Tuesday, July 28th, 2009
ShoreBank is a community bank. Our roots are deep in our neighborhoods. Our tellers know customers by name; our mortgage team knows the address of the home an applicant seeks to buy. Our customer relationships are often long-term and personal because our customers’ successes in business or in life benefit the community and not just the bank’s bottom line.
That is why the current economic situation is so personal to our team. We see firsthand the consequences of this economic crisis: closed businesses, unemployment, increased foreclosures and the threat of more. Home loss is devastating to all involved. A home is not like a stock or a bond – it has a presence and it occupies a central place in the life of a community and a family.
We hear the stories behind what threatens home ownership personally from those who are threatened: two-income families lose both their jobs; a spouse or a child becomes sick and the medical bills become too great; an elderly customer’s surgery reduces the hours she can work on a 2nd job. We listen and then we work to ensure their mortgages are affordable in light of changes that have come from this difficult economic environment – to modify loans so that payments are sustainable for the long term. Those modifications are critical to the continued health of our communities so we do everything we can to keep our customers in their homes.
Programs exist that can help people make their payments. President Obama’s mortgage modification program does not cost the borrower anything and can re-set rates to as low as 2%. ShoreBank has been implementing this new policy. Without it, many more people would have lost their homes.
We were able to modify our elderly customer’s mortgage, and mortgages for customers of many ages. People who work in our lending department talk about customers crying when they get the good news, that the loan can be worked out, that they can stay in their home. But less often they talk about the personal impact it has on them. One of our loan processors quietly recalled working with a woman who was signing her loan modification, “Tears were rolling from her eyes. She was so grateful to ShoreBank. She just broke down. I had to get up from there because I didn’t want her to see me crying.” Personally helping customers is what is best for the community. It’s what ShoreBank is all about.
Tags: community development, green banking, home affordability and stability plan, mortgage modification, ShoreBank, triple bottom line
Posted in Mortgage Lending | 3 Comments »
Tuesday, July 21st, 2009
Did you know that this is the Summer of Social Good? That’s right! The Summer of Social Good is the first large scale campaign to exclusively use social media to raise funds nonprofits (in this case for The Humane Society, LIVESTRONG, Oxfam America and WWF). In a summer with increasing financial stress on nonprofits, it is critical that we all buzz up programs that can provide support. That is why we are excited to share an article from the Chicago Tribune. It talks about our own recently launched Capacity-Plus Loan Program, a new way for foundations to partner with ShoreBank in supporting nonprofits. We are really enthusiastic about this program and we hope you like it too.
Financial lifeline bolsters ailing charities – Loan program aiding survival of non-profits
Ann Meyer
July 20, 2009
At Chicago Sinfonietta, the concerts will go on, but not without some sacrifices from workers — and a little help from an innovative loan program for non-profits.
Like charities throughout the nation, the 22-year-old orchestra’s budget has been crunched by shrinking grants, corporate sponsorships and individual support. So it is imposing furloughs, salary freezes and reduced hours for some workers, said Executive Director Jim Hirsch, who took the first hit by cutting his own salary for next year. While board members have increased their annual contributions, some other committed funders have been slow to make good on their pledges. The orchestra, which is dedicated to diversity and inclusiveness, has postponed paying some vendors while it waits for a $200,000 grant check that was promised months ago.
“It has created an unexpected cash-flow challenge,” Hirsch said.
But Chicago Sinfonietta is one of the first charities to receive a Capacity-Plus Loan from Chicago-based ShoreBank, secured with funds from the John D. and Catherine T. MacArthur Foundation. The program, designed for non-profits, is thought to be the first of its kind, using foundation investments as collateral for the loans to qualifying charities, experts said.
“If this program takes off, it could be significant,” said Kate Starr, investment officer at F.B. Heron Foundation in New York, which has made deposits for ShoreBank’s loan initiative. “It will help keep non-profits fully engaged in their work, so they’re not having to pull back at a time when their products and services are needed even more.”
ShoreBank announced the loans to non-profits about the same time that state and federal banking regulators asked the lender to improve its capitalization. However, the capacity loans for non-profits aren’t affected, said Brian Berg, vice president of marketing.
While the program could become a fixture in non-profit financing, it’s particularly relevant in the current credit crunch, as even healthy for-profits groups are being turned down by banks.
“This is a real solution for non-profits to gain access to affordable credit,” said Clare Golla, senior vice president of non-profit and foundation banking at ShoreBank, a community-development financial institution.
The program’s focus is on small charities short on collateral and reserve funds but with a good track record for paying their bills.
“These are little businesses. If they’re given these small forms of credit, they’re able to cover their expenses” and sustain their operations, said Allison Clark, program officer in program-related investments at the MacArthur Foundation.
Foundations, which are required to pay out at least 5 percent of their endowment every year, can make deposits to ShoreBank as program-related investments. At MacArthur, the program-related investment dollars for the loans won’t affect grant funds, said Elpeth Revere, vice president of the general program.
Several different loan products are available for arts organizations, including a standard line of credit ranging from $50,000 to $100,000 and bridge loans of $25,000 to $50,000. The interest rate on both products is prime, with a ceiling of 5 percent. Interested arts charities may contact the Executive Service Corps of Chicago, which is helping arts organizations prepare needed financial documents for loan applications, Revere said.
Charities must fall into a sector served by a participating foundation. Besides MacArthur’s $1 million in funds for loans to arts organizations, the Heron Foundation’s deposits will translate into $750,000 in triple-impact loans for charities devoted to community economic development, such as business development in underserved communities.
ShoreBank is actively seeking investments from other foundations, Golla said.
The line of credit that Redmoon Theater recently obtained from ShoreBank will give it breathing room between productions.
“ShoreBank provided us with a booster shot, so we’ll be able to manage the budget on a month-to-month basis,” said Rebecca Hunter, executive producer.
The theater company raised $1.8 million in a capital campaign in 2000, but the last portion of the funds was used in 2008, just as the recession began.
“It was a real crunch time for us,” Hunter said.
After approaching several lenders to no avail in 2008, Redmoon reorganized, reducing its full-time staff to nine from as many as 50 a few years ago, Hunter said. It also cut its 2009 operating budget to $1.2 million from $1.8 million in 2008 after sales slid for its events and catering arm, Redmoon for Hire.
Even so, the non-profit has stayed true to its mission of providing “unexpected theater in unexpected places,” Hunter said. “We looked at how small can we be but still deliver the kind of programming we’re good at and get funding for.”
The financial uncertainty for charities likely will continue in the coming months, experts said.
“I’ve never seen anything like this business environment in my career,” said Hirsch, who has worked as an executive director in the arts since 1982. “But you have to play the hand you’re dealt.
“You figure out what you need to do to present concerts and fulfill your mission, and that’s what you do.”
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Copyright © 2009, Chicago Tribune
Tags: capacity-plus loan program, community development, green banking, Non-profit loans, ShoreBank, triple bottom line, Twestival
Posted in Banking Industry | No Comments »
Tuesday, July 14th, 2009
The Universal Postal Union (UPU) was established in 1874. Today it is an agency of the United Nations. According to its website, the UPU sets the rules for international mail exchanges and makes recommendations to stimulate growth in mail volumes and to improve the quality of service for customers.” Its mission is “to develop social, cultural and commercial communication between people through the efficient operation of the postal service.” One of the services provided by the UPU is the International Reply Coupon (IRC).
“When one writes to a stranger and requests a reply, it is considered polite to enclose a self-addressed stamped envelope. This works well when both persons live in the same country; however, if they are from different countries, the enclosed postage stamp will not be valid. This technical problem was solved in 1906 when the Universal Postal Union, during its Congress in Rome, introduced the International Reply Coupon service. As the service began before the days of airmail, the earliest coupons could only be redeemed for a single-rate ordinary postage stamp to a foreign country.”
What a charming description of a beneficial, useful, and entirely unexceptionable resource. Who could imagine that IRCs would be at the heart of the one of the greatest financial scandals of the 20th Century?
Charles Ponzi was an Italian who immigrated to the United States in 1903 at the age of 21. He managed to spend five of the next 14 years in prisons in Canada and the US for various white-collar crimes. Ponzi discovered IRCs in 1919 when he received one from a Spanish company asking for a catalog he was hawking at the time. The catalog company failed, so Ponzi had no use for the IRC, but he had a Great Thought. IRCs had not caught up with the huge changes in foreign exchange rates following the end of World War I. If he could buy IRCs in Spain with Spanish pesetas, he could sell them in the US for a whole lot more dollars.
The total value of all the IRCs in existence in 1919 was less than $1 million, and, of course, they were all in very small denominations. But Ponzi thought it was worth a shot. He placed a few magazine ads claiming his postal coupon idea would double people’s money in a few months. Forty thousand suckers took the bait.
Between February and May 1920 Ponzi received more than enough money to set himself up for life back in Italy. “Investors” mailed in $420,000 in May alone, which is more than $4.5 million in today’s money. The original plan became untenable; Ponzi had $3.5 million more than the size of the IRC market. Needless to say, Ponzi did not buy any IRCs. Why bother with markets and real investing when so many people sent money merely because you placed na ad? Instead he simply paid early investors with funds received from later investors. It couldn’t last and it didn’t. By July, the newspapers were on his trail. Instead of making a break for it, Ponzi foolishly fought back. Maybe he believed his own hype. At any rate, the end came on August 12, 1920, when Ponzi was indicted for mail fraud. The whole thing lasted barely six months, but it was long enough for many foolish people to lose their homes, their life savings, and their innocence.
Charles Ponzi should have been no more than a footnote to the financial mania of the Roaring Twenties. He wasn’t the first swindler to fleece the unwary in a pyramid scheme—they had been around since 1720. And he certainly wasn’t the last. Not even Bernie Madoff’s 150-year sentence is enough to guarantee that. But for some reason—maybe because his rise and fall was so meteoric, or maybe just because his unusual name caught peoples’ fancy—pyramid investment scams have been known as Ponzi schemes ever since.
There is a moral to Charles Ponzi’s sad story. (And it is sad. He died penniless and blind in a Buenos Aires charity hospital in 1949 after several more prison stints.) The moral is, “If it sounds too good to be true, it is.” Now that sounds simple and obvious, but too many people translate this maxim as, “If it sounds too good to be true, it usually is,” or “it probably is,” or “it is, except in just this one special case.” Here’s the real translation: “If it sounds too good to be true, it is, absolutely is and always is and especially is this time.”
Tags: community development, economic predictors, green banking, Ponzi Scheme, ShoreBank, triple bottom line
Posted in Banking Industry | No Comments »
Tuesday, July 7th, 2009
One of the more intriguing questions surrounding the stimulus package is the extent to which the dramatic increase in funding for weatherization ($5 billion) will lead to a sharp rise in number of contractors skilled in energy efficiency retrofits. For states such as Illinois, which have not invested heavily in energy efficiency programs historically, and consequently have a very limited base of contractors knowledgeable in energy efficiency basics, the outcome matters a great deal.
Without question, the contractor issue has been one of the thorniest challenges we have faced in our attempts to catalyze the market for energy efficiency. Our programs have demonstrated that banks and other financial intermediaries can stimulate homeowner interest in energy efficiency by coupling information and capital together. However, these efforts may have minimal impact on energy usage without a corresponding effort to organize, train, and certify the contractor community. We simply have no way to guarantee that the work will be done correctly or produce the projected energy savings.
Indeed, anecdotal evidence suggests that the likelihood of achieving the savings may be quite small without substantial training and quality control measures being put in place. One example comes from the Executive Director of the Midwest Energy Efficiency Alliance, who recently installed a high efficiency furnace in her home. Despite the 94% efficiency rating on the furnace, it took the contractor several attempts and lots of re-working to push the performance up from the low level initially seen. Only because this particular contractor tested the system’s performance and understood how to rectify the situation, the furnace performs at its rated level.
There does appear to be some reason for optimism, however. ComEd, our local electrical utility company, has had notable success in its efforts to engage the contractor community around commercial lighting retrofits. We believe that with a determined focus and the necessary resources behind it, a similar program could prove equally effective for the residential marketplace.
Tags: community development, energy efficiency, green banking, green jobs, Midwest Energy Efficiency Alliance, ShoreBank, triple bottom line, weatherization
Posted in Green Collar | No Comments »
