Group of 20 Banks to Offer Loans for Affordable Housing
A consortium of 20 California banks plans to begin making $100 million worth of loans annually for multifamily, affordable housing in the state within a year, officials of the organization said Tuesday.
Formation of the new group, called the California Community Reinvestment Corp., marks the first time that California banks have agreed to a cooperative joint venture of this nature, said John R. Trauth, executive director of the San Francisco Development Fund, a nonprofit organization that conceived the project.
The first loans are expected to be made in about a year to finance multifamily apartment projects for tenants with low to moderate incomes, Trauth said. The loans will be available to both nonprofit and for-profit developers but not to individual homeowners. Later, he said, the project may be broadened to provide loans to individual homeowners.
Among the banks that have agreed to provide initial funds for the $100-million revolving loan fund are the three biggest banks in California: Bank of America, Security Pacific and Wells Fargo.
Six Japanese-owned banks are also involved: California First, Sumitomo, Sanwa, Bank of California, Tokai and Dai-Ichi Kangyo. Eleven smaller community and business banks have also joined.
George F. Moody, president and chief operating officer of Los Angeles-based Security Pacific, is chairman of the task force that is organizing the project over the next 12 months. He presided over the group’s first formal meeting Monday in Los Angeles.
The San Francisco Federal Reserve Bank is advising the organization, and the initial staff comes from the San Francisco Development Fund. Organizational start-up costs are coming from the banks, the Ford Foundation and the James Irvine Foundation of San Francisco.
Trauth said the initial $100 million in loans will be sold on the secondary mortgage market. Revenue from the sales will then be lent out again, which means that the potential impact of the program will extend far beyond $100 million.
The organization will have its own staff and establish criteria for loans. Each bank will assume a portion of the risk of each loan equal to its contribution to the capital pool, Trauth said.
Banks have come under pressure from community organizations to increase lending to low- and moderate-income neighborhoods. Federal regulations require banks to serve the communities in which they are situated.
For banks, the new program offers the opportunity to fulfill the federal obligations lending with minimal administrative costs and to share the loan risks with the other institutions involved.