In the midst of the unraveling of the subprime mortgage market and the present foreclosure crisis, a group of community development financial institutions (CDFIs) in our District, and nationally, continue to demonstrate that it is possible to lend to nonprime customers and get repaid. All of the CDFIs featured in this issue of Cascade serve customers who are not typical bank borrowers. But the CDFI lenders work hard to make certain they and their customers understand the risks of borrowing. This close relationship is often cited by the borrowers as the reason for their success.
Nonprofit community development loan funds have operated in the United States for 30 plus years, but they did not grow substantially until the CDFI Fund at the U.S. Treasury Department was created in 1994. There are now more than 700 nationally and more than two dozen in the Third District. Like mainstream financial institutions, CDFIs come in big sizes and small, and most have a particular market niche. Some are consumer-oriented; many respond to business and commercial requests. The one common factor is that all of them operate in low- and moderate-income communities. While the CDFIs may have started out as lenders to nonprofit community developers, now most lend to small developers undertaking urban projects.
As the industry has grown, CDFI leaders have been recognized by their communities. Some have participated in the Federal Reserve System’s Consumer Advisory Council, and this month a new bar has been reached. Jeremy Nowak, president and CEO of The Reinvestment Fund (TRF), has been appointed by the Federal Reserve System’s Board of Governors to serve on the Board of Directors of the Federal Reserve Bank of Philadelphia. In addition to overseeing the Reserve Bank’s operations, directors provide information about the economic conditions in their industries to monetary policymakers. Jeremy has led the development of TRF from its creation as a small nonprofit loan fund in the mid-1980s to a financial services firm that lends and invests in communities in New Jersey, Pennsylvania, Delaware, Maryland, and the District of Columbia. TRF closed more than $100 million in transactions in 2007 and presently has more than $400 million in assets under management. Congratulations to Jeremy on his new position as a director. We know he will continue to represent the community development industry well.
From March 26 to 28 we will be hosting our third Reinventing Older Communities conference. Our sub-theme is “How Does Place Matter?” We expect the presentations will give all of you good information on the complex issues that must be untangled in dealing with the problems facing America’s older communities. The web address for the conference is www.philadelphiafed.org/community-development/events/2008/reinventing-2008/. Please join us.