The Decks Are Stacked…In Our Favor
Financial institutions are at the front lines of changing the disparity in access to basic financial services for African-American and Hispanic households. Providing products like those tested in Filene's Reaching Minority Households Incubator program can be a win-win-win for the consumer, financial institution and community.
"But then the economy hit…"
Amy Nelson was hired by Point West Credit Union in Portland, Oregon for a specific reason: to help Point West fulfill its core value of serving the underserved, specifically to expand the array of products and services available to Portland's sizable immigrant community.
"The credit union," says Nelson, "was already well steeped in serving immigrant members," but her role as the newly hired training manager would be to "take it to a deeper level operationally." She was excited about the job of making a good thing better, and she hit the ground running. "But then," she says, "the economy hit."
A Reinvigorated Noncitizen Lending Program
Point West Credit Union in Portland, Oregon, was the launch institution for the program Filene replicated during the Reaching Minority Households Incubator. The credit union has been an ITIN lender since a merger in 2004 with Hacienda Community Credit Union, but that program had a history of losses, especially after the Great Recession.
Point West successfully launched a revamped program in 2014 and has had strong results with its noncitizen members ever since. Point West, like all financial institutions at the time, was navigating dangerous territory with the objective of mere survival. According to CUNA data, there was a decline of 1,167 credit unions between 2007 and 2012.
It was 2007, and signs of the Great Recession had begun to appear. Housing prices were on the decline, descending toward what would be the sharpest drop in history, and foreclosures were on the rise. Lenders focused on sub-prime mortgages began to declare bankruptcy in droves, and homeowners with underwater mortgages were following suit. Household income was declining, and unemployment was rising. For Point West and for many of its members, a time of reckoning was fast approaching. "What I had been brought on board to assist with," says Nelson, "I only got to dig into for maybe 10 months before it became about making sure that the credit union would survive for the membership." For the credit union, this meant undergoing the challenging process of developing and implementing a net worth restoration plan that would chart its course through the recession.
The plan involved tightening the budget and focusing on key products and services. A particularly painful step was the need to pull back from the credit union's Individual Taxpayer Identification Number (ITIN) lending program. At a time when many of its members were experiencing economic hardship, Point West was required to take a more conservative approach to its lending and outreach. Nelson, now the CEO, puts it this way:
"To say during the recession that we were not allowed to serve our immigrant community—in part just because the ITIN lending portfolio was not understood—to not be able to help those members so they were essentially having to fend for themselves during an economic downturn, was shattering for our credit union employees."
DECLARACION DE CREENCIAS DE POINT WEST
Gente de Portland,
El mundo está cambiando, pero lo que nosotros creemos no cambiará. Continuaremos educando, proveyendo acceso, y siendo un Punto de Oportunidad para cada miembro de nuestra comunidad. Si el continuar hacia adelante como un individuo se siente imposible, la comunidad está aquí para ayudarnos a todos a tomar el primer paso. Apoyamos a nuestros socios — todos los socios.
Como una institución financiera, nuestros valores son lo que nos definen y la guía en nuestras acciones. Sabemos que en una sociedad capitalista, uno vota con sus dólares, y les agradecemos que nos soporten en crear un legado de apoyo e inclusión.
Creemos en una comunidad inclusiva. Creemos en nuestra gente. Creemos en ti.
Para un mundo mejor,
Point West Credit Union
POINT WEST'S DECLARATION OF BELIEFS
People of Portland,
The world is changing, but what we stand for will not. We will continue to educate, provide access, and be a Point of Opportunity for every member of our community. If moving forward as an individual feels impossible, the community is here to help us all take the first step. We stand with our members — all of our members.
As a financial institution, our values are what define us and guide our actions. We know in a capitalist society, you vote with your dollars, and we thank you for standing with us in creating a legacy of support and inclusion.
We believe in an inclusive community. We believe in our people. We believe in you.
To a better world,
Point West Credit Union
The recession was a considerable challenge—for both Point West and its members—but it was also an opportunity for the credit union to rededicate itself to its core vision of the kind of institution it wanted to be when it emerged from the financial crisis. The credit union's mission explicitly prioritizes social equity and inclusion.
As an organization, Point West made it clear that its purpose was to provide financial empowerment to all of its members, and doing so meant actively advocating for and pursuing solutions for its non-citizen members. A reinvigorated non-citizen lending program was central to this process. Point West completed its net worth restoration plan two years ahead of schedule, and in 2014 was finally able reintroduce its ITIN lending program.
"Nobody will loan to me."
Many credit union members, too, needed a plan and a vision to make it through these challenging times. For Sara, it began with a family recipe.
“I TOLD MY HUSBAND, ‘THANK GOD THERE ARE PLACES TO BANK THAT CAN HELP US.’ IT’S VERY IMPORTANT. THERE ARE A LOT OF PEOPLE WHO NEED HELP AND THEY CAN’T CONQUER OR DO ANYTHING WITH THEIR BUSINESS OR IF THEY HAVE AN IDEA, THEY CAN’T CONQUER ANYTHING, WITHOUT THAT INITIAL HELP.”
Sara has been a member of Point West since 2004. Like many Spanish-speaking members, she would wait in line for her favorite teller, Mary Vasquez, who was, in 2007, the only Spanish-speaking teller at Point West (today, as a direct outcome of their strategic planning during the financial crisis, almost half the staff at Point West is bilingual and bicultural).
Vasquez and Sara became familiar friends through their brief chats, talking about their lives and families. One day, Sara brought in one of her homemade tamales for Mary. It was good. Really good. The kind of good that makes you tell someone they should go into business. Sara was doubtful when Mary suggested this very idea, but she decided to give it a try.
A stay-at-home mother of 4, Sara had a credit rating of 0 and no social security number. She did have an ITIN, and as a member of Point West, she had an ally. Point West issued Sara a $500 loan to pay for permits and ingredients to start her tamale business. Over the next few years, Sara received two additional micro-loans from Point West and -- just as Point West was doing -- continued to learn and refine her business model. For both Point West and Sara, an important community partner in this process was Hacienda Community Development Corporation (CDC).
Key insight from Reaching Minority Households Incubator:
To overcome feelings of suspicion, a best practice that has come from the ITIN Lending program is that financial institutions should work with community partners that have already earned the trust of the noncitizen individual —churches and community centers proved to be good options, as did immigrant-owned businesses, like auto dealers.
A number of credit unions partnered with the Mexican consulate as a way to connect with the noncitizen population; others worked with their local Hispanic Chamber of Commerce, perhaps as a member of their board or by helping with events in the local community.
"All fingers pointed to Point West."
Hacienda CDC's partnership with Point West began in 2004, when Hacienda Community Credit Union merged with Point West, bringing in about a thousand new members, primarily from the Latino and immigrant community. Since 1992, Hacienda CDC has provided affordable housing, financial advising, and educational support to the Latino community in Portland.
Among Hacienda's offerings is a class on small-business ownership and entrepreneurship, a class that Sara attended in the early stages of her business planning. Point West knew that expanding services to members like Sara was vital to their growth and stability. The class Sara attended, along with Hacienda's first-time homebuyer education and foreclosure prevention advising, are among the services provided by the CDC that make it a valuable community partner for Point West.
At the same time, Hacienda CDC was looking for ways to help its clients locate and secure loans for first-time homebuyers without social security numbers. Carlos Garcia, Director of Economic Opportunity at Hacienda, notes that often, people would attend Hacienda's first-time homebuyer's class but would be unable to secure a loan: "They would say, 'I want to buy a home. I have an income, I have the credit. I have savings. But because I don't have a social security number, I can't get a mortgage; nobody will loan to me.'"
Warren Morrow Hispanic Growth Fund Grant
Point West Credit Union of Portland, Oregon—the originator of the ITIN Lending program—was among seven credit unions from across the country chosen to receive the 2017 Warren Morrow Hispanic Growth Fund Grants.
- These grants are awarded by Credit Union National Association, the National Credit Union Foundation, and Coopera, a Hispanic consulting firm.
- To be considered for the grants, a credit union must have less than $500M in assets and have earned a Juntos Avanzamos (Together We Can Advance) designation. This program is operated by the National Federation of Community Development Credit Unions (the Federation) and is an indication of a credit union’s commitment to serve Hispanic and immigrant communities.
- To earn the Juntos Avanzamos designation, credit unions must offer bilingual services and information and collaborate with community organizations that support Hispanics. Like the minority household program, the Federation works to help people of modest means avoid predatory lenders and achieve financial independence.
(Reaching Minority Households Incubator, Aug. 2018)
Before the foreclosure crisis, there had been programs available for ITIN lending, but these programs had dried up. Affordable housing near the city center had become increasingly sparse as high-income earners moved in, and many residents were being pushed to look for homes up to 40 miles from where they worked and where their kids were going to school. Garcia went looking for a lender who would serve the clients of Hacienda. He had conversations with several other non-profits and community partners, and "all fingers pointed to Point West."
Garcia contacted Steve Pagenstecher, Vice President of Member Experience at Point West, and, says Garcia, "we were able to work with them to provide a product and provide a choice that hasn't been available in our community." Through the partnership, Hacienda CDC provides prepurchase counseling to make sure clients have the necessary credit, capital, collateral, and income. When they identify a potential client who meets the basic criteria, they call Point West and help set up a meeting with the client. Mary Vazquez at Point West stays in touch with the financial counselor at Hacienda CDC throughout the process.
“MY NEIGHBORS ASK ME, “HOW DID YOU DO THIS? YOU DON’T SPEAK ENGLISH. HOW CAN YOU DO IT?” AND I SAY, YOU HAVE TO TRY. IF YOU DON’T TRY, YOU’RE NOT GOING TO SUCCEED. EVERY DAY NOW I SAY, “I’M GOING TO DO IT, I’LL MAKE IT HAPPEN.’”
There were a couple of silver linings for Point West in the dark clouds of the Great Recession and the net worth restoration process. Their dependence upon community partners such as Hacienda CDC, and the strengthening of these relationships during the recession, was among these silver linings. As Point West began to emerge from the financial crisis and complete its net worth restoration plan, it was able to turn to Hacienda CDC and other community partners—with expertise in immigration law, health and human services, and other areas—to develop its noncitizen lending program.
"Sometimes if you don't have help, you can't do anything."
In the decade since Sara took out her first micro-loan at Point West, much has changed, for both Sara and the credit union. Sara's Tamales, LLC, has taken off as a self-sustaining and profitable business. Sara has gone from a credit score of 0 to a score of 778. She has long since paid off her micro-loans and has hired an additional employee to keep up with demand. She has become the primary breadwinner for her family and is helping two of her children further their educations. In addition, Sara received a $15,000 loan through Point West's non-citizen lending program, which, combined with over $10,000 she saved in profits from her business, she and her family recently used to buy their first home. Asked what advice she would give to other credit unions looking to extend its loan portfolio to non-citizens, Sara offers this reminder: "Sometimes if you don't have help, you can't do anything."
As both a provider and a recipient of help from its community, Point West, too, has thrived. From the board to the staff to the members, there is a common and widely shared understanding that the credit union is an inclusive organization that prioritizes the well-being of all of its members, including non-citizens.
“WE WANT OTHER INSTITUTIONS TO BE A PART OF THIS NONCITIZEN LENDING BECAUSE THE MORE INSTITUTIONS THERE ARE, THE MORE PEOPLE WE CAN HELP.”
This clearly articulated identity has freed Point West to advocate passionately for the financial empowerment of its members and to pursue programs and policies, products and services that align with its mission. For the staff at Point West, this means going to work at a place they believe in.
Mary Vasquez's job title at Point West—Community Advocate—speaks volumes. Her job is to proactively seek ways to help the members and to make sure the community is aware of the services available. For Mary and for other staff, being able to make a difference in people's lives provides a feedback loop: in helping others reach their goals, Point West's employees, too, are fulfilled. "I love going out and talking about what we do," says Mary, "even on my days off."
“I STRONGLY BELIEVE THAT WE HAVE TO BE A MISSION-FORWARD ORGANIZATION. IT'S NOT ABOUT JUST PUTTING PEOPLE INTO HOMES; IT'S PUTTING PEOPLE INTO HOMES THAT THEY CAN AFFORD AND THEN BUILD WEALTH AND BE FINANCIALLY EMPOWERED."
Steve Pagenstecher puts it succinctly, saying working at Point West "feeds my heart." And the other bottom line, the one that determines whether Point West will be able to keep its doors open and continue to serve its members and community? The non-citizen lending program is doing its part to help them reach greater success. According to Steve, “delinquency in the NCL portfolio is 0.83%, versus 0.75% for the portfolio overall. Most of the delinquency is under 60 days and resolves within that timeframe, but it’s certainly in line with the overall portfolio, and the weighted rate/earned loan interest income certainly make up for any differences.”
This is only the beginning...
"WE HIGHLY PRIZE OUR DATA. THE DATA SPEAKS FOR ITSELF, AND IT BECOMES ITS OWN CHAMPION FOR HOW TO BUILD THE PROGRAM FASTER THAN YOU ANTICIPATE."
Data from Reaching Minority Household Incubator Report:
- Credit unions reported having generally positive experiences with ITIN Lending, with all (100%) agreeing that they would refer ITIN Lending to other credit unions and that members liked the program.
- The data showed that more than two-thirds of ITIN Lending borrowers (67%) had not been members before they received their loans—making this the second-highest program within the Reaching Minority Households Incubator for attracting new members.
- Return on assets was an impressive 3.81% vs. a system average of 0.75%.
Despite all the progress, everyone—Amy, Mary, Steve, and Sara—seems to agree that this is only the beginning. Point West is reaching out to other financial institutions to describe its non-citizen lending program and how it can be a financially sound component of a lending portfolio. They recognize that the market is way bigger than they can hope to serve in the Portland metropolitan area alone, and they encourage credit unions and other financial institutions nationwide to take a second look at this opportunity.
And Sara? "Right now," she says, "my goal is to pay off my home loan to Point West and then take out another loan to do my own restaurant." She's on the lookout for locations. Along with Sara's A+ credit rating and impeccable loan payoff record, Point West has an additional incentive to offer the loan: the location she's currently looking at is a 3-minute walk from Point West's front door!
Coming Soon! ITIN implementation guide. Sign up to be notified when it's available.
St. Paul, MN
Check back in on October 18 to learn how Mariana and her family were able to secure a lower rate on her car loan thanks to the relationship between her credit union and an Hispanic business owner. Sign up to be notified.
Chicago Heights, IL
Check back in on October 23 to learn how Sam worked with his credit union to finally secure an affordable home loan for his family. Sign up to be notified.