An Unprecedented Investment for Historic Results: How Federal Support for MDIs... (EventID=114428)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Tuesday, February 16, 2022, at 12:00 P.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a virtual hearing entitled, “An Unprecedented Investment for Historic Results: How Federal Support for MDIs and CDFIs Have Launched a New Era for Disadvantaged Communities." ___________________________________ Witnesses for this one-panel hearing will be: • William J. Bynum, CEO, HOPE (Hope Credit Union/Hope Enterprise Corporation/Hope Policy Institute) • Nicole Elam, Esq., President & CEO, National Bankers Association • Everett K. Sands, CEO, Lendistry • Luz Lopez Urrutia, CEO, Accion Opportunity Fund • Michael Faulkender, Dean’s Professor of Finance, Smith School of Business, University of Maryland ___________________________________ Overview Minority depository institutions (MDIs) and community development financial institutions (CDFIs) deliver critical lending opportunities to low- and moderate-income (LMI) communities and communities of color. MDIs were first established in the late 19th century and are made up of depository institutions such as banks and credit unions where 51 percent or more of the stock is owned by one or more socially and economically disadvantaged individuals. CDFIs are institutions that provide financial products and services specifically aimed at the needs of low-income and marginalized communities and are certified by the CDFI Fund, which is operated by the U.S. Department of the Treasury (Treasury). CDFIs include banks, credit unions, loan funds, and venture capital funds. The top lines of business across CDFIs have historically been consumer and residential real estate finance, showing the importance of CDFI lending to individuals. The CDFI Fund administers programs that provide financial awards and assist eligible CDFIs with their operations. Technical assistance is a phrase often used to describe nonfinancial assistance to MDIs and CDFIs and includes the support and education needed for an organization to become successful, such as financial, legal, and accounting advice. MDIs and CDFIs support people and business owners in underserved communities, such as those who are less likely to use publicly traded depository institutions, those who have impaired or limited credit histories, those that may distrust publicly traded depository institutions, and those who do not have sufficient collateral to secure traditional loans. The impact of MDIs and CDFIs is multifaceted. According to the Federal Deposit Insurance Corporation (FDIC), MDIs typically serve communities of color and LMI census tracts at higher rates than non-MDI, non-community banks (e.g., megabanks). They originate mortgage loans to borrowers of color and for properties in LMI census tracts at higher rates than those of megabanks. They also originate Small Business Association (SBA) loans to borrowers of color and LMI borrowers at higher rates than megabanks. According to the CDFI Fund, 33% of CDFI lending in 2019 was in high poverty areas, nearly 75% of lending was to underserved populations and distressed areas, and 17% was to rural areas. Moreover, recipients of CDFI awards have been successful at investing in communities. For example, according to John Holdsclaw IV, the President of the CDFI Coalition, recipients of the CDFI Fund Financial Assistance Award have “financed 50,000 affordable housing units,” and recipients of the Healthy Foods Financing Award have financed “409 grocery stores, markets, and fresh food projects totaling over 4 million square feet.” As an illustration of MDIs’ success serving communities with high shares of populations of color, 62% of the population in areas served by African American MDIs is African American, whereas only 6% of the population served by megabanks is African American. Similarly, Latinx and Asian American MDIs are serving populations where the Latinx and Asian American populations, respectively, are significantly higher than in megabank service areas. The annual reporting by the CDFI Fund shows aggregate CDFI lending trends for “Other Targeted Populations” (OTP), which include “African Americans, Alaska Natives residing in Alaska, Hispanics, Native Americans, Native Hawaiians residing in Hawaii, and Other Pacific Islanders living in Other Pacific Islands,” the OTP data is not disaggregated by race or ethnicity. Despite their success in providing affordable capital to communities typically excluded from the mainstream financial system, as evidenced both above and by their work during the pandemic, the number of MDI banks and MDI credit unions has declined by about one-third... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=409027