CDFI Fund Director Donna Gambrell Selected to Serve in Treasury's Office of Financial Stability

As the CDFI Fund's fiscal year concluded on September 30th, it provided me an opportunity to reflect over the events of the past year, and particularly the past couple of months. We are living in extraordinary economic times, but as Secretary Paulson has noted: "America is a strong nation. We are a confident and optimistic people. Our confidence is born out of our long history of meeting every challenge we face. Time and time again, our nation has faced adversity and time and time again, we have overcome it and risen to new heights. This time will be no different."

I am honored to be serving as the Community Development Financial Institutions (CDFI) Fund Director during this period; the role that CDFIs play in serving distressed communities is more important than ever. I am also honored that Secretary Paulson has asked that I assume a collateral responsibility as interim Chief of Homeownership Preservation in the new Office of Financial Stability.

The Treasury Department is moving quickly to implement the Emergency Economic Stabilization Act of 2008. The law gives the Treasury Secretary broad and flexible authority to stabilize our financial markets and to design and deploy numerous tools to attack illiquid troubled assets that have led to the credit crisis. As the implementation of the Troubled Asset Relief Program (TARP) is being quickly implemented, the Treasury Department is also looking for every opportunity to help homeowners stay in their homes.

As we look toward the future, I do so proudly because of the work the Fund has accomplished over the last year. In FY 2008, the CDFI Fund awarded 240 organizations a total of more than $80 million in awards through the CDFI Program, the Bank Enterprise Award Program, and our Native Initiatives. In addition, $3.5 billion in tax credit allocations through the New Markets Tax Credit Program will be announced next week.

Across the nation, CDFIs and Community Development Entities are using the CDFI Fund's awards to engage in a wide range of economic development activities. These investments include small business lending, affordable home mortgage products, financial education, home ownership counseling, and other innovative solutions to meet community needs. It is critical that these activities continue and thrive in the upcoming year in order to meet and overcome the challenges before us.

Importance of CDFIs

CDFI financed home mortgages for predominantly low-income borrowers are experiencing low delinquency rates compared to all loans and subprime loans. Evidence compiled by the CDFI Fund shows that home mortgage delinquency rates on loans financed by CDFIs in 2007 were below the national rate for all loans and well below the subprime rate.

Against the backdrop of the subprime mortgage crisis, the CDFI industry is well positioned to continue providing fairly priced mortgage products to underserved populations and help to reestablish the flow of capital for homeownership in low- and moderate-income communities. Pre- and post-loan financial counseling is a key factor in ensuring solid loan performance in distressed markets. Furthermore, research commissioned by the CDFI Fund has shown that CDFIs are an innovative force in the area of foreclosure prevention, intervention, and recovery as they work closely with low-income borrowers to secure refinancing and loan modifications.

CDFI Fund data indicate that non-first lien loans made by CDFIs are often used to sustain homeownership and that such loans perform well. In addition, such non-first lien products often help CDFIs to establish prime lending in higher-risk markets by offering subordinate loans at low-interest and flexible repayment terms.


Over the next several weeks, the CDFI Fund has several actions planned.

  1. Tap into the knowledge and experience of CDFIs - To better understand how the credit crisis is impacting CDFIs and to understand what tools and resources they are using, or would use if offered, the CDFI Fund will begin a series of discussions and coordination with the CDFI industry.
  2. Create an Advisory Board Subcommittee - I have been in discussion with the CDFI Fund's Advisory Board Chairman Bill Bynum to coordinate the formation of a Subcommittee that will meet with those CDFIs or industry leaders with the strongest track record in home mortgages. The role of the Subcommittee will be to examine the best practices and new strategies being utilized by these institutions and to present its findings to the full Advisory Board for consideration. The Advisory Board will then make recommendations to me for consideration as Director of the CDFI Fund as part of the housing recovery solution.
  3. Public messages by the CDFI Fund - The Fund will continue to communicate the importance of lending in low-income communities by highlighting the Fund's data, as well as data from large community development lenders that have strong portfolio performance.

In closing, I again want to recognize the important role CDFIs and Community Development Entities have in improving the lives of Americans living in distressed communities. We must all work together to meet the challenges before us, and I am confident that they will be overcome.

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