Comment Detail

Comment

Thank you for the opportunity to comment on the FHLBank System at 100.

IFF is a Community Development Financial Institution (CDFI) certified by the U.S. Department of the Treasury. We are the largest nonprofit CDFI in the Midwest and one of only a few nationally to hold the top ranked Aeris four-star rating for impact management and AAA rating for financial strength and performance. From 1988 to 2021, we have made more than $1.3 billion in loans, leveraging $4 billion in community investments. Headquartered in Chicago, we have offices throughout the Midwest. We work at the nexus of nonprofit facilities and finance to help nonprofits and other service providers to create safe, inspiring facilities that enable them to achieve their missions and support low-income communities. We are also a vital lender on affordable housing projects providing invaluable predevelopment, mezzanine, and permanent financing on affordable, multi-family and supportive rental housing projects.
IFF was the first CDFI member of the FHLB Chicago and one of the first in the FHLB system. As a FHLB member, we are one of the largest sponsors of the FHLB Chicago’s Affordable Housing Program grants, particularly to important supportive housing projects. IFF was also a founding and active member of what became the CDFI/FHLB Working Group, which was formed by CDFIs to advocate for membership, advances, respect, and parity for CDFIs within the FHLB system. Those efforts evolved from just advocating for CDFI membership and respect from the various Banks to now active partnership with the Banks to advance community development finance on behalf of low-income and marginalized communities throughout the nation. The success of the Working Group is exemplified by the fact that there are CDFI members in every Bank in the System and that advances and AHP awards have been made by CDFI members in nearly every bank. Our partnership with the System culminated in a CDFI Forum held in Chicago in January of 2020. All participants remarked that the Forum was a new and important milestone in CDFI/FHLB relationship and one that will produce significant benefits for the communities that CDFIs serve. Of course, the global pandemic, two months later rocked the nation, CDFIs, and the communities we serve and interrupted much of our progress. However, the Working Group remains dedicated to working with the Banks in the System to advance capital through the various models that were constructed at the Forum.

With that background, my first comments are to praise most of the FHLBanks for their transition from general resistance to CDFIs as “odd” members to active partnering with their CDFI members in helping low-income and under-resourced communities obtain capital for community development and growth. IFF is a proud member of the Chicago bank, which leaned into its work helping under-resourced communities and populations. The Chicago bank has consistently viewed CDFIs as allies and partners for helping capital flow to meet community needs. That commitment was directly made by the Bank’s Board of Directors to the CDFI members at Board Meeting. And it is this kind of partnership that the Working Group has worked hard to promulgate throughout the system. The Chicago bank was a leader in this attitude, but the Working Group has seen nearly all other banks, except for the New York bank, increasingly engaging and partnering with CDFIs.
From the beginning of our work as a member of the FHLB System, we have advocated for the System to partner with CDFIs in helping ensure that capital flows equitably to all communities. We regularly see our role in advocating with philanthropy and government to view CDFIs as an active tool and conduit to reach under-resourced and under-estimated communities. This role was strongly highlighted during the pandemic in myriad ways like the PPP program and state and local grant programs. It is this role that CDFIs want to highlight with the FHLB system, including the FHFA. We complement the FHLB System Banks for recognizing this role. As mentioned, the January 2020 Forum was a first step in CDFIs and FHLBanks to partner to increase capital flow.
Of course, for CDFIs to connect capital more fully, we will continue to challenge the System to innovate ways to increase capital flow to CDFIs in the form of reducing our haircuts and increases in advances. We would not be true to our mission and the trust of our community partners and clients if we are not vociferously arguing for the FHLBank System and all GSEs, to push themselves to facilitate capital flow equitably to all our communities. We fundamentally believe that the FHLBanks can do more, and we believe the FHFA should also be an active partner in facilitating greater capital flow to our communities.
We are acutely aware of the need for safety and soundness within the system. We also know that there are multiple pathways for ensuring that advances will be repaid. At this juncture, CDFIs have borrowed and repaid millions of dollars in advances. CDFIs continue to increase their own financial stability and soundness. A number of CDFIs are SP Rated A or higher. While not rated, IFF has never lost a dime for its investors in its 34 years. At the January 2020 Forum there were multiple models proposed to increase capital flow to CDFIs. The Working Group is engaging to develop some of these models in partnership with FHLBanks. This work is innovative, and we encourage the System to continue to support of these partnerships (and we have had no indication that they will not). But innovation in a regulated system requires partnership, so we also want to comment on the role of FHFA as regulator. We encourage the FHFA to consider its role as both a safety and soundness regulator, but also as a partner to the participating Banks to help innovate new ways for CDFIs to safely and soundly use increasing advances to help their communities.
As mentioned, IFF is an active sponsor of AHP grants in the Chicago Bank. The Working Group understands deeply the importance of the AHP program to the affordable housing industry and we encourage the System to continue this vital program. But we also believe that the System should do more.
We encourage the System to create a new program for CDFIs. Chicago’s Community First Fund is an exemplar of what other Banks can do to advance CDFIs and resources for affordable housing and economic development. Another idea would be for Banks to set a small portion of its profits aside in a Community Development “credit enhancement pool” that could be used by the Banks on a competitive basis (like AHP) to support lower haircuts and greater advances for CDFI member projects that increase capital to increase affordable housing and economic development in low-income communities. As the credit enhancement burns off it could then be reused for additional work or paid out in dividends to members
We believe that we have just started to examine the possibilities to partner with the FHLBank System to increase capital in all our communities. We are excited to continue the partnership.
Thank You,
Joe Neri
IFF Chief Executive Officer, CDFI/FHLB Working Group Member