NCALL Loan Fund: Filling Funding GapsBy = Erin Mierzwa,=20 Community Development Specialist

No. 67
Winter=20 2008

Community=20 First Fund Expands and Diversifies

Message=20 from the Community Affairs Officer

Nonprofit=20 Finance Fund Analyzes Nonprofit Businesses

The=20 Progress Fund: Harnessing Tourism for Economic Development

Spotlight=20 on Research: How Can Community Development Financial Institutions = Measure=20 Economic and Social Impact?

Demand=20 Grows for CDFI Financing

Good=20 Data Drive Good Investment Decisions

NCALL=20 Loan Fund: Filling Funding Gaps

New=20 Jersey CDFI Focuses on Child Care Facilities and Charter Schools

Calendar=20 of Events

Complete Issue
(PDF, 3.5 = MB, 16=20 pages)

= Cascade=20 Main Page

What can be more difficult than finding predevelopment funds? If you = ask=20 NCALL (National Council on Agricultural Life and Labor Research Fund = Inc.), it=20 is finding predevelopment funds in rural areas, such as in Delaware. = NCALL=20 recognized that many of its nonprofit customers faced this challenge and = became=20 a community development financial institution (CDFI) in 2004. While = NCALL is not=20 the only statewide CDFI in Delaware, it is the only one with a mission = that is=20 primarily focused on rural areas.

NCALL, a 501 (c)(3) nonprofit based in Dover, Delaware, has been = providing=20 technical assistance to nonprofits focused on housing development and=20 homeownership counseling to individuals for over 30 years. Since 1983, = it has=20 been making small predevelopment loans to nonprofits, often in = conjunction with=20 multifamily housing development. NCALL formalized its approach to = lending and=20 began making larger loans when it became a CDFI and created the NCALL = loan=20 fund.

NCALL hired Karen Kollias, a community development lender with over = 25 years=E2=80=99=20 experience, including with ShoreBank, to manage the loan fund. Kollias,=20 originally from Delaware, had been providing NCALL with technical = assistance on=20 its CDFI application while she was at NeighborWorks America (formerly = the=20 Neighborhood Reinvestment Corporation). Joe Myer, executive director of = NCALL,=20 said: =E2=80=9CKollias brings a key set of community development lending = and financial=20 skills that were not previously available in Delaware.=E2=80=9D Working = with Kollias is=20 Dave Callahan, a lender with 15 years=E2=80=99 experience in community = banking who=20 oversees customer service, settlements, and servicing activity of the = loan=20 fund.

NCALL has focused its efforts on rural areas in Delaware, although it = is able=20 to lend throughout the Delmarva Peninsula, which includes the entire = state of=20 Delaware and portions of Maryland and Virginia. The loan fund offers a = variety=20 of products, including predevelopment loans, revolving lines of credit,=20 construction loans, gap/bridge financing, and credit enhancements/ = guarantees.=20 In addition to underwriting loans, NCALL provides nonprofits with = feedback on=20 their financial position. Most of NCALL=E2=80=99s loans are for no more = than five years=20 and are typically made at market interest rates or slightly below = market. Most=20 of the loans have terms and conditions that would be difficult for a = traditional=20 lender to offer.

One of the main challenges that NCALL faces is raising enough capital = to meet=20 the demand for loans. Kollias said, =E2=80=9CThe loan fund has grown = tremendously since=20 its inception in 2004, but we are always looking for ways to secure = additional=20 capital. It is a balance between projects we want to support and the = capital we=20 have available. We have had to be very creative in bringing other = funding=20 sources to our table.=E2=80=9D According to NCALL, the loan fund has = received capital=20 from the CDFI Fund, NeighborWorks America, Fannie Mae, JPMorgan Chase = and Co.,=20 Wachovia Regional Community Development Corporation, the Longwood = Foundation=20 Inc., and the Welfare Foundation Inc.

3D"NCALL NCALL and Discover Community Development Corporation = participated in=20 $1.5 million of financing that enabled Community Legal Aid Society Inc. = to=20 acquire and renovate a new office building in Georgetown, Del.

NCALL=E2=80=99s capitalization strategy includes attracting a mix of = local, regional,=20 and national investors who share in NCALL=E2=80=99s mission. NCALL = offers a great deal=20 of flexibility for investors, including project-specific loan = participations.=20 Kollias noted: =E2=80=9CEvery participation is different, as is every = project, and NCALL=20 is willing to structure participations to meet the financial = requirements of its=20 investors.=E2=80=9D NCALL said that lenders that have participated in = loans include=20 Discover Community Development Corporation (DCDC),* NHSA-CDFI (an = affiliate=20 corporation of Neighborhood Housing Services of America), Deutsche Bank, = the=20 Housing Assistance Council, and Neighborhood Capital Corporation.

In 2006, Discover Bank=E2=80=99s CRA director, Matthew Parks, asked = NCALL to=20 participate in and service loans on behalf of DCDC. DCDC has = participated with=20 NCALL on loans and lines of credit totaling $17.9 million. The loans and = lines=20 of credit have been made primarily to for-profit organizations for land = or=20 building acquisition with a community development impact. While the = purpose of=20 these loans was consistent with NCALL=E2=80=99s mission, the loan size = and type of=20 borrower would have prevented NCALL from making the loans without a = partner like=20 DCDC.

The capital for the loan fund provided by DCDC has enabled NCALL to = further=20 build its capacity by generating origination and loan servicing fees. = Parks=20 explained: =E2=80=9CDCDC chose NCALL as its lending partner because of = Discover Bank=E2=80=99s=20 longstanding relationship with the organization and NCALL=E2=80=99s = continued commitment=20 to meeting the housing and service needs of southern Delaware=E2=80=99s = low- to=20 moderate-income community.=E2=80=9D

Since becoming a CDFI, NCALL has closed 33 loans and provided $26 = million in=20 financing, of which $21 million came from other lenders. The loans have = financed=20 46 single-family housing units, 308 multifamily housing units, five = office=20 buildings for nonprofits, rural infrastructure improvements, working = capital,=20 and a single room occupancy residence. Kollias added, =E2=80=9CCDFIs are = a critical tool=20 for rural development and an important resource in Delaware. They are = able to=20 connect regulators, borrowers, and other lenders, and structure = financing in=20 ways that make the deals work.=E2=80=9D

For information, contact Karen Kollias of NCALL at (302) 678-9400 = or kkollias@ncall.org; http://www.ncall.org/; or Matthew = Parks of=20 Discover Bank at (302) 323-7485 or matthewparks@discover.com; = http://www.discoverbank.com/.

* DCDC was formed in 2005 as a for-profit subsidiary of Discover = Financial=20 Services to provide community development loans within portions of = Kent and=20 Sussex counties, Del.

FEDERAL RESERVE BANK OF PHILADELPHIA =E2=80=A2 TEN INDEPENDENCE MALL = =E2=80=A2 PHILADELPHIA,=20 PA 19106-1574 =E2=80=A2 TEL: (215) 574-6000

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NCALL Loan Fund: Filling Funding GapsBy = Erin Mierzwa,=20 Community Development Specialist

No. 67Winter=20 2008

FEDERAL RESERVE BANK OF PHILADELPHIA =E2=80=A2 TEN INDEPENDENCE MALL = =E2=80=A2 PHILADELPHIA,=20 PA 19106-1574 =E2=80=A2 TEL: (215) 574-6000

No. 67
Winter=20 2008