Introduction
Thank you Cliff for that warm introduction. Good evening everyone, it's an honor to be speaking before you at the Federation's 35th Annual Conference on Serving the Underserved.
Given the current economic conditions, the community development finance industry is experiencing a transition, the scope of which is still being determined. It is important for us to understand the role that each of us will play as the role of community development finance expands. Community Development Credit Unions (CDCUs) are a vital part of supporting economic opportunities and play an important role in our nation's recovery efforts within the most highly distressed communities across the nation.
Looking out across the audience, I can see that you are as equally committed to this prospect as I am. The CDFI Fund is proud to support you in your endeavors and through our funding programs we hope to build the capacity and ability of CDCUs to greater serve distressed communities. It is vitally important for low- and moderate-income people to have access to financial services and financial products.
With the arrival of a new Administration in Washington earlier this year, our ability to support your mission was significantly enhanced through the Recovery Act. In addition, the President's budget for fiscal year (FY) 2010 requests to more than double funding for the CDFI Fund.
Certification
As the CDFI Fund grows, the importance of CDCUs becomes even greater. I remain committed to making sure the Certification process works for you so the programs and financial products you offer to your members help you get certified. Tomorrow, CDFI Fund staff will be presenting at three separate sessions; one of the sessions will be on certification. I hope you can attend but if you miss that session please stop by the booth and talk to certification staff or set up an appointment to talk to one of them if the timing does not work for you.
In the last year, the CDFI Fund has certified 18 credit unions. There was an 85 percent success rate among credit union applicants for certification (only 3 of 21 have been declined). We recently completed a project to verify the active status of certified CDFIs with extended expiration dates, and there are now a total of 148 credit unions currently certified as CDFIs.
One of the recent additions is Philadelphia's People for People (PFP) Community Development Credit Union. Its mission is to promote the financial well being of the residents of the low-income community it serves, through progressive and comprehensive services. Their programs affect an area known for its high unemployment figures and single-family homes. They aim to instill financial independence in their community members, by offering such services as homeownership counseling, individual development accounts, and first accounts services to the un-banked.
Another recently certified CDCU is Comunidad Latina Federal Credit Union. Located in Santa Ana, California, Comunidad Latina is dedicated to providing financial services for its Latino community. It provides its members with protection of their financial assets, access to loans, and financial assistance and education.
Sentinel Federal Credit Union, which is located in the Black Hills of South Dakota, was also among the 18 that were certified in the last year. Sentinel has served the military personnel on Ellsworth Air Force Base for over 50 years. Recently, they have expanded their coverage area to include many of the local industries, offering a variety of services that include home loans, bond acquisition, and payroll deduction plans.
Certifying 18 credit unions in one year is good, but there's always room for improvement. While many of the Federation members are already certified, many still are not. While most of the 148 currently certified credit unions are also low-income designated by the National Credit Union Administration (NCUA), there are over 1,000 credit unions that hold NCUA's low-income credit union designation. Many of these credit unions may also meet the certification criteria.
CDCUs face a number of real and perceived barriers in the Certification process, and that is something that the CDFI Fund is working closely with them to address. One such issue is enhancing the processing time of applications.
During the last year, the average processing time for credit union CDFI Certification applications, from receipt to certification, has been four and a half months. We are working to further enhance the process, and my team is dedicated to ensuring all new Certification applications are processed in a more timely manner.
I am committed to targeting a turnaround that will not exceed 90 days for CDFI Certification applications.
Another perceived barrier for CDCUs is the lack of information and persistence of misinformation regarding CDFI Certification. In an effort to correct this, the CDFI Fund has been expanding its outreach efforts within the CDCU community.
We value the talent and expertise of CDCU professionals. Cliff has always been a reliable partner within the industry, and we respect his commitment. In an effort to enhance the CDFI Fund staff awareness of the role CDCUs must play in the economic recovery of our country, we recently invited Cliff to speak on the subject at CDFI Fund headquarters in Washington. Turnout was large, and it presented us with an opportunity to learn firsthand from an industry expert.
In the fall of 2008, we joined NCUA's efforts to provide technical assistance on certification applications for credit unions in Baton Rouge, Louisiana. We look to continue this partnership, as they expand their efforts to more states. Additionally, we will be jointly presenting a certification webinar with NCUA later this month.
Also in 2008, we initiated a program of monthly conference calls on certification, which all CDCUs are invited to take part in. The calls provide a forum for credit unions and others to ask their detailed application questions on CDFI Certification, and to hear the answers to the questions of other potential CDFIs as well. The next two certification conference calls are on June 18 and July 16, and the details for these sessions are available on the CDFI Fund's website.
A third issue is simply the complexity of the CDFI Certification application in certain areas and circumstances, and that CDCUs, especially the smaller ones, struggle at times to find the staffing and financial resources to dedicate to the application process. At the CDFI Fund, we are taking this issue seriously, and are looking for ways to make the process more manageable for CDCUs staff. Part of the solution is a new outreach effort that I will discuss momentarily.
However another part of the solution lies in providing better guidance on completing the application. For example, it can be challenging for a CDCU to translate its Field of Membership into an eligible Target Market, or to explain how certain services help clients access the CDCU's financial products and to fit the CDFI Fund's definition of Development Services. We are seeking to find better ways to explain the Certification criteria in a CDCU context, so that it is more obvious to CDCU applicants how they meet the requirements.
Additionally, some CDCUs are challenged in documenting the volume of activities provided to their Target Markets, as even the smaller CDCUs can have portfolios with a significant number of transactions. We are looking for ways to make it easier for CDCUs to analyze their portfolios and to provide the data underlying the qualification of investment areas in more usable forms.
Recertification
Later this year, we will begin a process of recertification for all certified CDFIs with extended certification expiration dates. It is our goal to make recertification as efficient as possible. To that end, we will be focusing the process on those certification factors within a CDFI that have changed since their initial certification application, or in some cases, their most recent CDFI recertification application. For CDCUs, this means that we will likely be looking primarily at the Target Market and Accountability criteria, as CDCUs are automatically deemed to meet the Financing Entity criteria. Other certification criteria, such as Legal Entity and Primary Mission, are likely to require much less scrutiny, as it is unlikely that they have changed.
As we further define the recertification process, we will provide certified CDFIs with extended certification expiration dates with more detailed timetables and requirements for the process. Our aim is not to surprise, but rather to assist CDFIs in being as well prepared for recertification as possible.
Outreach and Training
In an effort to increase the number of CDCU applications, the CDFI Fund will broaden its outreach efforts by offering more support during the application process. We appreciate the fact that writing a funding proposal is often time-intensive, and we will work with our applicants to streamline this process.
We are also in the process of creating a specialized Training and Outreach office within the CDFI Fund. Under the CDFI Fund statute, we are tasked with the critical requirement of offering training and technical assistance to CDFIs. Given the current economic crisis, it becomes even more essential for the CDFI Fund, as a primary funder of certified CDFIs, to provide this service in order to ensure their growth and sustainability.
The office will be primarily responsible for leveraging resources by contracting out training to organizations that currently provide this service to CDFIs, and forging or strengthening working relationships with our federal partners and other key stakeholders. Through a series of training workshops for CDCU practitioners, as well as individualized, on-site technical assistance the CDFI Fund will deliver capacity assessments, develop individualized capacity-building plans and evaluate improvements in capacity as a result of services rendered.
Importance of Community Development Credit Unions
The services that CDCUs offer to their clients have been greatly enhanced over the past few years, which during these difficult times, has proven to be more vital than ever. Between 2004 and 2007, data reported to the CDFI Fund shows that the number of CDCUs offering home ownership counseling services rose from 65.6 percent to 75 percent. Business technical assistance services nearly doubled during that same time period, rising from 37.5 percent to an impressive 68.8 percent. Housing technical assistance services also showed marked improvement, starting at 34.4 percent, and ending at nearly 49 percent.
As services increased, so too did the number of clients. Between 2004 and 2007, more than 106,000 new accounts were opened, and of those, approximately 39,000 were first-time bankers. Most impressively, CDCUs added nearly 62,000 consumer development services clients during that time.
CDFI Program Application
I know that many of you here today are wondering how well CDCUs have fared in the CDFI Fund's awards programs. When we take a look at the most recent figures available, we see that CDCUs have done very well. The numbers speak for themselves.
During FY 2008, CDCUs applying for technical assistance awards through the CDFI Program had a success rate of 50 percent, resulting in awards totaling $400,000. When we examine the figures for financial assistance awards during that same time period, we see that CDCUs submitted 26 applications and were successful 31 percent of the time, receiving awards nearing $4.2 million. The numbers are also very encouraging in the Small and/or Emerging CDFI Assistance category where CDCUs had an average success rate of approximately 35 percent between 2006 and 2008.
Conclusion
The CDFI Fund is committed to providing support to CDCUs that are committed to serving communities that have historically been underserved. We look forward to working with you to become certified, to utilize the CDFI Fund's programs, and to accomplish our shared mission.