|Volume 2, Issue 6, 2002||Federal Reserve Bank of Dallas|
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Fed Governors See Cameron Park Colonia Firsthand
When Federal Reserve Governors Susan Bies and Ben Bernanke shook hands with soon-to-be new homeowner Mario Banda, they became personally acquainted with the work of the Community Development Corporation of Brownsville. For more than 10 years, the CDCB has been a leader in building affordable housing that has enabled colonia residents to move from substandard dwellings to new, quality housing.
The Federal Reserve System regulates state member banks and bank holding companies and has had a long-standing interest in providing information on community and economic development efforts and ensuring fair and impartial access to credit.
Bies and Bernanke, recent Bush appointees to the Federal Reserve Board of Governors, visited Brownsville to learn more about issues facing colonias, including Cameron Park—one of the lowest-income communities in the country—and to learn about what community development efforts have been accomplished. The governors saw how area banks are helping finance affordable housing developments and microloans for small businesses.
Banda is one of 15 Cameron County residents currently participating in the CDCB's self-help program, in which families build about 65 percent of their own house. The CDCB provides an experienced construction manager to ensure quality construction and hires professionals to install electrical wiring and plumbing.
The CDCB is developing a 33-acre site on the eastern edge of Cameron Park, an unincorporated enclave of almost 7,000 residents. The development includes 133 lots on which more than 45 homes will be built as part of the self-help program. Area builders will construct homes on the remaining lots. Wells Fargo Bank financed the infrastructure for the development and is providing interim financing for all home construction in the subdivision. International Bank of Commerce, J.P. Morgan Chase and Texas State Bank have provided similar financing for other CDCB development projects.
Under the self-help program, the CDCB will own Banda's property until the house is completed; then ownership will transfer to him and his family with a CDCB-originated mortgage. CDCB originates FHA mortgages through the Texas State FHA Bond program or the USDA's 502 loan program.
Currently the CDCB has two groups building self-help housing in the development. The groups include seven or eight families, each building their own home on the same schedule. If construction of one family's home falls behind, the others must come to their aid with hammers in hand—much like an old-fashioned barn raising. The families must work a total of 40 hours a week on their homes—a realistic number because the family members usually pitch in and divide up the work.
The governors were impressed with the dedication and initiative of the families as well as the public–private partnership exhibited by the CDCB and area banks. "The people we have had a chance to meet clearly show how innovative approaches to old problems can be effective," Bies said.
"The great thing about the self-help program and what we stressed to the Fed governors is that just like the families who join together to help build houses, public and private entities can join together to build communities," said Manuel Casanova, executive vice president of the International Bank of Commerce. Casanova accompanied Bies and Bernanke on their visit. He also serves on the Federal Reserve System's Consumer Advisory Council .
A few blocks from the Bandas' future residence is the Cameron Park colonia and the recently rebuilt home of Maria Mendoza. Mendoza's previous house, a very old structure that had been declared dilapidated, was demolished and a new 1,000-square-foot home built in its place.
Mendoza's home was financed in part by the Rio Grande Valley Multi-Bank Community Development Corp. According to CDCB Executive Director Don Currie, nine banks have invested in the multibank CDC. Four of these banks are financing 50 percent of each loan through the multibank, and the CDCB finances the other 50 percent.
Currie explained to the governors that the investment by the banks in the multibank CDC has enabled the CDCB to build and finance 25 houses in the last two years—many more than if only public financing were available.
"Through their visit, we wanted the governors to see how the lack of adequate housing can be addressed through innovative partnerships," Currie said. "By visiting with Mr. Banda and Mrs. Mendoza, they saw firsthand how these partnerships directly affect peoples' lives."
But community development efforts are not limited to homebuilding, as the governors learned. They also include small businesses like Video Planet, located on Paredes Line Road at the edge of the Cameron Park colonia. Video Planet received a small business loan from ACCION Texas , the country's largest microlender. ACCION makes loans up to $25,000 to fledgling businesses that otherwise might not qualify for credit.
Janie Barrera, president of ACCION Texas, also accompanied the governors on the community tour. She explained how small loans like the ones ACCION has made to business ventures owned by Cameron Park residents pay big dividends for the families and the community. Like Casanova, Barrera serves on the Federal Reserve System's Consumer Advisory Council.
e-Perspectives, Volume 2, Issue 6, 2002