Only Four Credit Unions Get Treasury Grants; NFCDCU Shut Out

ARLINGTON, Va. – The U.S. Treasury Department’s Community Development Financial Institution’s Fund has left community development credit unions with empty pockets this year. Since 1995, CDCUs and organizations that work with them, like the National Federation of Community Development Credit Unions, have relied on over $30 million from the CDFI Fund for grants to help them grow. In 2002 CDFI, primarily through its Small and Emerging Assistance Program (SECA), awarded $3 million in capital grants to 22 individual CDCUs. More CDCUs were helped through a $2 million award to the Federation, which served as a mediator between the Fund and CDCUs which lacked the resources to apply for or administer CDFI grants on their own. But this year, the CDFI Fund made only four grants to CDCUs, totaling just slightly above $1 million and the Federation received no awards at all, although it had applied for $900,000. “Needless to say we are very disappointed,” said Cliff Rosenthal, the Federation’s Executive Director. “We think that these numbers indicate that the changes that have been made to the way the Fund is administered have not been in the interest of community development credit unions, which are the types of institutions the law authorizing the Fund meant it to help.” The Federation doesn’t yet have any hard figures on how many CDCUs applied for funding and were denied. The four CDCUs that CDFI favored with awards this year run the gamut of different sizes and public profiles. Topping the list is the $13 million Latino Community Credit Union, based in Durham, North Carolina, which received $700,000. Latino has been in the forefront of credit unions committed to working with primarily Hispanic immigrants to the U.S., one of the fastest growing segments of both the U.S. population generally and credit union members. The Fund’s $700,000 award will be used to implement a home mortgage lending program for new Latino immigrants, who make up over 85% of LCCU’s membership. LCCU seeks to increase the low homeownership rate in North Carolina’s Latino community. Over the next three years, LCCU will finance 65 mortgages for Latinos, at least 90% of who will become first-time homebuyers. LCCU will also provide homebuyer education for first-time homebuyers. The $2.7 million People’s Community Partnership FCU, based in Oakland, California, received $149,500. Chartered in November 2000, PCPFCU serves residents of Oakland’s low- and moderate income flatlands. The money will be used to establish savings accounts or homeownership focused Individual Development Accounts, providing personal loans to help better credit ratings, conducting homeownership counseling, and eventually providing home mortgage loans. Approximately 97% of this award will be targeted to so-called Hot Zones. Hot Zones is the CDFI term for specific areas of urban and rural blight and poverty that it seeks to target with it grants. The $2.3 million Little Haiti-Edison FCU, based in Miami, received $120,000. The credit union serves six low-income neighborhoods in northeast Miami which commonly go under the name of “little Haiti.” The award will be used as loan capital and to launch a micro-business loan product that would be offered through the City of Miami’s Microloan Program which would further leverage LHEFCU’s resources by utilizing the city’s funds as share deposits to secure small business loans. In addition, in the next three years, the credit union projects it will make 554 new consumer loans and 131 micro business loans. Approximately 75% of this award will be targeted to Hot Zones, according to the Fund. Faith Ann Quarterman, CEO of the credit union, explained that the $120,000 from the Fund is less than the $150,000 that the credit union has received from this city of Miami. The loans that the grant will fund will range between $500 and $10,000 and will be used mostly to help local business expand and strengthen their economic position. “I really don’t know what more to say about the award,” she said. “I only found out about it late last night by e-mail and it has been a little overwhelming so far.” The $2 million Tri-Valley Community FCU, based in Helena Montana, received the smallest grant, $73,500. The year old credit union will use the money primarily to increase its net worth, offer new loan products, supplement its loan loss reserves, provide homeownership counseling, and for technical assistance needed to open a new office. Approximately 58% of this award will be targeted to Hot Zones, the Fund said. Although Rosenthal and the Federation haven’t any data on how many projects were denied funding, Rosenthal did say that the CDFI staff was disappointed with the quality of the grant applications for less than $5 million, a category that covers most CDCUs. Rosenthal attributed this somewhat to the CDFI Fund’s changing its procedures for applying for funds; going to an electronic application for which many CDCU’s lack the resources to use to their best advantage. But he also suggested that the elimination of the SECA program, which is how the CDFI Fund has granted most of its CDCU money in the past, indicated a fundamental change in the way the Fund sees CDCUs and sees its role. “The Fund seems to have forgotten that it was created to serve the needs of development, and beginning development institutions by definition are going to start small and is not going to have the same degrees of resources that other, more established, institutions are going to have,” he said. Rosenthal used as an example the $11 million Lower East Side People’s FCU, now considered a trend setter, as an example of what good can be done with CDCUs. “But 10 years ago, Lower East Side would probably not have met the CDFI Fund’s contemporary standards for grants under $5 million,” Rosenthal said. He did put the Federation’s funding in some perspective, however. “We have been batting .300,” Rosenthal said. “We can’t expect to get money every year.” [email protected]