Rep. Ellison Statement on GAO Report on CDFI FHLBank Participation

WASHINGTON, D.C. – May 25, 2015 – (RealEstateRama) — Rep. Keith Ellison (D-MN) released the following statement today after the Government Accountability Office released a report providing a status update on new authority allowing nondepository community development financial institutions (CDFIs) to join a Federal Home Loan Bank (FHLBank).

“CDFIs have a long history of successfully financing businesses, schools, health care facilities and homes in support of underserved urban and rural communities,” Rep. Ellison said.

“The GAO report points to the great benefits that a few CDFIs receive from joining a FHLBank. Yet, not all banks are actively engaging with CDFIs in their communities. More needs to be done to encourage membership and investment. The GAO reported that updated collateral requirements are helping but more outreach and collaboration are needed. In addition, Congress needs to update the collateral rules to ensure that CDFIs can pledge small business and community development collateral.”

“The GAO report underscores the efforts that Congressman Ellison is making to improve access to the FHLBank by CDFIs,” said Frank Altman, President and CEO of Community Reinvestment Fund, USA based in Minneapolis.

In 2008, Congress passed The Housing and Economic Recovery Act, which permitted Treasury-certified non-depository CDFIs to become a member of a FHLBank. CDFIs could join, pledge collateral and receive advances (loans). This change enabled CDFIs to use their current loan portfolio to raise cash to make new loans.

Unfortunately, the bill did not clarify that CDFIs could pledge small business, small agriculture and community economic development collateral. CDFIs were able to join as regular members, which restricted their collateral to long-term housing loans only. The Small Business and Community Investments Expansion Act (H.R. 1355) would permit CDFIs who finance small business lending, charter schools, community facilities, commercial facilities, etc. to pledge those loans in exchange for advances, if they qualified for FHLB membership. This technical change to give CDFIs the same collateral flexibility as the existing membership category of community financial institutions (CFIs). CFIs, small banks, are able to pledge non-housing collateral. This bill would result in greater economic activity in communities, create jobs and would be especially beneficial to inner-city and rural communities and communities facing disinvestment.

Rep. Ellison introduced The Small Business and Community Investments Expansion Act (H.R. 1355) on March 13th which would allow CDFIs to pledge small business, small agriculture and community economic development collateral. The bill is cosponsored by Representatives Stivers, Maloney, Paulsen, Delaney, and Cartwright. It is supported by Supported by LISC, Opportunity Finance Network, Capital Impact Partners, Ohio Finance Fund, Community Reinvestment Fund and TRF.