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OCC’s Four Districts Report on New Opportunities for Banks

Western District

Los Angeles Loan Fund Will Offer Banks Commercial Development Opportunities

The Los Angeles Local Development Corporation (LDC), a community development financial institution, is launching a new commercial loan fund to benefit businesses in Los Angeles, Orange, and Ventura counties of California. The 504 ACE Loan Fund II (ACE II) will make loans to businesses and nonprofits qualifying for SBA’s 504 program. The $20 million fund is soliciting investments from banks that are recipients of Troubled Asset Relief Program (TARP) funds as well as others. The minimum investment amount is $200,000. The fund is scheduled to close at the end of the first quarter of 2010. Loans made through ACE II will primarily be commercial real estate loans with loan-to-value ratios up to a maximum 80 percent and maturities of 15 years.

The Los Angeles LDC was incorporated in 1995. It is known for its expertise in SBA 504 loans, direct small business loans, commercial real estate loans, and facilities loans to nonprofits. The organization launched the first 504 ACE Loan Fund in 2004, a $10 million fund whose investors included several of the largest financial institutions in Southern California.

For more information, e-mail Michael Banner, or call (213) 362-9113.

Southern District

Tennessee/Kentucky Housing Fund Achieves More Than $43 Million in Financing in 13 Years

The Housing Fund, Inc. (THF), a 501(c)(3) nonprofit, was established in 1996 to finance affordable housing and neighborhood revitalization projects throughout middle Tennessee and Allen, Edmonson, and Warren counties in Kentucky. Since 1996, THF has helped more than 2,300 first-time homebuyers and provided more than $43 million in financing to help individuals and organizations purchase, rehabilitate, or construct homes for low- and moderate-income families.

THF has several lending programs designed to meet the affordable housing needs of low- and moderate-income persons. In addition, THF offers second mortgage loans and a free, one-on-one counseling session. THF also has a predevelopment loan program for nonprofit organizations and a development loan program for nonprofit and for-profit developers. THF provides technical assistance services to nonprofit organizations, housing authorities, and community organizations.

THF is certified by the U.S. Department of the Treasury as a community development financial institution and is supported by public and private resources. Financial institutions that want to support THF’s efforts can provide equity equivalents (EQ2) and program-related investments. For more information, contact The Housing Fund at (615) 780-7000.

HUD Housing Vouchers Can Create Homeownership Opportunities

The federal Section 8/Housing Choice Voucher program dates back to 1975. The program helps low-income families, the elderly, and people with disabilities rent decent, safe, and affordable housing. In 2000, the U.S. Department of Housing and Urban Development (HUD) modified the program to permit the use of monthly assistance payments to make mortgage payments. The vouchers may be used toward mortgage payments for 10 to 15 years, depending on the loan terms. If the buyer is elderly or disabled, there is no time limit. More than 700 housing authorities nationwide have helped nearly 7,000 low-income families and individuals purchase homes by using Section 8 vouchers.

The program requires that financing be provided by a lender. Each loan must be insured or guaranteed and must comply with secondary mortgage or private sector underwriting standards. Applicants must be first-time homeowners, undergo HUD-certified home buyer training, and agree to live in the home. The housing choice vouchers are used as a source of income and can be blended with other funding sources such as individual development accounts, the HOME Investment Partnerships program, and the Affordable Housing Program.

Trustmark National Bank has been a leading partner in the homeownership program since 1999, when the Mississippi Regional Housing Authority 6 (MRHA 6) piloted the concept in Jackson. Over the past 10 years, MRHA 6 has used housing choice vouchers to help 18 low-income families become homeowners.

For more information on how your bank can participate in the homeownership program, e-mail Nelma Thomas, MRHA 6 Family Self-Sufficiency Coordinator, or call (601) 714-3943.

Texas Panhandle’s Venture Capital Source

Equitrend Capital is a for-profit fund that provides equity capital to start-up and early stage ventures in the Texas Panhandle. Equitrend focuses on finding undiscovered potential in rural and underserved markets by targeting companies seeking to raise $50,000 to $5 million.

The following goals govern the direction and activities of the fund: 1) generate above-market returns for investors, 2) provide rural small businesses with the resources and opportunities to stay in their area, 3) build sustainable enterprises positioned to create quality jobs, and 4) expand local business capacity. Equitrend Capital uses a nonprofit manager to minimize operating expenses and employs multiple layers of due diligence on its investments. Equitrend received a community development financial institution grant in 2009 to pay for supervisory and technical assistance to invested companies.

An advisory board composed of investors and community stakeholders provides strategic advice and guidance, and an investment committee composed of investor representatives makes investment decisions for the fund. Equitrend closed its first round of funding in November 2008 and made its first investment in January 2009.

Investment in the fund is still available to accredited investors in units of $50,000. For information, e-mail P. J. Pronger, call (806) 683-9439, or visit www.equitrendcapital.com.

Northeastern District

Investment Fund Helping to Rehabilitate Foreclosed Properties in South Carolina

The South Carolina Association of Community Development Corporations (SCACDC) is a statewide trade association for nonprofit community development corporations that serve low- and moderate-income persons and communities in South Carolina. SCACDC established the Silver Crescent Investment Fund (SCIF) to raise $15 million in equity and subordinated debt to help communities in the state that have high numbers of foreclosures.

SCIF will provide flexible capital that can be used by certified community development corporations and community development financial institutions to acquire and rehabilitate foreclosed properties in targeted communities. According to the fund offering, SCIF is seeking to raise capital to fund up to 10 community economic development ventures. Under the proposal, investors in SCIF would receive a 33 percent credit (using the South Carolina Community Development Tax Credit program) against their state tax liability and interest on their investment while supporting neighborhood stabilization efforts in the state.

Central District

Rebuilding a St. Louis Community, One Red Brick at a Time

The Red Brick Community Land Trust is a nonprofit devoted to building diverse and healthy communities in the St. Louis area. The trust is currently developing 15 affordable units for sale. The three projects include four townhouses, five condominiums, and six scattered-site, single-family homes. The units are a combination of new construction (the townhouses) and rehabilitation development (the condos and the single-family homes). All the units are in the low-income Bohemian Hill neighborhood. Red Brick selected these properties because they are on stable streets that can profit from the sale of improved units and the development of new in-fill properties.

Each of the three projects is in a different stage of development, and all three will require construction financing. The townhouses need approximately $1.2 million in private construction financing, the condos approximately $300,000, and the single-family homes approximately $540,000. Each home will sell for approximately $60,000. Funding sources include Federal Home Loan Bank grants and other city and state subsidies. Potential homebuyers will receive counseling through the trust, and a partner agency is providing down payment assistance. Banks can provide construction loans and technical assistance or may contact the trust about the future sale of foreclosed or other real estate owned properties.

For more information, e-mail Mark Bohnert, Executive Director, call (314) 436-1400 x18, or visit the Red Brick Community Land Trust Website.

Targeting Investments in Community Development Credit Unions

The National Federation of Community Development Credit Unions is a 35-year-old national nonprofit association of community development credit unions (CDCU) serving lower-income communities. The federation is certified as a community development financial institution (CDFI) by the Treasury Department’s CDFI Fund. The federation aims to help revitalize low-income communities by advocating for public policies that help CDCUs accomplish their mission and by providing CDCUs with financial and technical assistance.

The federation provides financial assistance to CDCUs through its Community Development Investment Program (CDIP) and manages nearly $50 million in investments and commitments from 38 investors (including 10 banks). It has investments in more than 120 credit unions in inner cities and rural areas and on reservations across the country. In 25 years of operating the CDIP, the federation has not missed a payment to an investor.

Banks most often use the CDIP’s Nominee Deposit Program to target investments to local CDCUs. Under this program, the federation acts as nominee for the investing bank, placing separate deposits of up to $250,000 (or the maximum insured amount) in multiple CDCUs. The result is that a bank can invest more than $250,000 in the CDIP and receive 100 percent insurance from the National Credit Union Administration on each of the underlying deposits. Banks also make uninsured loans to the federation. These loans are used to purchase mortgages from its members, increasing the flow of mortgage lending in low-income communities.

For more information, e-mail the federation’s Capitalization Program Manager, Alice Greenwald, or call (212) 809-1850 x212.