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Opinion/Editorial: Senators hope to give all Americans a shot at dreams

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CDFI's

In its first decade, the Community Investment Collaborative (CIC) in Charlottesville loaned $2 million to low income borrowers. In the next five years, the Charlottesville-based group hopes to loan $5 million more to people who might not be able to borrow from traditional financial institutions.

Finding ways to get capital to non-traditional borrowers to buy homes or start businesses continues to be an ongoing challenge in the Charlottesville region and around the country. This is why local leaders like Stephen Davis, the president of CIC, and Sunshine Mathon, executive director of the Piedmont Housing Alliance, welcomed Monday’s announcement of a new bipartisan U.S. Senate caucus focused on Community Financial Development Institutions (CFDI’s) and Minority Depository Institutions (MDI’s).

The Senate Community Development Finance Caucus has 14 members. Seven are Republicans; seven are Democrats. They come from the Mid-Atlantic region, the Upper Midwest, the Great Plains, the Deep South and New England. They all agree that CFDI’s and MDI’s offer ways to give non-traditional customers access to financial institutions.

Virginia Democrat Mark Warner and Idaho Republican Mike Crapo organized the caucus, which is dedicated to getting more money, education and staff support to institutions that increase chances for low- and middle-income households and people of color to build businesses or buy homes.

The caucus hopes to connect billions of available dollars with start-ups or mortgage loans. It is the kind of vision that attracts almost everyone’s blessing. But what’s being planned here seems to be more than a pipedream. With its size and geographical breadth, the caucus brings collective political clout to its goals. Equally important, it seems more interested in results than platitudes. Properly executed, the relationships the caucus seeks can produce vital injections of funds into neighborhoods, households and ethnic groups traditionally underrepresented in the American economy.

Davis, whose group works in an area stretching from Charlottesville to Culpeper, summed up the challenge perfectly.

“The old expression is it takes money to make money,” he said. “But if you never had money, what do you do?”

Entrepreneurs with great ideas may not get funded.

Mathon, whose group also works in the Charlottesville region, said the area’s hot housing market often leaves low-income home buyers unable to come up with money for mortgage down payments that qualify them for loans.

On the lenders’ side, Mathon added, “one of the challenges for traditional lenders is the perception of risk.”

The new caucus believes CDFI’s and MDI’s can bridge this gap. The institutions exist to serve low-income communities. They have experience making loans in those communities. Most of the loans get repaid. Davis and Mathon say their respective organizations are mission-driven, not profit-driven. But they also say they can help private financial institutions identify reliable borrowers. Davis calls this “capital lent in sustainable ways.”

The Community Reinvestment Act aids the caucus’ cause. The law requires private banks to do a certain amount of lending or grant-making in areas where they operate.

There are also public funds.

Warner, Crapo and other colleagues worked with former President Donald Trump’s Treasury Secretary Steven Mnuchin to include a Jobs and Neighborhood Investment Act in the COVID relief act of 2020. The bill carved out $12 billion for CDFI’s and MDI’s with $3 billion going to grant funding and $9 billion going to loans that can be used to leverage up to 10 times that amount in other kinds of borrowing.

It sounds complex. But all these technicalities boil down to a simple charge.

This country should do whatever it can to give everyone, regardless of economic circumstance or ethnicity, an equal shot at the American Dream.

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