Can't forget the Motor City
Hank Hubbard, president and CEO of One Detroit Credit Union, a $38 million institution based in the Motor City, said his credit union has received a number of CDFI grants in recent years and that such funds are generally used for “capacity building.”
“These grants help to make our organization stronger and allows us to reach deeper to help our membership with their financial goals,” he said.
For example, in 2009, One Detroit CU received a CDFI grant for about $2 million, which was used primarily as lending capital. Another grant was used to help construct a second branch for the credit union.
While Detroit has made some economic improvements in recent years, the city remains mired in poverty, crime, unemployment and a poor transit system. Closely matching the overall demographics of the city, One Detroit CU’s membership is about 80 percent African-American, with about 40 percent living below the poverty line. As such, the membership has many needs.
“One trial made possible by the grants involved the refinancing of auto loans, where we were able to offer a rate that was about half that charged by other lenders,” Hubbard said. “We found out that the risk associated with these loans was much lower than we originally expected, and have since added it to our ongoing product line.”
With respect to the auto lending program (called “RefiMyRide”) which was piloted with CDFI grant funds, Hubbard explained the grants “allowed us to try something we thought was risky.”
“Since that trial we have refinanced over 800 loans, totaling some $1.4 million, cutting their rates in half and saving those people over $1.8 million in interest payments,” he elaborated.
“[Thus,] a $1.5 million grant resulted in over $10 million in loans, and funneled $1.8 million back into the communities in the form of lower loan payments.”