After the Storm: Banks Respond to Katrina's Punch
Of all the problems facing victims of Hurricane Katrina, finances are among the most serious, close behind physical and emotional well-being. As individuals try to recover from the storm's devastating blow, financial institutions have been scrambling to help customers regain their financial standing. Banks and other lenders find themselves in unusual circumstances, requiring a new way of thinking.
Resourceful banks have designed creative ways to resume business, incorporating "flexibility" and "customization" into their vocabulary, engaging in recovery area investment projects and forming alliances with community partners. Examples of innovative programs abound.
Customized Programs for Special Customers
Just before Hurricane Katrina struck, one credit union erected a new branch in New Orleans. The branch was destroyed yet was committed to offering hope to its customers. Sponsored by Enterprise Corporation of the Delta based in Jackson, Miss., Hope Credit Union lost its new location, but continues serving evacuees through flexible banking options.
Determining their customers' needs, acquiring funds and developing customized options were Hope's more pressing challenges, says Richard Campbell, chief financial officer. Hope interviewed victims to identify needs, looked to their socially responsible investors (financial institutions, community and faith-based groups, and individuals) for funding and then tailored options to fit the needs.
Through these actions, Hope developed an array of loan options and services. Loan options include a six-month, interest-free housing recovery loan that can be extended for 12 or 24 months with low interest; a 90-day, interest-free consumer loan; a low-interest auto loan with no payments for 60 days; and loans adapted for small business recovery and other needs. Services include opening no-fee checking accounts for one year. For details, see www.hopecu.org.
In Memphis, the Bank of Bartlett is helping hurricane victims buy homes in the area through the New Neighbors Homeownership program. So far, 36 evacuees have been approved for mortgages, 10 have closed or are in the process of closing and the remainder are looking for homes.
The mortgage program, initiated by Federal Home Loan Bank of Cincinnati, provides up to a $20,000 down-payment grant to victims who want to purchase homes in Tennessee, Kentucky or Ohio on a first-come, first-served basis. Storm victims must be registered with the Federal Emergency Management Agency (FEMA). They are required to keep homes they purchase for five years. House values can be up to $175,000.
The Memphis and Shelby County Community Services Agency, an organization working with partners to provide services for families, ran information about the program through Bank of Bartlett in a recent newsletter. In the first few days after the newsletter was distributed, more than 100 people inquired about the program.
The initiative also is offered in Memphis through the Memphis Area Teachers Credit Union.
To review the program, visit the Federal Home Loan Bank of Cincinnati's web site, www.fhlbcin.com.
Partnerships with Nonprofits
Banks in Arkansas, Mississippi and Tennessee were challenged to assist the tens of thousands who fled into these nearby areas for refuge. In response, joint ventures have formed on both corporate and local levels to expand access to aid. The alliances have generated monetary donations, housing stock, supplies, food and water. Such partnering lessens the amount of government funding needed and may qualify for Community Reinvestment Act consideration during bank examinations.
FEMA estimates 30,000 to 50,000 evacuees fled into Arkansas, and banks with Arkansas branches responded.
For example, Regions Bank, with about 1,600 locations in its multistate footprint—including many in the disaster area and in Arkansas—opened an account to collect donations at all branches. Regions partnered with the American Red Cross and the Salvation Army to distribute aid to evacuees, who included bank associates. The bank also formed local partnerships such as in Little Rock, where Regions' banks donated $10,000 to the Water Shed Human Development Agency. The nonprofit entity helped Little Rock evacuees get back on their feet. On a corporate level, the bank is considering a partnership investment with three agencies that propose building thousands of affordable housing units across the Gulf area.
In Mississippi, FEMA estimates there are more than 200,000 remaining evacuees in its metropolitan areas and an undetermined number in rural areas. BankPlus, a state bank with 56 branches throughout Mississippi, was directly impacted by the hurricane and partnered with the Central Mississippi Chapter of the American Red Cross to ensure that funds directly aided Mississippi residents.
"Our goal was to help displaced Mississippians," says David Dumeyer, spokesman for BankPlus. The bank accepted donations at all branches and matched $250,000 of the total collected. About $800,000 has been collected, and the bank expects that figure to rise through its continued efforts to raise funds.
Memphis is among the top five cities in the number of evacuees it received. An estimated 15,000 to 18,000 remain, according to the Louisiana Recovery Authority. SunTrust Bank, with more than 1,600 branches nationally, including about 40 in Memphis, has no locations on the Gulf Coast. Nevertheless, it delivered a corporate plan to aid Katrina victims. The plan included local projects: SunTrust's Memphis banks partnered with the Memphis Chamber Foundation. SunTrust donated $50,000 for the foundation's efforts to help local churches and charitable agencies that requested assistance for victims.
Challenges to Lenders, Customers
Federal financial regulating agencies are encouraging banks, thrifts and credit unions to continue providing flexible options to customers affected by Hurricane Katrina. At the same time, regulators stress balancing investments and flexible options with sound measures.
In cities with high concentrations of evacuees, such as Baton Rouge, Little Rock and Memphis, lenders have attended workshops conducted by the Federal Deposit Insurance Corp. (FDIC) to discuss their concerns and possible solutions to problems they have encountered. Ideas that lenders would like to see implemented include:
- development of loan pools to minimize risks and increase loan capacity at smaller banks;
- definitions by regulators of forbearance vs. forgiveness and descriptions of acceptable forms of identification for accessing or opening accounts;
- coordinated disaster scenario exercises involving key agencies;
- development of a disaster area investment projects list;
- development of an alternative funding resources list, including national and regional intermediaries, such as NeighborWorks America, the Local Initiatives Support Corp. and Enterprise Community Partners;
- development of land trusts to preserve affordable housing options and land banking opportunities so developers can hold land for future development;
- acquisition of flood maps from FEMA when local planning offices are inoperable and of building codes from city or county web sites, if available, as codes are updated for underwriting requirements;
- utilization by lenders of the new SBA Gulf Opportunity Pilot Loan program, "Go Loans," which offers a streamlined loan process for evacuees seeking small business recovery (www.sba.gov/content/gulf-opportunity-pilot-loan-program);
- a list of Katrina-related web sites with updated resources and information.
For a list of Katrina information and resource web sites, click here.