Credit Union AntiPoverty Partnership Strategies

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Credit Union Anti-Poverty Partnership
Strategies Presented by Audrey D.
Cerise, President CEO, ASI Federal Credit Union
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• History of Credit Unions and CDCUs
• A credit union is
• A cooperative financial institution
• Owned and controlled by the people who use its
  services
• Responsible to its membership
• Profits are returned to members in the form of
  dividends
• Governed by a volunteer board of directors, not
  stockholders
• Made up of groups that share a common bond
• Not-for-profit
• Insured by the National Credit Union Share
  Insurance Fund (all deposits insured to
  100,000)
• What are the differences in organizational
  structure between banks and credit unions?
• Banks are owned by groups of stockholders credit
  unions are true cooperatives, owned and operated
  by the members of the credit union.

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The credit union philosophy is a simple one
People should be able to pool their money and
make loans to each other. This idea evolved from
cooperatives in 19th century Europe.

• Since that time, the credit unions guiding
  principles
• have remained the same
• Only people who are credit union members should
  borrow there
• loans are made for "prudent and productive"
  purposes
• a person's desire to repay (character) is
  considered as important than the ability (income)
  to repay.
• Members are, after all, borrowing their own
  money and that of the other members. These
  principles still govern most of the world's
  credit unions.

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CDCUs CDCUs-or community development credit
unions are credit unions with the specific
purpose of serving low income people and
communities. The CDCU designation must be
awarded from the NCUA. Banks, CDCUs, and
government agencies have found success in
assisting low-income people through partnering
with each other. Banks assist CDCUs in
building net worth, allowing credit unions to
expand community development services in
low-income communities. Government agencies,
particularly social service branches of
government, have worked in cohesion with credit
unions to refer lower income people to credit
unions for credit counseling, basic financial
education, individual development account savings
programs, first time homebuyer programs, and
more. By working together, banks, CDCUs, and
government agencies can broaden the scope of
anti-poverty initiatives.
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Case Studies Self-Help Credit Union-Durham, NC
Center for Community Self-Help (1980)The Center
is a nonprofit 501(c)(3) organization that
develops and coordinates Self-Help's programs,
raises resources, and advocates for economic
opportunity. Self-Help Credit Union (1984)The
Credit Union is a federally insured,
state-chartered credit union.  It raises market
rate deposits from members to make commercial and
home loans.  Its members include nonprofit and
religious organizations and other
socially-responsible individuals and
institutions. Self-Help Ventures Fund (1984)The
Ventures Fund is a nonprofit 501(c)(3)
organization funded with loans and grants from
foundations, religious organizations,
corporations, and government sources.  It manages
Self-Help's higher-risk business loans, real
estate development, and home loan secondary
market programs. Center for Responsible Lending
(2002)The Center for Responsible Lending is a
national nonprofit, nonpartisan research and
policy affiliate.  CRL is dedicated to protecting
home ownership and family wealth by working to
eliminate abusive financial practices.

• Organizational structure
• one credit union
• two 501 (c) 3s
• one nonprofit

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Self Help Credit Union and Homeownership

• Homeownership Financing
• Self Help has developed specific programs for
  buyers with weak credit or limited down payment
  funds, enabling them to build financial security
  and giving them a stake in their communities.
  There are also special programs that finance
  rehabilitation of older homes.
• Since 1980, Self-Help has made direct home loans
  worth 119 million to 2.090 North Carolina
  families.
• These home loans went to
• 68 minorities
• 40 women-headed households
• 74 low-income families
• 38 rural households

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Self-Help and Community Rehabilitation
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Alternatives Federal Credit Union-Ithaca, NY

• Alternatives Encompasses Five Corporations One
  Mission, One Staff, Separate Boards
• Alternatives Federal Credit Union-core insured
  depository and lender
• Alternatives Community Ventures-501 (c) 3, IDA
  Matching Fund
• Alternatives Ithaca CUSO-for profit investments
  and financial plans
• Friends of Alternatives-Secondary capital
• Alternatives Fund-Trade Association, Field of
  Membership

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• Alternatives FCU--Successful Community
  Partnership Lending Program
• potential to help low-income individuals, enhance
  networking and strengthen community resources.
• As welfare reform threatens many of our
  community's poor families, credit, not charity,
  may provide a way out of poverty for some. The
  program, in partnership with non-profit
  organizations, makes loans to clients of
  non-profits that might otherwise be considered
  "unbankable." Those loans often result in
  increased incomes for families. Revolving loans
  and peer lending programs in industrialized
  countries have given people the means to start
  their own businesses and move up from poverty.
• Here's how it works
• The non-profit organization raises funds to
  support loans.
• The funds are deposited with Alternatives, and
  Alternatives agrees to fund loans to a maximum of
  double the funds on deposit. (For example, if an
  organization raises 5,000 AFCU will lend
  10,000 if 30,000 is raised, AFCU will lend
  60,000).
• The non-profit organization decides on loan
  policy (which Alternatives can help with) and
  makes the loan decisions.
• Alternatives gives out the loans approved by the
  non-profit organization and services the loans
  (loan fund management such as collecting payments
  and tracking history, reporting, collection).
• If a loan is not repaid, the non-profit
  organization's deposit account is charged for the
  loan balance

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Alternatives Partnership, continued

• The benefits of this partnership are
• Since the non-profit weighs the factors to decide
  who should get a loan, the loans can be specific
  to the group's needs (Ex. The Wheels-to-Work
  Program provides auto loans to the economically
  disadvantaged clients referred by the
  non-profit).
• When the organization seeks funding, the offer
  that Alternatives will double the money provides
  an attractive consideration to funders since
  Alternatives will, in essence, be matching funds.
  
• Doubling the non-profit organization's funds
  means that the scope of the program can be
  broadened, reaching more people.
• Alternatives' servicing the loans eases the
  administrative burden for the non-profit
  organization.
• The non-profit organization owns the risk pool
  and can withdraw funds not guaranteeing loans.
• For more information, contact Mary Ziegler at
  AFCU
• [phone] ext 819 or mary_at_alternatives.org.

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BETHEX Federal Credit Union-Bronx, NY
In an unlikely partnership, Joy Cousminer, CEO of
Bethex, teamed up with Joe Coleman, president of
RiteCheck (a check cashing operation), to provide
convenient and affordable check cashing and
deposit services to members and nonmembers of the
credit union. The check cashers lobbies run a
tv commercial continuously playing an infomercial
about the credit unions services. NY laws
prohibit check cashers from making payday loans,
so the goal of the credit union was to provide
credit union membership and loan services to the
unbanked people who rely on check cashing
services. Together, the CEOs designed the Cash
in a Flash program to help poor people manage
their debts.
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What are the advantages for each side? Because of
the partnership, Bethex members can now use ATM
cards at any RiteCheck location to perform
deposits or withdrawals for free. Credit union
members also receive a discount when cashing
checks, and they have the option to cash a check
and then deposit all or part of the check into a
credit union account. Bethex is able to provide
members increased access to accounts without the
costs incurred in building additional
full-service branches. The program also allows
RiteCheck (check cashing) customers to take
advantage of credit union membership while still
utilizing the convenience of RiteCheck locations.
For RiteCheck, the program has been advantageous
because customers can now be offered deposit and
loan options through the credit union
partnershipthese are services that the check
casher is not authorized to offer, but referring
customers to the credit union has led to
increased business for the check cashing
locations.
For more information, go to www.bethexfcu.org or
call [phone]
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VITA-Volunteer Income Tax Assistance Program ASI
volunteers sponsor free tax preparation sites at
three credit union branches each Saturday, from 9
a.m.-1 p.m., during tax season. The program is
run through a partnership with the IRS, who
provide free tax training to our volunteers and
free online filing software. Volunteers prepare
and file tax returns for free, while educating
filers about tax credits for which they may be
eligible, like the EITC, or Earned Income Tax
Credit
Qualifications Generally, VITA sites can
accept non-itemized returns for INDIVIDUALS
with income up to 25,000 FAMILIES with income
up to 40,000
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ASI Federal Credit Unions IDA Program
Individual Development Accounts are designated
savings accounts for three allowable purposes
only post-secondary education, homeownership,
or micro-enterprise. ASI, through a partnership
with three branches of Habitat for Humanity,
works with families who have been approved as
future homeowners. They are referred to ASI. A
homeownership IDA is opened, and each family has
a savings goal of 500.
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Homeownership IDAs Continued

• Through grants from the NFCDCU (National
  Federation of Community Development Credit
  Unions), ASI has been able to match each
  participating familys savings up to 500 on a
  21 basis. The 1,500 that families end up with
  at the end of the program is used to pay the
  mortgage closing costs for the new Habitat for
  Humanity home.
• Only deposits are permitted until closing on the
  home-no withdrawals allowed for this type of
  account
• Financial education is a mandatory component of
  the program for participating families
• The IDA funds must be saved over a period of AT
  LEAST six months. The goal of the program is for
  families to develop a pattern of asset-saving
  behavior over time that will last.

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• ASIs Dream Maker Mortgage Loan
• Criteria
• First-time homebuyers
• low to moderate income
• Verifiable rental payments for at least 12
  months, none can be over 30 days delinquent
• Educational Component
• Prospective homebuyer must agree to mandatory
  homebuyer education (this can be done at home
  with workbooks, and is offered in either Spanish
  or English)

• How it works
• This type of loan allows non-traditional credit
  history if no traditional credit history is
  available on the homebuyer

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• Dream Maker Loan, continued
• How it Works
• If debt-to-income ratio is high, this loan type
  allows 25 of non-trackable cash income to be
  used on the income side (cash income from tips,
  babysitting, a part-time job, etc.)
• A non-profit may contribute the closing costs (up
  to 3) on this type of loan, and the seller may
  also choose to contribute
• A cash gift from a friend or family member may
  also be used for the closing costs
• As soon as the educational course is completed, a
  test and completion certificate must be sent off
  for underwriting to become finalized

For more information about this, or any of ASI
FCUs other programs, call [phone] or log
onto our website at www.asifcu.org.
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Community Reinvestment Act
In 1977, Congress enacted legislation in the form
of the Community Reinvestment Act to encourage
depository institutions to help meet the credit
and financial needs of the communities in which
they operate. This act has had significant
impact on low and moderate-income neighborhoods.
The very mission of community development credit
unions is serving low-income communities.
Often, credit unions can be perfect partners
for banks who wish to serve these markets.
Support of Community Development Credit Unions is
recognized as eligible CRA activity.
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Why invest in CDCUs?

• CDCUs are government regulated and federally
  insured
• They generally serve minority memberships
• Members usually have poor to little or no credit
• CDCUs are tax-exempt institutions with low
  overhead
• HOW CAN BANKS BECOME INVOLVED IN HELPING POOR
  COMMUNITIES?
• One of the easiest and most effective ways to
  assist the disadvantaged is to invest in credit
  unions. Banks can assist in start up and
  expansion of CDCUs with grants, deposits, and
  even the donation of bank facilities.

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• Questions about investing in CDCUs
• Do CDCUs offer insurance on deposits? Yes. Over
  90 of all CDCUs are federally insured the rest
  are insured by private funders.
• Are all deposits in CDCUs insured? All member
  deposits are insured, up to 100,000 per
  depositor, per account. Some credit unions are
  also eligible to accept a quota of fully insured
  non-member deposits.
• What governing body insures CDCUs and credit
  union? The National Credit Union Administration
  insures, regulates, and supervises all federal
  and many state chartered credit unions.
• How do I locate a CDCU to invest in? The NFCDCU
  can help you find a CDCU in your local area.
• Can I stipulate how funds are used? Some credit
  unions may allow depositors and funders to
  stipulate certain projects or categories of
  lending. However, credit unions cannot ensure
  that your funding will go to a particular
  borrower.

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Investing in the NFCDCU Many foundations,
banks, religious organizations, and other
institutions have invested in local CDCUs through
the NFCDCUs Capitalization Program.  The Ford
Foundation, John D. and Catherine T. MacArthur
Foundation, the Presbyterian Church (USA)
Foundation, and Federal CDFI Fund are just a few
of the NFCDCUs investors.  Today, the Federation
manages approximately 25 million, with
investments outstanding in 119 different CDCUs. 
The Federation provides not only deposits, but
loans (secondary capital) and grants. Funds are
generally invested in a diversified portfolio
divided between several different credit unions.
The most common way to invest in CDCUs is through
federally-insured, below-market deposits. Most
deposits are made in amounts up to 100,000 at
rates ranging from zero to two percent, generally
for terms of 3 years. For more information,
please pick up a hand out or contact www.natfed.o
rg.