CUs to Leverage Tools & Funding from FHA, Treasury, & CDFI

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Credit unions in California and Nevada that are driving social impact lending and safe-banking efforts for their members and local communities received good news this week from the Federal Housing Administration, U.S. Treasury Department, and the Community Development Financial Institutions (CDFI) Fund!

FHA: Positive Rental Payment History for First-Time Homebuyers
The FHA announced this week it will begin to permit inclusion of a first-time homebuyer’s positive rental payment history as an additional factor in the credit assessment performed in the Technology Open to Approved Lenders (TOTAL) Mortgage Scorecard to determine eligibility for an FHA-insured mortgage.

By adding this positive rental history indicator, FHA’s credit evaluation will become “more comprehensive and equitable, with the goal of enabling first-time homebuyers,” a news release states. “If you’re regularly paying your rent on time, that’s a good indication you will also pay your mortgage on time.”

The new policy considers positive rental payment history as the on-time payment of all rental payments in the previous 12 months. To utilize this added factor, lenders originating forward-purchase mortgages for FHA insurance will be required to obtain verification of the borrower’s on-time rental payments and indicate via a new indicator within the scorecard the submission of positive rental payment history.

Lenders may begin indicating a borrower’s positive rental payment history in the TOTAL Mortgage Scorecard for scoring events on or after Oct. 30, 2022, as well as for case numbers assigned on or after Sept. 20, 2021.

Treasury Program Awards $75 Million to 5 California Credit Unions
The Treasury Department’s Emergency Capital Investment Program (ECIP) awarded the following credit unions in California over $75 million in investment funds this past week:

  • Financial Partners CU — $35 million
  • Orange County’s CU — $35 million
  • MERCO CU — $3.5 million
  • Northeast Community FCU — $1.5 million
  • Episcopal Community FCU — $38,000

Congress created the ECIP as part of the Consolidated Appropriations Act of 2021 to help community-based financial institutions support consumers and local small businesses in low-income and underserved communities disproportionately affected by the economic effects of the COVID-19 pandemic. A federally insured credit union must be certified as a CDFI or a minority depository institution (MDI) to participate in the program.

CDFI and MDI credit unions are continually recognized as able to meet the needs of their communities, lend deeper, and expand access to affordable, responsible, and sustainable financial products and services for small businesses, low-income consumers, and communities of color who were heavily impacted by the economic downturn in 2020 and after.

CDFI Awards $398K to 2 California Credit Unions
The Treasury Department’s CDFI Fund awarded more than $398,000 in grants to two CDFI credit unions in California this week through the fiscal year 2022 round of the Small Dollar Loan Program (SDL Program):

  • Tucoemas FCU — $184,250 Loan Loss Reserve Award; and a $87,738 Technical Assistance Award ($271,988 total).
  • Valley First CU — $38,614 Loan Loss Reserve Award; and a $87,738 Technical Assistance Award ($126,352 total).

The awards will help expand consumer access to financial institutions by providing alternatives to high-cost small dollar lending.

The SDL Program helps certified CDFIs address the issue of expanding consumer access to mainstream financial institutions and provide alternatives to high-cost small dollar loans. The program was also created to help unbanked and underbanked populations build credit, access affordable capital, and allow greater access to the mainstream financial system.

Through the program, the CDFI Fund provides Loan Loss Reserves (LLR) awards to enable CDFIs to establish a loan loss reserve fund to defray the costs of establishing or maintaining a small dollar loan program; and Technical Assistance (TA) awards to support technology, staffing, and other eligible activities to enable a CDFI to establish and maintain a small dollar loan program.

For the FY 2022 SDL Program funding round, 66 Certified CDFI financial institutions and other entities received $11.4 million in awards.

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