that we have accomplished, much more remains to be done," Donovan said. "As those who work in low-income communities every day know all too well, our work will not be complete until economic opportunity is a reality for all. So this is our challenge for the next decade—to create ways not only to protect the precious asset that we have created but also to leverage it for further progress. As the Director of the CDFI Fund, I am committed to doing everything I can to help the CDFI industry progress through the next stage of its evolution."
Two years after the demise of a proposal to speed up U.S. electronic payments, a revised measure now appears likely to be approved by the banking industry. The new proposal was designed to resolve an issue that derailed the 2012 proposal: the fact that banks on the receiving end of transactions will be required to invest in the upgraded ACH network, but won't receive many direct benefits. The revised proposal would require any bank that initiates a same-day payment to pay 8.2 cents per transaction to the bank on the other end, covering the technological investments that banks on the receiving end of the transactions would need to make. Nacha is accepting comments on the proposal, with a deadline Feb. 6.