Introduction
Thank you very much for that kind introduction Saurabh. I am delighted to be here today at the 2008 National Community Investment Fund (NCIF) Annual Development Banking Conference. The Treasury Department's Community Development Financial Institutions (CDFI) Fund and NCIF share a common mission of expanding the capacity of financial institutions to provide credit, capital, and financial services for underserved communities across the United States.
In FY 2008, the CDFI Fund's four major programs, the CDFI Program, the New Markets Tax Credit Program, the Bank Enterprise Award Program, and our Native Initiatives provided over 240 organizations in excess of $80 million in awards and $3.5 billion in tax credit allocations to serve distressed communities.
Interrelated in our common mission, the CDFI Fund and NCIF share the common goal of increasing the number of certified CDFI depository institutions. There are now 63 banks and thrifts that are certified as CDFIs, an increase of 7 percent from FY 2007 to FY 2008. While it is great to see improvement, we are diligently working to continue to improve that number.
I commend NCIF for its efforts to develop a methodology for identifying depository institutions with a community development mission. The resulting Social Performance Metrics offer a thoughtful and analytical method for examining products and services provided in low-income communities by community-based financial institutions that may be eligible to become certified CDFIs.
Through our shared efforts and collaboration I am confident that we will continue to identify high-performing banks and thrifts through these metrics and encourage these institutions to apply to be certified as CDFIs.
The following are among the banks and Depository Institution Holding Companies that have been certified as CDFIs during FY 2008:
Nuestro Banco serves Hispanic communities in eight distressed North Carolina counties that lack adequate access to capital. Nuestro Banco's mission is to accelerate the integration of Hispanics within the communities it serves by providing financial products and services needed to create economic empowerment.
American State Bank serves African American communities residing in Tulsa, Oklahoma. American State Bank's mission is to create an environment in which customers see the bank as a partner in achieving their financial goals and the community sees the bank as a responsible and committed partner.
Premier Bank is a locally-owned community bank in Wilmette, Illinois that reaches beyond the borders of North Shore by providing financial services to commercial and individual customers throughout the metropolitan Chicago area. Premier is dedicated to meeting the banking needs of the community from providing savings accounts for children to financing real estate and business ventures. Premier specializes in financing for franchises, commercial real estate developments, nursing care facilities and taxicab medallions.
JD Financial Group, Inc. serves primarily Hispanic individuals and families residing in Chicago, Illinois. JD Financial Group is the holding company of Pan American Bank. Pan American Bank focuses on delivering quality service to individuals, families and businesses, thus enhancing the economic environment of the communities it serves.
I strongly encourage those of you whose organizations are not certified CDFIs to examine CDFI certification and our funding programs. Ask whether the CDFI Fund could be beneficial to you in your existing markets or possibly in new ones. Chris Stever, the CDFI Fund's Manager of Certification & Training is here with me today and available to answer questions. Also joining me from the CDFI Fund is Jodi Harris, the Program Advisor for Depository Institutions.
The Importance of CDFIs in Today's Market
Now, I would like to turn to an important issue facing all of us today. With the contraction in the credit markets, CDFIs will be more sought after more than ever by low-income individuals and businesses as a source of capital for borrowers to finance investments in low income communities.
CDFIs serve a critical role as they offer responsible loan products and technical assistance to those borrowers who may not be reached by mainstream financial institutions. Pre- and post-loan financial counseling is a key factor in ensuring solid loan performance in distressed markets. Data reflects that CDFIs were very deliberate in their lending and largely avoided originating risky, subprime loans and adjustable rate mortgages.
In fact, evidence compiled by the CDFI Fund from active awardees shows home mortgage delinquency rates for all loans in 2007 below the national rate, and almost 40 percent below the delinquency rate for subprime loans.
In addition, independent research conducted for the CDFI Fund indicates that home mortgage products provided by CDFIs are 2.3 times more likely to serve minority borrowers as prime and FHA mortgage markets; 70 percent more likely to serve low-income borrowers than prime mortgage markets, and 18 percent more likely to serve low-income borrowers than FHA mortgages. Furthermore, CDFI mortgages are 70 percent more likely to go to high-minority census tracts. Overall, CDFI home mortgages are about 3 times more likely to serve low-income areas as prime and FHA mortgage markets.
Through years of successful lending practices CDFIs have developed innovative homebuyer education courses, mortgage financing for low-income and first-time homeowners, flexible loan underwriting, and financial education counseling services to help individuals select and manage appropriate and affordable lending products.
Many of the organizations receiving CDFI Fund support are on the front lines of creating real solutions for those facing foreclosure in our nation's rural and urban low-income communities. CDFIs have developed many innovative solutions in the area of foreclosure prevention, intervention, and recovery.
I would like to applaud NCIF for taking the initiative to develop a working paper titled Foreclosure Prevention Financing Models. I was pleased to see that among the ten models a CDFI was recognized for administering one of most successful anti-foreclosure programs in the country - the Neighborhood Housing Services (NHS) of Chicago. NHS's Home Ownership Preservation Initiative (HOPI) is a unique public-private partnership with the City of Chicago, the Federal Reserve Bank of Chicago, and several leading financial institutions. NHS has also received several financial assistance awards from the CDFI Fund to enable this innovative program.
The main idea of HOPI is that low-to-moderate income borrowers are eligible for gap financing on their mortgages and lenders are able to gain access to these funds if they participate in the program. Since 2003, HOPI has provided groundbreaking solutions to the many problems associated with predatory lending, loan default, and foreclosure.
As we now look ahead to identify successful models, we must work together to evaluate the opportunities for the CDFI Fund to provide greater support to CDFIs serving our nations distressed communities. Towards this goal, the CDFI Fund has coordinated the formation of a Subcommittee to the Community Development Advisory Board that will hold meetings with leaders and experts in the community development finance field to explore possible new policy recommendations. The work of the Subcommittee will include an examination of best practices and strategies currently utilized by CDFIs that have been successful in low-income communities. I look forward to NCIF sharing their working paper and ideas with the members of the Advisory Board Subcommittee.
Emergency Economic Stabilization Act
I would like to provide an update on the Treasury Department's implementation of the Emergency Economic Stabilization Act (EESA). As you are aware, in addition to serving as the Director of the CDFI Fund, Secretary Paulson asked that I assume a collateral responsibility as interim Chief of Homeownership Preservation under the new Office of Financial Stability. Treasury has moved quickly since the enactment of the EESA to implement programs to help enable our financial institutions to support consumers and businesses across the country. Treasury is moving on many fronts, and I will briefly address two that are of interest to the financial institutions here today.
Capital Purchase Program: Last month Treasury announced a capital purchase program through which Treasury will purchase up to $250 billion of senior preferred shares from qualifying U.S. controlled banks and financial institutions. Treasury recently announced a streamlined, systematic process for all banks wishing to access this program. Qualified and interested publicly-held financial institutions will use a single application form to submit to their primary regulator - the Federal Reserve, the FDIC, the OCC or the OTS. These regulators have posted this common application form on their websites.
We are working hard to finalize and publish the required legal documents so private banks can participate as well. The Treasury Department will soon publish these terms and application guidelines for privately-held financial institutions to participate in the Capital Purchase Program.
Homeownership Preservation: The mission of the Homeownership Preservation Office is to identify every opportunity possible to help homeowners protect their homes, while also protecting taxpayers. Through polices affecting homeowners, home mortgage loans, lenders, servicers and their communities, we will strive to reduce the number of principal residences lost to foreclosure and stabilize the value of homeownership in surrounding communities. We are working with the Department of Housing and Urban Development and HOPE NOW to maximize all opportunities to help homeowners.
Closing
I want to thank you all for joining me here today, and I hope that you will look at the CDFI Fund's programs as a source of capital to support the economic and community development in your communities.
Thank you