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Enhancing Affordable Housing through Community Development Financial Institutions (CDFIs)

This presentation delivered by Donna Fabiani at the North Carolina Affordable Housing Conference highlights the critical role of Community Development Financial Institutions (CDFIs) in addressing affordable housing needs. It outlines the mission and impact of CDFIs, which serve low-to-moderate income communities by providing innovative financing products and technical assistance. The presentation includes an overview of the CDFI industry, partnerships with banks, and their collective accomplishments in financing affordable housing units and supporting economic opportunity.

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Enhancing Affordable Housing through Community Development Financial Institutions (CDFIs)

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  1. CDFIs and Affordable HousingPresentation to the North Carolina Affordable Housing Conference: “Housing Works” Donna Fabiani | September 17, 2010

  2. CDFIs and Affordable Housing • What is a Community Development Financial Institution (CDFI)? • Who is Opportunity Finance Network? • CDFI Industry • CDFIs and Affordable Housing • Bank-CDFI Relationships

  3. What is a Community Development Financial Institution (CDFI)? • Mission-driven financial institutions serving low-to moderate income communities • Serve customers that cannot meet strict collateral or underwriting requirements • Provide innovative financing products as well as technical assistance • Create economic opportunity in the form of • New jobs • Affordable housing units • Community services • Financial services for the underbanked and unbanked

  4. What is a CDFI? • Four CDFI Institution Types • Community development banks • Community development credit unions • Community development loan funds • Community development venture capital funds • Financing Sectors • Affordable Housing Development and Individual Homeownership • Nonprofits and Community Facilities • Business and Microenterprise • Consumer

  5. Who Is Opportunity Finance Network? • A Network of 182 opportunity finance institutions or CDFIs serving low-income and low-wealth urban, rural, and Native communities in all 50 states • Mission:Lead the opportunity finance system to scale through capital formation, policy, and capacity development • Finance CDFIs, Rate CDFIs, Policy, Knowledge Sharing • Opportunity Finance Network Members have provided more than $23.5 billion in cumulative financing in their markets through 2008

  6. CDFI Industry • U.S. Treasury has certified 900 CDFIs • 568 loan funds • 203 credit unions • 104 banks and bank holding companies Source: CDFI Fund, as of August 31, 2010 • Data available for 495 CDFIs • $29.4 billion in assets • $20.4 billion in direct financing outstanding • Loan Funds are capitalized primarily by bank debt; credit unions and banks by deposits. Source: FY 2008 CDFI Data Project Data

  7. CDFI Industry $ Portfolio Outstanding by Sector Source: FY 2008 CDFI Data Project

  8. CDFI Industry • In FY 2008 CDFIs • Financed the construction or renovation of 60,205 units of affordable housing • Provided 16,405 responsible mortgages to first-time and other home buyers • Financed and assisted businesses that created or maintained 35,624 jobs Source: FY 2008 CDFI Data Project • Cumulatively, OFN Members • Financed 630,000 units of affordable housing

  9. CDFIs and Affordable Housing • 200 CDFIs with $8 billion outstanding • Financing for housing developers • Predevelopment • Acquisition • Construction • Renovation • Working Capital • Bridge loans • Financing for individuals • Home-purchase mortgages for low-income and first-time homebuyers • Down payment assistance • Rehab Loans

  10. CDFIs and Affordable Housing • Manufactured housing park conversions • REO purchases and resale • Technical assistance to developers • First-time homebuyer training & counseling • Federal housing policy

  11. CDFIs and Affordable Housing • 20 Certified CDFIs in North Carolina • NC Housing CDFIs include • Latino Community Credit Union, Durham • NC Community Development Initiative, Raleigh • Self-Help Ventures Fund and Credit Union, Durham • National CDFIs Lending in North Carolina • Housing Assistance Council • Institute for Community Economics Revolving Loan Fund • National Housing Trust Community Development Fund • Rural LISC

  12. CDFI-Bank Partnerships • CDFIs are good investment partners • Active lenders • Performing lenders: Mitigate risks by investing in multiple projects, providing technical assistance • Know and are known by LMI communities • Proven track record • CDFIs’ Roles • Co-lend with banks • Participate with banks • Take subordinate position to bank

  13. CDFI –Bank Partnerships Net charge-off rates compare favorably to FDIC insured financial institutions CDFI Delinquency Rates are typically higher than FDIC insured financial institutions Source: Q4 2009 CDFI Market Conditions Report

  14. CDFI – Bank Partnerships • Demand for CDFI Housing Development financing is trending upward • 53% received more financing applications in 2ndQ 2010 than in 2ndQ 2009 • CDFIs’ Housing Development loan originations are trending upward • 37% reported increase in originations in 2ndQ 2010 over year • Housing CDFIs are capital-constrained • Could have deployed $55 million more in last quarter • Need estimated $400 million in new debt and equity capital in next 12 months • CARS™ Ratings may be available

  15. For more information on CDFIs • www.opportunityfinance.net • CDFIs Side by Side • CDFI Market Conditions Report • CDFI Data Project Report • www.opportunityfinance.net/conference • Donna Fabiani, dfabiani@opportunityfinance.net

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