Recent News
The Senate Banking Committee is continuing negotiations on legislation to overhaul Fannie Mae and Freddie Mac, but it remains unclear when panel leaders will reschedule a vote on the bill. Committee Chairman Tim Johnson (D-S.D.) and Sen. Mike Crapo (R-Idaho) postponed the vote to win additional support within the committee. Supporters hope the bill will attract several more Democrats to the coalition, showing the support necessary to bring the bill to the Senate floor. Failing that, Johnson and Crapo may choose to pass the bill out of the committee without hope of seeing it on the Senate... Read more
As the peer-to-peer lending industry matures, the big financial firms peer-to-peer had set out to bypass have come to dominate the industry's investor pool. More than 80 percent of the loans issued on peer-to-peer marketplace Prosper went to those firms. The big players’ entry runs counter to the original notion of the sector as a populist alternative to the high stakes world of Wall Street. The original investors are now outgunned by the cash-rich, algorithm-wielding financial firms. Like high-frequency trading, peer-to-peer lending has become a game of speed. The dynamics taking shape —... Read more
The Federal Reserve Bank of San Francisco's latest issue of Community Investments focuses on the theme of collective action -- the model of change in which various sectors coordinate efforts and share resources in pursuit of social, economic and environmental goals. Articles included explore best practices for building cross-sector partnerships, methods of structuring coalitions, findings from the Department of Housing and Urban Development's Sustainable Communities Initiative and several case studies of applied collective action initiatives in California.
In remarks to the Independent Community Bankers of America 2014 Washington Policy Summit, Fed Chairwoman Janet Yellen addressed the regulatory challenges they face. She said the Fed would "tailor" the regulator's oversight of community banks to ensure they don't face an unfair burden. Yellen also said the Fed is working to use technology make examinations of community banks less disruptive and burdensome. She also adressed the role she sees for community banks in the economy. "I believe a healthy financial... Read more
Urban Partnership Bank CEO William Farrow discussed bank regulation in an interview with Bloomberg. According to Farrow, the regulations “have created a series of challenges” for community banks. He discussed the “fear factor” community development banks feel that any mistake will prompt severe regulatory repercussions. But labor costs for compliance officials can be high in the current competitive market. Technological necessities also pose big challenge as bank must ensure their third party vendors are also compliant. Farrow says Urban Partnership so far has had more... Read more
A collaboration of public and private partners in Mississippi County, Arkansas, including Southern Bancorp, has culminated in the unveiling of the county’s first Delta Bridge Project Strategic Plan. The Delta Bridge Project is a community-led initiative aimed at revitalizing the county’s social and economic sectors. “We’re excited to be part of this new phase in Mississippi County’s social and economic growth,” said Steve Jones, Senior VP of Programs for Southern Bancorp Community Partners. “Southern Bancorp has seen the impacts firsthand that the Delta Bridge Project can... Read more
In a report on the Community Development Capital Impact (CDCI) Program, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) urged the Treasury to tighten oversight of recipients. CDCI injected $570 million into 84 CDFI-certified banks and credit unions serving minority and low income communities. The inspector general's report faulted the Treasury for not doing enough to ensure that these lenders were using their federal money to boost lending to local businesses. The report found that... Read more
The Western Independent Bankers Association has named Community Bank of the Bay winner of its annual Community Bank of the Year award. The award highlighted the San Francisco Bay Area bank’s newly redesigned Bay Area Green Fund, which attracts capital and deposits that are exclusively loaned to local environmentally sustainable projects and companies. The association also praised the bank’s sponsorship of local nonprofit Mindblown Labs, which has included three years of free office space. Mindblown teaches underserved students at two Oakland high schools app development,... Read more
Prospects of passage have dimmed for the Johnson-Crapo housing finance reform bill as the Senate Banking Committee postponed its vote on the legislation. Committee Chairman Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho) wanted to secure at least 16 "yes" votes on the 22-member panel to pressure Senate Majority Leader Harry Reid to let the measure come up on the Senate floor. The bill would replace Fannie and Freddie with an agency that offers a government guarantee on home loans. If the bill cleared the panel and Senate, it would need to be reconciled with a House bill, the most... Read more
Mortgage rates are likely to rise under any plan that would overhaul Fannie and Freddie. Lawmakers face a key dilemma: requiring successors to Fannie and Freddie to hold more capital could reduce the risk of future taxpayer losses, but would also raise borrowing costs. The Senate bill would require successors to maintain a 10% capital cushion. Fannie estimates that would cause rates to rise by around 0.5 and 1 percentage points from current levels, though borrowers with weaker credit could see rates rise by more than 3 percentage points. Freddie estimates rates will rise by 0.1 and 0.6... Read more
Top Obama administration officials defended a bipartisan bill to overhaul the mortgage-finance system as the best—and possibly only—chance to settle the firms' fate. "One shouldn't wait until there's a crisis to deal with this. We ought to deal with it now," Treasury Secretary Jacob Lew said. Shaun Donovan, secretary of the Department of Housing and Urban Development, dismissed critics as self-interested on Monday. "They are making a lot of money off the old system," he said. Fannie and Freddie aren't allowed to lobby. In memos to their regulator that were made public last week after they... Read more
Proposals by economists John Cochrane and Martin Wolf envision the elimination of fractional reserve banking in order to neutralize risk that resulted in the Great Recession. Wolf focuses on the risks introduced by the "private money" created as a byproduct of lending. He favors a system in which the government is given a complete monopoly on money creation. Cochrane argues that banks should be 100%... Read more
Several national companies that offer small loans at high interest rates have agreed to refund money to more than one thousand Vermont borrowers. The agreement is the result of a lawsuit brought by Vermont Attorney General Bill Sorrell. Vermont is one of 15 states that restrict payday loans, but that hasn’t stopped dozens of unlicensed national lenders from offering the products. Sorrell says settlements reached with three of the lenders and one payment processor will result in refunds exceeding $1 million for borrowers and will stop the companies from issuing any more loans in the state.... Read more
FDIC officials have presented a new white paper exploring how the use of mobile phones could broaden banking access to unbanked and underbanked borrowers. The paper noted that 68% of unbanked adults have access to a cell phone, of which 49% are smartphones. "MFS is likely to be a more useful financial tool for the underserved if ways can be found to reconcile and meet the underserved's needs for electronic transactions with their need for paper payments or... Read more
Virginia Community Capital has partnered with Goldman Sachs on the 10,000 Small Businesses education program, a nationwide initiative offering small business owners training from business experts and peers as well as classes at Babson College. Program participant Merissa Sachs owns personalized clothing vendor Marketing on Main Street. "The personal interaction with Goldman Sachs professionals, Babson professors and my peers was a significant benefit," she says. "I think of Babson as a CEO on my advisory board; I can turn to them at anytime for advice and guidance."
The CDFI Fund has opened the FY 2014 application period for the Bank Enterprise Award Program, making up to $18 million in awards available to eligible banks and thrifts. Application materials are available on the CDFI Fund's website. The award application consists of two parts. The first part must be submitted through Grants.gov by 11:59 p.m. EDT on June 2 and the second part must be submitted through myCDFIFund by 5:00 p.m. EDT on June 4. The CDFI Fund will also be conducting three informational webinars: two focusing on the BEA Program... Read more
Boston based Charles Street African Methodist Episcopal Church has agreed to sell the Roxbury Renaissance Center in order to pay back the nearly $5 million it owes creditors including OneUnited Bank and emerge from bankruptcy. The church already has an offer from a local non-profit to buy the community center for $2 million. OneUnited said the proposition, which would leave OneUnited Bank with a $900,000 loss, still falls short of meeting the church’s obligations. “The bank believes that the proposed sale of certain assets does not maximize value to creditors,” OneUnited... Read more
Several big hedge funds that stand to win billions of dollars for their shares in Fannie Mae and Freddie Mac are said to be backing new investors' rights groups airing attacks ads and statements against the Johnson-Crapo housing finance reform legislation. Hedge fund managers oppose the legislation because it would codify a contentious 2012 change to the terms of Fannie and Freddie shareholders' agreement in which Treasury imposed a sweep on all GSE shareholder company profits. Investors are currently fighting that action in more than a dozen lawsuits. Although the advocacy groups portray... Read more
Stepped-up demands from liberal Democrats and conservative Republicans are threatening prospects for the Johnson-Crapo mortgage market reform legislation. Liberal Democrats want to add mandates requiring private lenders to offer loans to minority groups. Conservative Republicans are insisting that Fannie and Freddie be entirely eliminated. Too much motion in either direction would kill the bill's bipartisan support. Analysts expect the bill to pass through the Senate Banking Committee, but its prospects for passing the chamber are dim with elections looming. Legislators increasingly are... Read more
Walmart has announced a new service allowing customers to make store-to-store money transfers within the United States at cut-rate fees. The offering is aimed largely at lower-income shoppers who often rely on check-cashing stores for simple transactions. Walmart has become a big player in alternative financial products including prepaid debit cards and check cashing. Walmart's new service will offer transfers of up to $50 will cost $4.50 and transfers of up to $900 costing $9.50. In comparison, sending $900 via Western Union could cost as much as $76. But Western Union and MoneyGram... Read more