Credit Union Anti-Poverty Partnership Strategies Presented by: Audrey D. Cerise,

1. Credit Union Anti-Poverty Partnership Strategies Presented by: Audrey D. Cerise, President & CEO, ASI Federal Credit Union

2. 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.

3. 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. • Sincethat 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.

4. 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.

5. 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

6. 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

7. Self-Help promotes wealth building through homeownership. Praised as a model of affordable housing redevelopment, the award-winning Walltown Homeownership Program provides single-family home ownership for first-time homebuyers of low and moderate income. Serving the urban community of Durham, North Carolina, Self-Help builds and sells single-family homes in the historic and traditionally African-American neighborhood of Walltown. Self-Help and Community Rehabilitation

8. Walltown, an historically African-American neighborhood first established in the late 1880s, was known as a tight-knit neighborhood with strong neighborhood churches, parks and a school. By the mid-1990s, however, about 80 percent of the area's housing had become rental property. Many of the houses were in severe disrepair -- even boarded up -- and crime had increased dramatically.  Beginning in 1995, Self-Help led a public-private partnership of community members, local churches, Duke University, the City of Durham, the North Carolina Housing Finance Agency, private foundations and others to improve the condition of the neighborhood’s housing stock and encourage homeownership among low and moderate income families who live and work in Durham.   To date, over 43 families have become homeowners through the program, impacting virtually every block in the neighborhood. For more information contact: walltown_info@self-help.org

9. 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

10. 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

11. 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: • (607) 273-4611 ext 819 or mary@alternatives.org.

12. 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 casher’s lobbies run a tv commercial continuously playing an infomercial about the credit union’s 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.

13. 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 partnership—these 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 (718) 299-9100

14. 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

15. ASI Federal Credit Union’s 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.

16. Homeownership IDAs Continued • Through grants from the NFCDCU (National Federation of Community Development Credit Unions), ASI has been able to match each participating family’s savings up to $500 on a 2:1 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.

17. ASI’s 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

18. 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 FCU’s other programs, call (504) 733-7274 or log onto our website at: www.asifcu.org.

19. 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.

20. 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.

21. 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.

22. Investing in the NFCDCU: Many foundations, banks, religious organizations, and other institutions have invested in local CDCUs through the NFCDCU’s 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 NFCDCU’s 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 depositsare 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.org.