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Capital One
The Park at Lemoyne in D'Iberville, Mississippi.
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Capital One
Riverchase in Gulfport, Mississippi.
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Dorothy Broadman, Head of Community Development Banking, Capital One Financial Corporation
In 2005, Capital One acquired Hibernia Bank, the largest financial institution in Louisiana. Headquartered in New Orleans, Capital One Bank associates soon found themselves literally and figuratively in the eye of Hurricane Katrina when it hit landfall that year. Critical issues of survival and restoration immediately confronted us, our customers, and the communities we serve.
The unparalleled dimension of the crisis wreaked by Katrina required a comprehensive and proactive response. Building on Hibernia's 140-year history of serving New Orleans, Capital One Bank mobilized resources across the company, including retail banking, all of our lending areas including small business, commercial, commercial real estate, mortgage, consumer, community development banking, and community relations.
Each of these units played a role in the immediate aftermath of the disaster, and they continue to assist with the region's recovery today.
Supporting Associates Immediately Before and After Katrina
As the likelihood of a hurricane became apparent, the bank's first priority was assisting our employees. The bank expedited payroll to assist with evacuation costs. Immediately after the hurricane, we located and assisted 3,100 displaced employees by establishing emergency hotlines to provide answers to individual questions.
Additionally, the bank broadcast radio and television advertisements with information updates, and it made $30 million available for bank employees' housing and emergency shelter needs. The bank spent an additional $2.7 million on other emergency expenses, such as food, child care, and car rentals.
Helping employees address basic life needs and cope with personal trauma enabled the bank to reopen branches quickly and ensure that staff members were available to provide much-needed banking services.
Supporting Borrowers through Forbearance
Forbearance was a key principle in meeting customer needs in the wake of the hurricane. Capital One deferred payments on all consumer and most small business loans and lines of credit. Consumer loans were deferred until January 2006, and mortgage loans were suspended for up to three months with no reporting to the credit bureaus. In addition, the bank provided mortgagors with 18-month forbearance, established a skip-pay in September for credit cardholders, and lowered interest rates and minimum payments for six months.
Access to Branch Service
Recognizing that all bank customers in the affected areas, not just Capital One customers, needed access to banking services, the bank, in an unprecedented collaboration, provided space to competitor banks that were unable to open their own offices. We arranged bus service to Capital One branches and to our competitors' branches so local residents could cash Federal Emergency Management Agency (FEMA) checks, and we waived foreign automated teller machine (ATM) fees. Additionally, the bank:
- Established an emergency hotline to provide the latest update on the status of efforts to restore customer service.
- Created and distributed disaster recovery fact sheets in branches.
- Distributed stored-value cards for Red Cross disaster relief assistance.
- Provided spare checks and ATM/debit cards.
Capital One was the first bank to restore banking in New Orleans East, one of the city's largest neighborhoods and one of the areas hardest hit. The bank was also one of the first to open a temporary branch in the heavily impacted St. Bernard parish.
Public Policy Advocacy Enhancing Home Mortgage Lending
Following the hurricane, Capital One joined other banks and regulators in meeting the needs of bank customers recovering from the disaster. One of the priorities was supporting the housing market in the wake of storms that severely damaged hundreds of thousands of housing units. The extent of damage to housing required that banks and regulators rethink mortgage rehabilitation products.
Along with the Finance Authority of New Orleans, Capital One employees took the lead in advocating for changes to the Federal Housing Administration (FHA) 203(k) rehabilitation product and the FHA Streamline product, specifically for hurricane-affected areas. The resulting modifications extended the permitted rehabilitation period and expanded the types of construction allowed for the 203(k) product and increased the dollar limit for the Streamline product.
Approved in October 2006, more than 550 families have benefited from these modifications through May 2008. As homeowners become increasingly able to address a myriad of challenges presented by the hurricane, including access to federal recovery funds, the availability of qualified contractors, weakened credit scores, and increased insurance and construction costs, we anticipate a significant increase in the number of families who will benefit from the modified products.
Capital One also led the advocacy to increase first-time home buyer subsidies from the city of New Orleans for low and moderate-income families still struggling to find housing post-Katrina. The additional subsidies, increased from $25,000 to $50,000, were needed because of significant increases in housing and insurance costs following the hurricane.
Small Business Lending and Economic Development
Small business needed as much attention as homeowners did in the recovery period, and Capital One pursued a number of small business initiatives. These included participating in two rounds of the Louisiana Emergency Bridge Loan Program by providing nearly $8 million to 183 small businesses. The bank accounted for 30 percent of loans extended in the first round of the program and 10 percent of the loans in the second round. The bank also participated in the Louisiana Society of CPAs' Disaster Recovery Seminar series, which disseminated information about governmental assistance programs to business owners.
The bank provided payment deferrals to all small businesses located in hurricane-affected areas for 90 to 120 days following the hurricane. Finally, Capital One issued updated disaster-planning guidelines to help businesses prepare for future hurricane seasons. This information was disseminated through press releases; the guidelines are available at Capital One's Web page entitled "Disaster Planning Guidelines for Business."
Capital One also supported a number of strategies to assist small businesses needing loans that did not meet standard banking credit requirements. Among these strategies was the establishment of the Baton Rouge Micro and Small Business Fund created in partnership with the mayor of Baton Rouge and other financial institutions. The fund promotes economic development by providing technical assistance and financing to non-bankable, small businesses that create jobs. The Baton Rouge fund is an important part of the recovery effort because many New Orleans small business owners seeking to start anew relocated in Baton Rouge after Katrina. Capital One also invested in the fund and provided an operating grant. This fund is just beginning and already has a substantial pipeline of projects and a few loan closings. Seedco Financial Services, a national community development financial institution (CDFI), has been retained as the fund operator.
In Baton Rouge and New Orleans, the bank also implemented a program to refer declined small business applicants to select nonprofit partners. Our partners have technical assistance programs and provide access to capital through micro-business loan funds.
New Markets Tax Credit Financing
Providing capital to commercial businesses continues to be an essential element of recovery efforts. In June 2006, the bank received an allocation of $100 million in new markets tax credits (NMTC). This program provides loans to businesses investing in low-income communities across the country. Capital One's allocation was targeted to communities located in the Louisiana GO Zone. The bank used this program to provide financing to various commercial borrowers that offer health, educational, and other services.
Many of the bank's NMTC projects have involved redevelopment of vacant or abandoned buildings in inner-city areas. Capital One has implemented an innovative program that couples NMTCs with funds from FEMA and other public agencies.
Because the public monies are not available until completion of the projects, the bank added a bridge loan component to its NMTC product, thereby making these important rebuilding projects feasible. As one example, the bank used this combination of products to support the development of the Holy Cross School originally located in the Lower Ninth Ward of New Orleans. Capital One made a $42.1 million investment to help finance the rebuilding of the school in the Gentilly neighborhood and created 375 construction jobs and 27 permanent jobs.
In addition to the bank's own tax credit allocation, Capital One has invested an additional $200 million in other NMTC projects in the Gulf Coast, including areas designated as a GO Zone.
Community Development Finance
The bank continues to work with developers throughout the Gulf Coast region to provide capital for developing new housing and rebuilding homes that were lost.
The first-time home buyer requirement is waived for the MRB-financed programs (not for the HOME/MRB program) for those buying in targeted economically distressed census tracts or in targeted parishes impacted by hurricanes Katrina or Rita. The requirement is also waived for buyers who had owned a home as of August 28, 2005, that was rendered uninhabitable by hurricane Katrina. Since the hurricanes, the LHFA has issued more than $200 million in MRBs, helping over 1,700 families buy homes in 2006.
The Mississippi Home Corporation used $157 million in tax-exempt bond authority to issue MRBs to support Mississippi home buyers, many of whom were affected by hurricane Katrina. Qualifying home buyers are eligible for below-market interest rates, and the program helps pay for a portion of closing costs. More than 2,700 low to moderate-income families, including 400 in the coastal counties, have purchased their first homes through this program. Mortgages are originated by participating lenders.
We have coupled the knowledge of our local bankers with the expertise of the bank's national community development division to fund investments in low-income housing tax credits (LIHTC). In 2007, Capital One invested $66 million in LIHTCs in Louisiana, and we expect to invest as much as $150 million in the Gulf Coast region in 2008.
Examples of recovery lending and investing activities include:
- $14 million LIHTC investment in New Orleans East, an area that suffered substantial damage, to replace a National Housing Partnership Foundation housing development. (See NHP Foundation article.)
- $9 million loan to D'Iberville Partners, LLC, in D'Iberville, Mississippi, to construct 160 affordable rental units. These units will be affordable to low- and moderate-income families in a market where virtually no available rental units exist today. A second $7.3 million loan was provided to a related entity to construct an additional 216 units of affordable housing in the Riverchase development in Gulfport, Mississippi.
- $5 million participation in the Louisiana Loan Fund, LLC, a product of the Local Initiative Support Corporation (LISC); and in the Enterprise Louisiana Loan Fund LLC, providing predevelopment funding for local developers to build affordable housing. (See LISC and Enterprise Community Partners articles.)
Through 2009, Capital One will have supported the rehabilitation and construction of over 939 housing units throughout the Gulf Coast region. Most of these units are in the form of affordable housing.
Philanthropic Support
Soon after the hurricane, the bank provided philanthropic support for educational needs and social services. In May 2006, we announced grants totaling $3 million to help support Orleans Parish and communities across Louisiana. The grants included $125,000 to restore the libraries at two charter schools in New Orleans that were heavily damaged by Katrina
In 2006, LHFA created an innovative addition to its HOME/MRB program by creating an insurance assistance program that provides for two percentage points of the interest paid by borrowers to be placed in an escrow account to be used to prepay the homeowner's insurance premiums. This subsidy is covered by the HOME/MRB program in the form of a lowered interest rate charged to the borrower. For instance, as of August 2008, the nominal interest rate charged by the HOME/MRB program is 4.85 percent. As the borrower makes mortgage payments, the loan servicer deposits two percentage points of the interest into the borrower's escrow accounts for insurance and sends the remaining 2.85 percent to LHFA. According to LHFA, 35 buyers participated in the first five months of this program.
Committed for the Long Term
For further information, call Dorothy Broadman, Capital One Community Development Banking, at (703) 720-2368.
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The Park at Lemoyne
| Sources of Funds |
| Capital Sources - Construction |
Amounts |
Construction Loan (Capital One) |
$ 8,922,000 |
Standby LC (Capital One) |
106,000 |
LIHTC Equity |
14,930,000 |
Total |
$23,852,000 |
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