Community Development Financial Institutions (CDFIs) such as banks, credit unions, and loan funds strive to foster economic opportunity and revitalize low-income neighborhoods by providing financing to support families' first homes, small businesses, and community centers. The US Treasury Department manages the CDFI Fund, which provides targeted funds to help low-income areas and certified CDFIs. Frankenmuth Credit Union uses these funds to offer innovative financing programs like their MIhome Mortgage program that provides flexible home loans in underserved areas and their MIGrow Business Loan program for startups and expansions of farmers markets and groceries in food deserts.

1. Greg Dietrich, MBA
Marketing & Community Development

2. Community Development Financial Institutions (CDFI)
Solutions for members who are credit-challenged in low income
areas
CDFI Effectiveness and our Mission

3. “CDFIs can be banks, credit unions, loan funds, microloan
funds, or venture capital providers. CDFIs are helping
families finance their first homes, supporting community
residents starting businesses, and investing in local health
centers, schools, or community centers. CDFIs strive to foster
economic opportunity and revitalize neighborhoods.”
https://www.cdfifund.gov/Documents/CDFI_infographic_v08A.pdf

4. The US Treasury Department manages the fund
Funds are targeted to help low income areas
Eligible to get up to $4M a year
CDFI Certification is for 3 years then must reapply
Michigan ranks 23rd in awards received by the Fund since the
late 90’s
https://www.cdfifund.gov/Pages/default.aspx

5. “By offering tailored resources and innovative programs that
invest federal dollars alongside private sector capital, the CDFI
Fund serves mission-driven financial institutions that take a
market-based approach to supporting economically
disadvantaged communities.”
https://www.cdfifund.gov/Pages/default.aspx

6. https://www.cdfifund.gov/Pages/default.aspx
Loan Loss Reserves - Funds set aside in the form of cash
reserves to cover losses on loans
Leverage Funds – Funds set aside must be leverage with
FCU’s funds. E.G. $2M award must be leveraged with $20M to
loan out over a period of three years.

7. $1.4M in Loan Loss Reserves
Michigan Development Mortgage Product
$2.0M in Loan Loss Reserves
Healthy Food/Healthy Michigan Small Business Product

9. MIhome Mortgage
Unprecedented flexibility
110% LTV
Waive Private Mortgage Insurance (PMI)
Target in low-income census tract
investment areas

10. • Homeownership rate in US is 64.4%*: Bay City 69.1%
Saginaw 60.9% Flint 55.5% Pontiac 44.4% Detroit 50.7%
• Difficult to get a traditional mortgage because of job loss or
poor credit score
• Reason for Mortgage Delinquencies**
2010 2015
Unemployment 55% 38%
Excessive Obligation 21% 21%
*United States Census 2014
** Freddie Mac Blog 2015

11. • “Compared to prior years, middle and high-income borrowers
(not the poor), as well as those with medium and high credit
scores, made up a much larger share of delinquencies in the
crisis relative to earlier years.”*
*Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle
Class, Manuel Adelino, Antoinette Schoar, Felipe Severino, 2015

12. *Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle
Class, Manuel Adelino, Antoinette Schoar, Felipe Severino, 2015
Bay, Genesee, Lapeer,
Saginaw, Sanilac, and
Tuscola counties.
116 Census Tract Investment Areas

14. MIGrow Business Loan
Financing for startup and expansion of Farmers’ markets
and groceries in USDA Food Deserts.
Frankenmuth Credit Union was the first in the State of
Michigan to receive HFFI funds.

15. http://www.ers.usda.gov/data-products/food-access-research-atlas/go-to-the-atlas/

16. • Rural areas have fewer food retailers of any type compared to
urban areas, and only 14 percent the number of chain
supermarkets.*
• Low-income neighborhoods have half as many supermarkets
as the wealthiest neighborhoods and four times as many
smaller grocery stores.**
* “Food Store Availability and Neighborhood Characteristics in the United States.”
**“Associations of Neighborhood Characteristics with the Location and Type of Food Stores.”

17. • Businesses that are less than a year old have added, on
average, 2.9 million jobs annually between 1980 and 2010
• Top reason why growing, startup, and micro businesses were
denied credit is insufficient credit history*
• Loan applicants were successful 76% of the time at small
banks versus 58% of the time at large banks*
*2015 Small Business Credit Survey

18. *Federal Deposit Insurance Corporation

19. • We realize the difficult challenges that Michigan faces when it
comes to teaching our communities financial literacy
• Teachers are less prepared to teach subjects such as savings
investments, financial management and decision making*
• Financial decision making is crucial for young adults to
grasp, especially those who are under the burden
of poverty**
*http://www.cfs.wisc.edu/papers/WayHolden2010_TeachersPaper.pdf
** Poverty impedes cognitive function. Www.Siencemag.Org, 341 2013

20. New Orleans Food Co-Op: Upper Ninth Ward
a very low-income area and qualified food desert.

21. CDFI banks and credit unions were found to have no more risk
of financial failure than mainstream financial institutions, even
after the mortgage market during the financial crisis.*
Despite serving predominately low-income markets, CDFI
banks and credit unions had virtually the same level of
performance as mainstream financial institutions.*
From 2005 through 2012, Community Reinvestment
Act reported lending decreased while CDFI loan
fund reported lending more than tripled.**
*Risk and Efficiency among CDFIs: A Statistical Evaluation Using Multiple Methods, conducted by Gregory B. Fairchild from the Darden
School of Business at the University of Virginia and Ruo Jia from the Stanford Graduate School of Business
**CDFIs Stepping into the Breach: An Impact Evaluation—Summary Report, undertaken by Michael Swack, Eric Hangen, and Jack
Northrup from the Carsey School of Public Policy at the University of New Hampshire

22. GreenPath Debt Solutions
Required pre purchasing financial counseling
Reduces delinquency for first-time home buyers by 29%.*
Habitat for Humanity
Critical Home Repair & Home Preservation Program
United Way
Project HOME – Provides budgeting and like skills that allow residents to remain self-sufficient
Creating a shared value
* http://www.freddiemac.com/news/blog/pdf/benefits_of_pre_purchase.pdf

23. Small Business Development Center (Delta College)
Business Start-ups services
Business Plan Development
Financial Management
Technology and export strategy
MSU Extension
Offers healthy food education
“Cashing In on Business Opportunities” Workshop
Creating a shared value

24. Increase in home ownership in Census Tract Investment Areas
Reduction in regional food deserts along with small business
growth
Increase in membership/deposits for Frankenmuth Credit Union
Increase in promoting financial literacy
Show that value oriented partnerships can foster effective economic
development
What we hope to see in 3 years

25. “For CDFIs, addressing the imperfections of our society and our
economy is what drives us. It’s our primary mission: to use the
tools of financial capital and financial empowerment to create
a more inclusive economy, one that generates opportunity in
distressed communities and for underserved people.”
CDFI Director Annie Donovan
Speech made at the 2016 Opportunity Finance Network Conference October 26, 2016 in Atlanta GA

26. At Frankenmuth Credit Union we are growing trusted
relationships by providing personalized financial solutions for our
members and financial services that empower our communities.

27. Greg Dietrich, MBA
Marketing & Community Development