If the price of higher education is giving you sticker shock, you’re not alone.
The average cost of tuition for 2023-24 was $26,027 for in-state residents at public colleges, and $27,091 for out-of-state students. At private colleges, the average tuition and fees totaled a whopping $38,768!
Most students end up taking out student loans to cover the cost of college. Over 43 million Americans have federal student loan debt, with an average balance of $37,718 each. Combined, Americans now hold $1.766 trillion in student loan debt!
Paying off your loan may become a burden, especially if you opt for a career in public service, art, or another low-paying field. Your debt may also become unmanageable if you run into unexpected economic difficulties due to medical bills, losing your job, caring for a parent or child, or other challenges.
If more traditional student loan repayment plans aren’t working, you may want to think outside the box. One approach could be crowdfunding student loans. Here are some things to know about this creative way to tackle your debt.
What Is Crowdfunding
Crowdfunding is the process of soliciting small contributions from multiple donors to meet a financial goal. Through online platforms like Kickstarter and GoFundMe, people have turned to crowdfunding to raise money for entrepreneurial ventures, medical crises, disaster victims, classroom supplies, and much more.
You can solicit donations from friends, family, and even complete strangers. By splitting the contributions among a large quantity of people, crowdfunding is a way to meet a big financial goal while not having to rely on finding one major source of funding.
Raising money online makes it easy to share your campaign widely and for people to easily contribute. Increasingly, people have been crowdfunding to pay off their debt, including fundraising for college. That can include textbooks, tuition, studying abroad, or living expenses — or, of course, student loans. 💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.
Sites for Crowdfunding Your Student Loan Repayment
There are a number of sites that allow you to set up a crowdfunding campaign so you can pay off your student loans. Before you sign up, you’ll want to make sure that you understand all the rules and fees that you might encounter during the process.
Here are some crowdfunding sites to look into:
GoFundMe: GoFundMe is perhaps the best-known crowdfunding platform out there. Setting up a fundraiser is easy. Once you have a GoFundMe account and set a goal, you’re encouraged to tell your personal story of why you’re raising money and add a photo or video. Then you can share the campaign with your network of family, friends, coworkers, followers on social media, etc. Once your GoFundMe page starts raising money, you can start withdrawing it. While GoFundMe doesn’t charge fees for setting up a page, there are transaction fees (2.9% + $0.30, which includes debit and credit charges).
Rally.org: Rally.org works a lot like GoFundMe. Once you have an account, you can set a goal, tell your story, and then start sharing with friends and family. Like GoFundMe, you can start withdrawing money as soon as people start donating to your fundraiser. There’s one big difference between Rally.org and GoFundMe: the fees. While there’s only transaction fees on GoFundMe fundraisers, Rally.org charges 5% + credit card fees (2.9% + 30 cents) for each donation processed. That 5% can make it harder for you to reach your fundraising goal.
Gift of College: If you’re not looking to launch a full-blown crowdfunding campaign, but you do want to make it easier for friends or family to help you pay off your student loans in the form of gifts at birthdays, holidays, or graduation, you might consider an account with Gift of College. To get started, you set up an account and link your student loan account. Then you can share your profile with friends and family to encourage them to buy you Gift of College gift cards for special occasions. It’s free to set up a Gift of College account, but there is a 5% processing/service fee charged to the gift giver for every gift card they buy (though the fee is capped at $15 per transaction). Gift of College can also be attached to 529 accounts.
Is Crowdfunding for Repaying Student Loans a Good Idea?
There are pros and cons to turning to the crowdfunding model as a way of making a dent in your student loan debt. Let’s start with the positives. If your campaign is successful, it’s an easy way to earn money to pay off your debt, and you don’t have to do much in return. Earning and saving the same amount through a job would likely take much longer, depending on your living expenses.
Similar to a wedding registry, a crowdfunding site also makes it less awkward to ask people in your life for help, compared to just asking for money outright. You probably have lots of loved ones who would like to help you but don’t have an easy way to do it.
Another perk is that obtaining a lump sum and putting it toward your loan principal can greatly reduce the interest that accumulates and the amount you owe over the life of the loan. Finally, crowdfunding often works. There are many examples of successful campaigns out there to inspire you.
There are some downsides to consider. One is that a crowdfunding effort is likely to get you a chunk of money once, rather than a regular stream of funding.
Considering the size of most student loans, and how interest compounds over time, you may not raise enough money to pay off the entire loan. So you’ll still have to figure out a way to consistently make your monthly payments.
Also, how much you may earn is unpredictable — it depends on the strength of your campaign and the size of your network, plus the generosity of donors, so it’s a bit risky to rely on this to stay solvent.
Another con is that depending on the size of the donation, you may need to pay taxes on the money, so you wouldn’t get to keep the entire amount you raise. Finally, even though a specialized crowdfunding site makes it easier, it may still feel uncomfortable to ask people you know for money, especially if they are facing their own debts and financial challenges.
How To Set Up a Crowdfunding Campaign
Pick a crowdfunding platform: First, you need to pick a crowdfunding site to use. Review the terms carefully so you understand how the process works. You’ll want to see if the platform keeps a percentage of funds donated, what processing fees are charged, whether it allows employers or the general public to contribute, and whether the money goes to your lender directly or comes to you in the form of cash.
Set a goal: If your fundraising goal sounds impossibly high, it could prevent some people from donating. Starting with a number that’s ambitious but reasonable may help, even if it means asking for less than your total student loan amount.
Build trust with your funders: You need to spell out what you are going to do with the money. Potential donors likely want to know what, exactly, their gift is supporting. And they probably want to be sure it will actually go toward student loans and not other expenses. Make clear how exactly you will pay off the loan and how you will hold yourself accountable to donors can go a long way toward building trust.
Telling your personal story: People may be more likely to support you if they understand the impact they can have on your life. Telling your unique story can help make their gift about more than just debt. You could describe your past accomplishments and future goals, as well as how the support will help you achieve them. Try putting up photos and a video to help people connect with your goals emotionally.
Leveraging your network: In order to have a successful campaign you’ll need to share with people you know through email and social media. You might want to tie the campaign to a special occasion, such as your birthday or graduation. You can ask your network to share on their channels as well.
Keeping the momentum going: A successful campaign doesn’t end when you launch. Posting updates on your crowdfunding page regularly will keep people interested and remind them to donate could help you reach your goal.
Express gratitude: People are doing you a favor when you donate, so thank them early and often! It will make them feel good about their gifts and perhaps even encourage them to share your campaign or donate more down the line.
Thinking About Student Loan Refinancing
If you can fund your student loan debt in full through crowdfunding, congratulations! But most people can’t depend on this as a long-term strategy and will need to find additional ways to pay off the rest of their balance.
If you’re still struggling with student debt, refinancing your student loans may be another way to make your loans more affordable. You can refinance federal loans, private loans, or a mix of both by taking out a new loan with a private lender like SoFi and using it to pay off your old ones. Note that if you do refinance federal loans with a private lender, you will lose eligibility for federal student loan benefits like deferment and income-driven repayment programs.
You may be able to qualify for a lower interest rate or lower monthly payments, depending on your credit history and income. It could be worth checking what rates you’d qualify for by applying for pre-qualification online. If you refinance with SoFi, membership includes complimentary support from career coaches and protection during periods of unemployment for those who qualify. Plus there are no hidden fees.
The Takeaway
With student debt growing exponentially, it’s worth considering creative solutions. Crowdfunding can be a relatively easy way to make a dent in your student loans without investing a lot of time. But for most people, it won’t be enough to eliminate their debt completely.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
Student Loan Refinancing If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
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Northwestern Mutual doubles down on commitment in the fight against childhood cancer, reignites social media #LemonTopChallenge for Childhood Cancer Awareness Month Company announces additional major investments toward cancer research and scholarships and enacts local activations MILWAUKEE, Sept. 14, 2023 /PRNewswire/ — Every day, more than 1,000 children worldwide are diagnosed with childhood cancer. Today Northwestern … [Read more…]
In our latest real estate tech entrepreneur interview, we’re speaking with Marshall Beck from BrokerAssist. He’s a recent addition to the Geek Estate Mastermind.
Who are you, and what do you do?
Marshall Beck here, Co-founder and CEO of BrokerAssist, and I do lots! Currently, my main focus is to add great value in helping real estate professionals manage and grow their businesses, with the BrokerAssist collaboration and referral network. I also write unscripted television shows and have a few projects in the works with a production company. I co-host quarterly wellness seminars and promote a vegan lifestyle; for the health and happiness of ourselves, the planet, and animals.
What problem does your product/service solve?
Think gig economy for real estate. As a real time, mobile marketplace for agents and brokers to collaborate on fractional assistance and referral needs, BrokerAssist solves the logistical problems brokers face with last minute showings, coverage while on vacation, referral needs, and more.
How do agents grow their businesses? By building teams. BrokerAssist is a cost-effective solution for the agent trying to grow their business without the budget for a full or part time assistant. It’s for the agents who would rather knock out a few more listing appointments than sit at an inspection, which could easily be covered for them by a fellow quality, licensed agent or broker. It’s also for the agents who have some free time to earn extra cash, and maybe a newer agent who’d like more experience at these tasks.
There is no industry wide platform for fractional assistance and referral networking where independent and national firms may collaborate for business growth. Agents and brokers are resorting to Facebook groups, email threads, phone/text, and other outdated and non-integrated payment options.
It’s time to move on from the expensive industry referral models that take as much as 33% of broker and agent commissions. These platforms have lengthy processes and are not on-demand as agents and broker expect, to ensure their referral opportunities are not lost. BrokerAssist solves this as the free on demand referral connection service for real estate professionals. We help keep brokers and agents at the center of their transactions.
What are you most excited about right now?
The BrokerAssist team is deep in QA, wrapping up some development features and starting the Beta testing process. These are exciting times as we move closer to our national launch to android and iOS app stores very soon! I am most excited to see how our technology is adopted and to learn from brokers and agents on how we can improve and expand our products and services as we grow.
What’s next for you?
Growth is next with a deep dive into building a robust BrokerAssist network. Our team has so many great ideas on next generation features and how to expand this platform into other real estate horizontals for additional application. To accomplish this, our next move involves fundraising among friends/family and angel investors.
What’s a cause you’re passionate about and why?
I am a vegan wellness and lifestyle advocate because I care deeply about our responsibility to sustain the happiness and health of ourselves, the planet, and the animals. It’s as simple as supply and demand. We vote with our dollars, and conscious consumption with a vegan lifestyle is a part of the future as we learn to live in harmony with Mother Nature during these modern times.
Thanks to Marshall for sharing his story. If you’d like to connect, find him on LinkedIn here.
We’re constantly looking for great real estate tech entrepreneurs to feature. If that’s you, please read this post — then drop me a line (drew @ geekestatelabs dot com).
LibreMax Capital’s main fund notched returns of roughly 6% through July this year, according to a person familiar with the matter, after betting on asset-backed securities and rotating out of commercial and residential mortgage debt and collateralized loan obligations.
The LibreMax Partners Fund, which totals about $1 billion, invests in structured products tied to both corporate and consumer debt. The fund gained about 4% in the first half of last year, as previously reported by Bloomberg. Separately, LibreMax has raised $1 billion across two other funds, namely the LibreMax Core Fund and LibreMax Dislocation Fund, added the person, who declined to be identified as the details are private.
LibreMax believes that structured bonds, which repackage debt into securities of varying risk and size, will outperform junk debt, citing “historically high yields” and fundamentals underpinned by strong consumer finances and record-low unemployment, Chief Investment Officer Greg Lippmann wrote in a July 27 letter to investors, obtained by Bloomberg.
In that vein, the firm increased its ABS exposure while lowering its allocations to commercial mortgage debt, CLOs and residential mortgages. Within ABS, it invested across subprime auto bonds, consumer unsecured, aircraft, solar and credit card securities, the letter details.
The Dislocation Fund, launched earlier this year, capitalizes on market volatility by buying stressed structured bonds at a discount, which are likely to appreciate once the market normalizes, added the person close to the matter.
A LibreMax representative declined to comment.
The New York-based hedge fund anticipates more volatility over 2023 and into the first half of 2024, as persistently high inflation or a recession seem more likely than a soft landing, Lippmann wrote. Lippmann, a former Deutsche Bank AG trader, famously bet against subprime mortgages before the 2008 financial crisis. He appeared in Michael Lewis’s book “The Big Short” in 2010.
Boosting Credit Returns
The fundraising comes during a tough year for US credit markets, which have been roiled by aggressive interest rate hikes from the Federal Reserve and the collapse of multiple US regional banks. The banking tumult that started in March led to corporates postponing or pulling financings across the ABS market, while delinquencies in debt like subprime auto bonds and credit card-backed notes are expected to rise.
LibreMax sees opportunities in whole business debt in particular. It participated in a $90 million advance to Coinstar LLC, giving the coin kiosk operator flexibility to restructure about $1 billion in whole business securitization deals that reached a key repayment date in late April, as reported by Bloomberg.
“We will look to source similar investment opportunities going forward,” Lippmann wrote.
CLOs have had a slower 2023 compared to ABS. Issuance is down about 24% year-over-year at around $69 billion, while ABS sales are 7.6% lower year-over-year at $191.4 billion, data compiled by Bloomberg News shows. LibreMax moved away from lower-quality US CLO debt and equity, selling around $90 million in market value, according to the letter. Those proceeds were used to move up the capital stack with the purchase of about $75 million of US investment-grade debt. Still, the bulk of LibreMax’s activity was in Europe, where it invested in short-duration tranches, including equity, the letter noted.
Meanwhile, the CMBS market rout continues as landowners default on mortgages and credit risk spikes. LibreMax bought short-duration investment-grade bonds that may present low double-digit yields, where it believes “the market mispriced the extension likelihood and where returns are still attractive to moderate extensions.”
In residential mortgage bonds, LibreMax moved down the capital stack based on certain borrowers’ performance, reads the letter. The firm is also seeking out opportunities in single-family rental bonds, where companies have struggled to raise rents amid higher expenses.
Lippmann is also “concerned” about the unsecured private credit market, which he says may become “troublesome” if rates stay higher and economic growth slows. He also notes that LibreMax has increased the investment-grade portion of its portfolio to 28%, from 12% in December 2021.
LibreMax and its CLO platform Trimaran Advisors, which it acquired in 2018, collectively had about $9.6 billion of assets under management as of the end of June, according to the note.
The Jefferson Avenue commercial district in Buffalo, New York, is anchored by a supermarket.
There are dozens of other businesses and services along the 12-block corridor — a couple of bank branches, a library, a coffee shop, gas stations, a small plaza with a dollar store and a primary care clinic and a business incubator for entrepreneurs of color.
But Tops Friendly Markets, the only grocery store on Buffalo’s vast East Side, is the center of activity. More than just a place to buy food, pick up medications and use an ATM, the store is a communal gathering space in a predominantly Black neighborhood that, for generations, has been segregated, isolated and disenfranchised from the wealthier — and whiter — parts of the city.
Which explains how it came to be the site of a mass shooting on a spring day in May of last year. On that Saturday, a gunman, who lived 200 miles away in another part of the state, drove to Jefferson Avenue and went into Tops, and in just a few minutes killed 10 people, injured three and inflicted mass trauma across the community.
It is a scenario that has sadly, and repeatedly, played out in other parts of the country that have experienced mass shootings. But this one came with a twist: The gunman’s intention was to kill as many Black people as possible.
To achieve that, he specifically targeted a ZIP code with one of the highest percentages of Black residents in New York state. All 10 who died that day were Black.
“The mere fact that someone can research, ‘Where will the greatest number of Black people be … on a Saturday morning,’ that’s not by chance,” said Franchelle Parker, a community organizer and executive director of Open Buffalo, a nonprofit focused on racial, economic and ecological justice. “That’s not a mistake. It’s a community that’s been deeply segregated for decades.”
The day of the shooting, Parker, who grew up in nearby Niagara Falls, was driving to Tops, where she planned to buy a donut and an unsweetened iced tea before heading into the Open Buffalo office, which is located a block away from Tops. The mother of two had intended to complete the mundane task of cleaning up her desk — “old coffee cups and stuff” — after a busy week.
She saw the news on Twitter and didn’t know if she should keep driving to Jefferson Avenue or turn around and go back home. She eventually picked the latter.
When she showed up the next day, there were thousands of people grieving in the streets. “The only way that I could explain my feeling, it was almost like watching an old war movie when a bomb had gone off and someone’s in, like, shell shock. That’s how it felt,” said Parker, vividly recounting the community’s collective trauma in a meeting room tucked inside of Open Buffalo’s second-story office on Jefferson Avenue.
Almost immediately following the May 14, 2022, massacre, which was the second-deadliest mass shooting in the United States last year, conversations locally and nationally turned to the harsh realities of the East Side and how long-standing factors that affect the daily life of residents — racism, poverty and inequity — made the community an ideal target for a white supremacist.
Now, more than a year after the tragedy, there is growing concern that not enough is being done fast enough to begin to dismantle those factors. And amid those conversations, there are mounting calls for the banking industry — whose historical policies and practices helped cement the racial segregation and disinvestment that ultimately shaped the East Side — to leverage its collective power and influence to band together in an effort to create systemic change.
The ideas about how banks should support the East Side and better embed themselves in the neighborhood vary by people and organizations. But the basic argument is the same: Banks, in their role as financiers and because of the industry’s history of lending discrimination, are obligated to bring forth economic prosperity in disinvested communities like the East Side.
I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.
Chiwuike Owunwanne, corporate responsibility officer at KeyBank
“Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that,” said The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity, a four-year-old enterprise focused on racial, geographic and economic health disparities. “But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.”
To be sure, banks’ ability to reverse the course of the community isn’t guaranteed — and there is no formula to determine how much accountability they should hold to fix deeply entrenched problems like racism. Several Buffalo-area bankers said that while the Tops shooting heightened the urgency to help the East Side, the industry itself cannot be the sole driver of change.
“There are a lot of institutions … that can certainly play a part in reversing the challenges that we see today,” said Chiwuike “Chi-Chi” Owunwanne, a corporate responsibility officer at KeyBank, the second-largest bank by deposits in Buffalo. “I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.”
A long history of segregation
How the East Side — and the Tops store on Jefferson Avenue — became the destination for a racially motivated mass murderer is a story about racism, segregation and disinvestment.
Even as it bears the nickname “the city of good neighbors,” Buffalo has long been one of the most racially segregated cities in the United States. Of the 114,965 residents who live on the East Side, 59% are Black, according to data from the 2021 U.S. Census American Community Survey. The percentage is even higher in the 14208 ZIP code, where the Tops store is located. In that ZIP code, among 11,029 total residents, nearly 76% are Black, the census data shows.
The city’s path toward racial segregation started in the early 20th century when a small number of job-seeking Black Americans migrated north to Buffalo, a former steel and auto manufacturing hub at the far northwestern end of New York state. Initially, they moved into the same neighborhoods as many of the city’s poorer immigrants and lived just east of what is today the city’s downtown district. As the number of Blacks arriving in Buffalo swelled in the 1940s, they were increasingly confronted with various housing challenges, including racist zoning laws and restrictive deed covenants that kept them from buying homes in more affluent white areas.
Black Buffalonians also faced housing discrimination in the form of redlining, the practice of restricting the flow of capital into minority communities. In 1933, as the Great Depression roiled the economy, a temporary federal agency known as the Home Owners’ Loan Corporation used government bonds to buy out and refinance mortgages of properties that were facing or already in foreclosure. The point was to try to stabilize the nation’s real estate market.
As part of its program, HOLC created maps of American cities, including Buffalo, that used a color coding scheme — green, blue, yellow and red — to convey the perceived riskiness of making loans in certain neighborhoods. Green was considered minimally risky; other areas that were largely populated by immigrant, Black or Latino residents were labeled red and thus determined to be “hazardous.”
“The goal was to free up mortgage capital by going to cities and giving banks a way to unload mortgages, so they could turn around and make more mortgage loans,” said Jason Richardson, senior director of research at the National Community Reinvestment Coalition, an association of more than 750 community-based organizations that advocates for fair lending. “It was kind of a radical concept and it has evolved over the decades into our modern mortgage finance system.”
The Federal Housing Administration, which was established as a permanent agency in 1934, used similar methods to map urban areas and labeled neighborhoods from “A” to “D,” with “A” considered to be the most financially stable and “D” considered the least. Neighborhoods that were largely Black, even relatively stable ones, were put in the “D” category.
The result was that banks, which wanted to be able to sell mortgage loans to the FHA, were largely dissuaded from making loans in “risky” areas. And Buffalo’s East Side, where the majority of Blacks were settling, was deemed risky. Unable to get loans, Blacks couldn’t buy homes, start businesses or build equity. At the same time, large industrial factories on the East Side were closing or moving away, limiting job opportunities and contributing to rising poverty levels.
“Today what we’re left with is the residue of this process where we’ve enshrined … a pattern of economic segregation that favors neighborhoods that had fewer Black people in them and generally ignores neighborhoods that had African Americans living in them,” Richardson said.
Case in point: Research by the National Community Reinvestment Coalition shows that three-quarters of neighborhoods that were once redlined are low- to moderate-income neighborhoods today, and two-thirds of them are majority minority communities.
Adding to the division between Blacks and whites in Buffalo was the construction of a highway called the Kensington Expressway. Built during the 1960s, the below-grade, limited-access highway proved to be a speedy way for suburban workers to get to their downtown jobs. But its construction cut off the already-segregated East Side even more from other parts of the city, displacing residents, devaluing houses and destroying neighborhoods and small businesses.
As a result of those factors and more, many Black residents have become “trapped” on the East Side, according to Dr. Henry Louis Taylor Jr., a professor of urban and regional planning at the University at Buffalo. In 1987, Taylor founded the UB Center for Urban Studies, a research, neighborhood planning and community development institute that works on eliminating inequality in cities and metropolitan regions. In September 2021, eight months before the Tops shooting, the Center for Urban Studies published a report that compared the state of Black Buffalo in 1990 to present-day conditions. The conclusion: Nothing had changed for Blacks over 31 years.
As of 2019, the Black unemployment rate was 11%, the average household income was $42,000 and about 35% of Blacks had incomes that fell below the poverty line, the report said. It also noted that just 32% of Blacks own their homes and that most Blacks in the area live on the East Side.
“Those figures remain virtually unchanged while the actual, physical conditions that existed inside of the community worsened,” Taylor told American Banker in an interview in his sun-filled office at the center, located on the University at Buffalo’s city campus. “When we looked upstream to see what was causing it, it was clear: It was systemic, structural racism.”
Banks’ moral obligations
As the East Side struggled over the decades with rampant poverty, dilapidated housing, vacant lots and disintegrating infrastructure, banks kept a physical presence in the community, albeit a shrinking one. In mid-2000, there were at least 20 bank branches scattered across the East Side, but by mid-2022, the number had fallen to around 14, according to the Federal Deposit Insurance Corp.’s deposit market share data. The 14 include four new branches that have opened since early 2019 — Northwest Bank, KeyBank, Evans Bank and BankOnBuffalo.
The first two branches, operated by Northwest in Columbus, Ohio, and KeyBank, the banking subsidiary of KeyCorp in Cleveland, were requirements of community benefits agreements negotiated between each bank and the National Community Reinvestment Coalition. In both cases, Northwest and KeyBank agreed to open an office in an underserved community.
Evans Bank opened its first East Side branch in the fall of 2021. The office is located in the basement of an $84 million affordable senior housing building that was financed by Evans, a $2.1 billion-asset community bank headquartered south of Buffalo in Angola, New York.
Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that. But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.
The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity
On the community and economic development front, banks have had varying levels of participation. Buffalo-based M&T Bank, which holds a whopping 64% of all deposits in the Buffalo market and is one of the largest private employers in the region, has made consistent investments in the East Side by supporting Westminster Community Charter School, a kindergarten through eighth-grade school, and the Buffalo Promise Neighborhood, a nonprofit organization focused on improving access to education in the city’s 14215 ZIP code.
Currently, Buffalo Promise Neighborhood operates four schools. In addition to Westminster, it runs Highgate Heights Elementary, also K-8, as well as two academies that serve children ages six weeks through pre-kindergarten. Twelve M&T employees are dedicated to the program, according to the Buffalo Promise Neighborhood website. The bank has invested $31.5 million into the program since its 2010 launch, a spokesperson said.
Other banks are making contributions in other ways. In addition to the Jefferson Avenue branch and as part of its community benefits plan, Northwest Bank, a $14.2 billion-asset bank, supports a financial education center through a partnership with Belmont Housing Resources of Western New York. Meanwhile, the $198 billion-asset KeyBank gave $30 million for bridge and construction financing for Northland Workforce Training Center, a $100 million redevelopment project at a former manufacturing complex on the East Side that was partially funded by the state.
BankOnBuffalo’s East Side branch is located inside the center, which offers KeyBank training in advanced manufacturing and clean energy technology careers. A subsidiary of $5.6 billion-asset CNB Financial in Clearfield, Pennsylvania, BankOnBuffalo’s office opened a month after the shooting. The timing was coincidental, but important, said Michael Noah, president of BankOnBuffalo.
“I think it just cemented the point that this is a place we need to be, to be able to be part of these communities and this community specifically, and be able to build this community up,” Noah said.
In terms of public-private collaboration, some banks have been involved in a deeper way. In 2019, New York state, which had already been pouring $1 billion into Buffalo to help revitalize the economy, announced a $65 million economic development fund for the East Side. The initiative is focused on stabilizing neighborhoods, increasing homeownership, redeveloping commercial corridors including Jefferson Avenue, improving historical assets, expanding workforce training and development and supporting small businesses and entrepreneurship.
In conjunction with the funding, a public-private partnership called East Side Avenues was created to provide capital and organizational support to the projects happening along four East Side commercial corridors. Six banks — Charlotte, North Carolina-based Bank of America, the second-largest bank in the nation with $2.5 trillion of assets; M&T, which has $203 billion of assets; KeyBank; Warsaw, New York-based Five Star Bank, which has about $6 billion of assets; Northwest and Evans — are among the 14 private and philanthropic organizations that pledged a combined $8.4 million to pay for five years’ worth of operational support, governance and finance, fundraising and technical assistance to support the nonprofits doing the work.
Laura Quebral, director of the University at Buffalo Regional Institute, which is managing East Side Avenues, said the banks were the first corporations to step up to the request for help, and since then have provided loans and other products and education to keep the program moving.
Their participation “is a signal to the community that banks cared and were invested and were willing to collaborate around something,” Quebral said. “Being at the table was so meaningful.”
Richard Hamister is Northwest’s New York regional president and former co-chair of East Side Avenues. Hamister, who is based in Buffalo, said banks are a “community asset” that have a responsibility to lift up all communities, including those where conditions have arisen that allow it to be a target of racism like the East Side.
“We operate under federal charters, so we have an obligation to the community to not only provide products and services they need but also support when you go through a tragedy like that,” Hamister said. “We also have a moral obligation to try to help when things are broken … and to do what we can. We can’t fix everything, but we’ve got to fix our piece and try to help where we can.”
In the wake of a tragedy
After the massacre, there was a flurry of activity within banks and other organizations, local and out-of-town, to respond to the immediate needs of East Side residents. With the community’s only supermarket closed indefinitely, much of the response centered around food collection and distribution. Three of M&T’s five East Side branches, including the Jefferson Avenue branch across the street from Tops, became food distribution sites for weeks after the shooting. On two consecutive Fridays, Northwest provided around 200 free lunches to the community, using a neighborhood caterer who is also the bank’s customer. And BankOnBuffalo collected employee donations that amounted to more than 20 boxes of toiletries and other items that were distributed to a nonprofit.
At the same time, M&T, KeyBank and other banks began financial donations to organizations that could support the immediate needs of the community. KeyBank provided a van that delivered food and took people to nearby grocery stores. Providence, Rhode Island-based Citizens Financial Group, whose ATM inside Tops was inaccessible during the store’s temporary closure, installed a fee-free ATM near a community center located about a half-mile north of Tops, and later put a permanent ATM inside the center that remains there today. And M&T rolled out a short-term loan program to provide capital to East Side small-business owners.
One of the funds that benefited from banks’ support was the Buffalo Together Community Response Fund, which has raised $6.2 million to address the long-term needs of the East Side.
Bank of America and Evans Bank each donated $100,000 to the fund, whose list of major sponsors includes four other banks — JPMorgan Chase, Citigroup, M&T and KeyBank. Thomas Beauford Jr., a former banker who is co-chair of the response fund, said banks, by and large, directed their resources into organizations where the dollars would have an immediate impact.
“Banks said, ‘Hey, you know … it doesn’t make sense for us to try to build something right now. … We will fund you in the work you’re doing,'” said Beauford, who has been president and CEO of the Buffalo Urban League since the fall of 2020. “I would say banks showed up in a big way.”
Fourteen months later, banks say they are committed to playing a positive role on the East Side. For the second year, KeyBank is sponsoring a farmers’ market on the East Side, an attempt to help fill the food desert in the community. Last fall, BankOnBuffalo launched a mobile “bank on wheels” truck that’s stationed on the East Side every Wednesday. The 34-foot-long truck, which is staffed by two people and includes an ATM and a printer to make debit cards, was in the works before the shooting, and will eventually make four stops per week around the Buffalo area.
Evans has partnered with the city of Buffalo to construct seven market-rate single family homes on vacant lots on the East Side. The relationship with the city is an example of how banks can pair up with other entities to create something meaningful and lasting, more than they might be able to do on their own, said Evans President and CEO David Nasca.
The bank has “picked areas” where it can use its resources to make a difference, Nasca said.
“I don’t think the root causes can be ameliorated” by banks alone, he said. “We can’t just grant money. It has to be within our construct of a financial institution that invests and supports the public-private partnership. … All the oars [need to be] pulling together or this doesn’t work.”
‘Little or no engagement with minorities’
All of these efforts are, of course, welcomed by the community, but there is still criticism that banks haven’t done enough to make up for their past contributions to segregating the city. And perhaps more importantly, some of that criticism centers on banks failing to do their most basic function in society — provide credit.
In 2021, the New York State Department of Financial Services issued a report about redlining in Buffalo. The regulator looked at banks and nonbank lenders and found that loans made to minorities in the Buffalo metro area made up 9.74% of total loans in Buffalo. Overall, Black residents comprise about 33% of Buffalo’s total population of more than 276,000, census data shows.
The department said its investigation showed the lower percentage was not due to “excessive denials of loan applications based on race or ethnicity,” but rather that “these companies had little or no engagement with minorities and generally made scant effort to do so.”
“The unsurprising result of this has been that few minority customers or individuals seeking homes in majority-minority neighborhoods have made loan applications … in the first instance.”
Furthermore, accusations of redlining persist today, even though the practice of discriminating in housing based on race was outlawed by the Fair Housing Act of 1968.
In 2014, Evans was accused of redlining by the New York State Attorney General, which said the community bank was specifically avoiding making mortgage loans on the East Side. The bank, which at the time had $874 million of assets, agreed to pay $825,000 to settle the case, but Nasca maintains that the charges were unfounded. He points to the fact that the bank never had a fair lending or fair housing violation, no specific incidents were ever claimed and that the bank’s Community Reinvestment Act exam never found evidence of discriminatory or illegal credit practices.
The bank has a greater presence on the East Side today, but that’s because it has grown in size, not because it is trying to make up for previous accusations of redlining, he said.
“Ten years ago, our involvement [on the East Side] certainly wasn’t what you’re seeing today,” Nasca said. “We were looking to participate more, but we were participating within our means and our reach. As we have grown, we have built more resources to be able to do more.”
Shortly after accusations were made against Evans, Five Star Bank, the banking arm of Financial Institutions in Warsaw, New York, was also accused of redlining by the state Attorney General. Five Star, which has been growing its presence in the Buffalo market for several years, wound up settling the charges for $900,000 and agreeing to open two branches in the city of Rochester.
KeyBank is currently being accused of redlining by the National Community Reinvestment Coalition. In a 2022 report, the group said that KeyBank is engaging in systemic redlining by making very few home purchase loans in certain neighborhoods where the majority of residents are Black. Buffalo is one of several cities where the bank’s mortgage lending “effectively wall[ed] out Black neighborhoods,” especially parts of the East Side, the report said.
KeyBank denied the allegations. In March, the coalition asked regulators to investigate the bank’s mortgage lending practices.
Beyond providing more credit, some community members believe that banks should be playing a larger role in addressing other needs on the East Side. And the list of needs runs the gamut from more grocery stores to safe, affordable housing to infrastructure improvements such as street and sidewalk repairs.
Alexander Wright is founder of the African Heritage Food Co-op, an initiative launched in 2016 to address the dearth of grocery store options on the East Side, where he grew up. Wright said that while banks’ philanthropic efforts are important, banks in general “need to be in a place of remediation” to fix underlying issues that the industry, as a whole, helped create. (After publication of this story, Wright left his job as CEO of the African Heritage Food Co-Op.)
Aside from charitable donations, banks should be finding more ways to work directly with East Side business owners and entrepreneurs, helping them with capital-building support along the way, Wright said. One place to start would be technical assistance by way of bank volunteers.
“Banks are always looking to volunteer. ‘Hey, want to come out and paint a fence? Want to come out and do a garden?'” Wright said. “No. Come out here and help Keshia with bookkeeping. Come out here and do QuickBooks classes for folks. Bring out tax experts. Because these are things that befuddle a lot of small businesses. Who is your marketing person? Bring that person out here. Because those are the things that are going to build the business to self-sufficiency.
“Anything short of the capacity-building … that will allow folks to rise to the occasion and be self-sufficient I think is almost a waste,” Wright added. “We don’t need them to lead the plan. What we need them to do is be in the community and [be] hearing the plan and supporting it.”
Parker, of Open Buffalo, has similar thoughts about the role that banks should play. One day, soon after the massacre, an ATM appeared down the street from Tops, next to the library that sits across the street from Parker’s office. Soon after the ATM was installed, Parker began fielding questions from area residents who were skeptical of the machine and wanted to know if it was legitimate. But Parker didn’t have any information to share with them. “There was no outreach. There was no community engagement. So I’m like, ‘Let me investigate,'” she said. “I think that’s a symptom of how investment is done in Black communities, even though it may be well-intentioned.”
As it turns out, the temporary ATM belonged to JPMorgan Chase. The megabank has had a commercial banking presence in Buffalo for years, but it didn’t operate a retail branch in the region until last year. Today it has four branches in operation and plans to open another two by the end of the year, a spokesperson said.
After the Tops shooting, the governor’s office reached out to Chase asking if the bank could help in some way, the spokesperson said in response to the skepticism. The spokesperson said that while the Chase retail brand is new to the Buffalo region, the company has been active in the market for decades by way of commercial banking, private banking, credit card lending, home lending and other businesses.
In addition to the ATM, the bank provided funding to local organizations including FeedMore Western New York, which distributes food throughout the region.
“We are committed to continuing our support for Buffalo and helping the community increase access to opportunities that build wealth and economic empowerment,” the spokesperson said in an email.
In the year since the massacre, there has been some progress by banks in terms of their interest in listening to the East Side community and learning about its needs, said Nicholas. But he hasn’t felt an air of urgency from the banking community to tackle the issues right now.
“I do experience banks being a little more open to figuring out what their role is, but it’s slow. It’s slow,” said Nicholas. The senior pastor of the Lincoln Memorial United Methodist Church, located about a mile north from Tops, Nicholas is part of a 13-member local advisory committee for the New York arm of Local Initiatives Support Coalition, or LISC. The group is focused on mobilizing resources, including banks, to address affordable housing in Western New York, specifically in the inner city, as well as training minority developers and connecting them to potential investors, Nicholas said.
Of the 13 members, seven are from banks — one each from M&T, Bank of America, BankOnBuffalo, Evans and KeyBank, and two members from Citizens Financial Group. One of the priorities of LISC NY is health equity, and the fact that banks are becoming more engaged in looking at health disparities is promising, Nicholas said. Still, they have more work to do, he said.
“I need them to think more on how to strengthen and build the economy on the East Side and provide leadership around that, not only to provide charitable things, but using sound business and banking and community development principles to say, ‘OK, if we’re going to invest in this community, these are the types of things that need to happen in this community,’ and then encourage their partners and other people they work with … to come fully in on the East Side.”
Some bankers agree with the community activists.
“Putting a branch in is great. Having a bank on wheels is great,” said Noah of BankOnBuffalo. “But if you’re not embedded in the community, listening to the community and trying to improve it, you’re not creating that wealth and creating a better lifestyle for everyone.”
What could make a substantial difference in terms of banks’ impact on the community is a combination of collaboration and leadership, said Taylor. He supports the idea of banks leading the charge on the creation of a comprehensive redevelopment and reinvestment plan for the East Side, and then investing accordingly and collaboratively through their charitable foundations.
“All of them have these foundations,” Taylor said. “You can either spend that money in a strategic and intentional way designed to develop a community for the existing population, or you can spend that money alone in piecemeal, siloed, sectorial fashion that will look good on an annual report, but won’t generate transformational and generational changes inside a community.”
Banks might be incentivized to work together because it could mean two things for them, according to Taylor: First, they’d have an opportunity to spend money in a way that would have maximum impact on the East Side, and second, if done right, the city and the banks could become a model of the way to create high levels of diversity, equity and inclusion in an urban area.
“If you prove how to do that, all that does is open up other markets of consumption all over the country because people want to figure out how to do that same thing,” Taylor said.
Some of that is already happening, at least on a bank-by-bank case, said KeyBank’s Owunwanne. Through the KeyBank Foundation, the company is able to leverage different relationships that connect nonprofits to other entities and corporations that can provide help.
“I see this as an opportunity for us to make not just incremental changes, but monumental changes … as part of a larger group,” Owunwanne said “Again, I say that not to absolve the bank of any responsibility, but just as a larger group.”
Downstairs from Parker’s office, Golden Cup Coffee, a roastery and cafe run by a husband and wife team, and some other Jefferson Avenue businesses are trying to build up a business association for existing and potential Jefferson-area businesses. Parker imagined what the group could accomplish if one of the banks could provide someone on a part-time basis to facilitate conversations, provide administrative support and coordinate marketing efforts.
“In the grand scheme of things, when we’re talking about a multimillion dollar [bank], a part-time employee specifically dedicated to relationship-building and building out coalitions, it sounds like a small thing,” Parker said. “But that’s transformational.”
Mr. Cooper’s chairman and CEO, Jay Bray, said the company delivered “strong margins in both servicing and operations, while Xome generated higher sales this quarter.”
Bray said Mr. Cooper is working on three strategic initiatives: drive further reductions in costs, which will help to generate greater operating leverage and deploy capital to portfolio growth; improve the direct-to-consumer platform contribution to the overall profitability, exploring new products; and grow the subservicing business, which provides incremental income, including gain on sale from recapture without tying up capital or liquidity.
The company’s servicing portfolio ended the second quarter with a pretax operating income of $182 million, compared to $157 million in the previous quarter. Based on these results, executives said Mr. Cooper raised its full-year guidance for operating income by 17%, from $600 million to $700 million.
Mr. Cooper had 4.3 million customers and $882 billion in unpaid principal balance (UPB) at the end of June, compared to $853 billion at the end of March. The servicing portfolio grew because of Rushmore’s special servicing platform acquisition, which brought about 300 employees to Mr. Cooper.
Other deals may bring the servicing portfolio to $957 billion, including $83 billion from the acquisition of Home Point Capital and $25 billion in pending bulk acquisitions, executives said.
The Home Point deal is expected to close in the third quarter, with loans onboarding in late 2023 or early 2024, executives told analysts. On Monday, Heisman Merger Sub, Mr. Cooper’s subsidiary, extended the expiration date of its offer to acquire all of Home Point’s outstanding shares of common stock for $2.33 per share.
“We continue to see a buyers market for MSRs, with plenty of attractive pools trading at unlevered pretax yields in the low double digits for conventional loans, and even higher for Ginnie Mae, which is exactly what we guided you to expect when we shared our proprietary forecasts late last year,” Chris Marshall, vice chairman and president, told analysts.
According to Marshall, “We’re now seeing a sharp increase in regional banks bringing MSR pools to market,” and one of the reasons is the expected new capital requirements for these financial institutions.
Regarding its subservicing business, Mr. Cooper is in the process of launching an MSR Fund. “We’re expecting our acquisition of the platform company to close in the third quarter subject to regulatory approval, positioning us to begin a fundraising campaign in the fourth quarter,” Marshall said.
Mortgage originations
Mr. Cooper’s origination business, which focuses on acquiring loans through the correspondent channel and refinancing existing loans through the direct-to-consumer channel, delivered $38 million in pretax operating income, compared to a $23 million net income in the previous quarter.
“During the quarter, we saw continued outstanding execution by our DTC platform and somewhat more rational competition in the corresponding channel,” Marshall said. “However, with mortgage rates hovering at 7%, we’re going to keep our guidance unchanged at $20 to $30 million [net income] per quarter.”
Mr. Cooper’s funded volume increased to $3.8 billion in the second quarter of 2023 from $2.7 billion in the previous quarter.
Direct-to-consumer originations reached $1.6 billion, compared to $1.4 billion in the previous quarter. Meanwhile, according to executives, the correspondent channel was responsible for $2.2 billion in Q2 2023, compared to $1.3 billion in Q1 2023, due to more rational pricing.
Mr. Cooper had strong second-quarter earnings, said a team of equity analysts at Jeffries.
“While volumes in the originations segment improved, ancillary revenues in servicing primarily drove the beat,” the Jefferies analysts wrote in a report. “As COOP is now occupied with closing the HMPT acquisition, we anticipate the company taking a step back from the bulk market in the N/T.”
At BTIG, analysts said it was a “good quarter,” reflecting the benefit of slow prepayment speeds and significant operating leverage.
“We think earnings visibility has strengthened as the company has further scaled its servicing portfolio, and the expense load appears relatively well-calibrated for the current interest rate environment. We also see enough liquidity to support additional bulk MSR purchases, as banks, in all likelihood, will be net sellers of servicing over the foreseeable future.”
To support its acquisition mode, Mr. Cooper said it has strong liquidity. The company had $2.2 billion in liquidity at the end of June, including $517 million in unrestricted cash.
Mr. Cooper’s share was trading at $57.17 on Wednesday around noon, up 5.73% from the previous closing. The firm’s board of directors has authorized stock repurchases of $200 million.
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Home prices rose to record levels in May thanks to a lack of supply of existing houses for sale.
Home prices rose 0.7% nationally compared with April at a seasonally adjusted rate — hitting a record, according to a report from Black Knight released on Monday. Additionally, home prices in May were 0.1% higher than the year before.
GOP WHIP REPORTS MASSIVE FUNDRAISING HAUL AS PARTY FIGHTS TO KEEP HOUSE MAJORITY
Even as the spring homebuying season comes to an end and mortgage rates push to multimonth highs, there are signs that the housing market is reheating following a slump last year. Black Knight’s vice president of enterprise research, Andy Walden, noted that five back-to-back months of price increases have now reversed the pullback that began last July.
“There is no doubt that the housing market has reignited from a home price perspective,” he said. “Firming prices have now fully erased the pullback we tracked through the last half of 2022 and lifted the seasonally adjusted Black Knight HPI to a new record high in May.”
More than half of the 50 biggest U.S. housing markets are seeing prices at or above their 2022 peaks. A mere eight of the top 50 markets are still down more than 5% from their zeniths.
The Federal Reserve has been raising interest rates for more than a year and has penciled in further hikes after holding off last month.
As of this past week, the average rate on a 30-year fixed-rate mortgage was 6.81%, up a tenth of a percentage point from the week before, according to Freddie Mac. Mortgage rates are now the highest they have been since November when they skyrocketed to above 7%.
This most recent number is up from a recent trough of 6.08% registered in February. The rate on an average 15-year fixed-rate mortgage is now sitting at 6.24%.
During the outset of the pandemic, the Fed slashed rates to near-zero levels to ignite economic activity and stave off a recession. That caused mortgage rates to plunge to super low levels — during much of 2020 and 2021, homebuyers were able to lock in mortgages at below 3%.
Because mortgage rates have surged so much, owners of existing homes who have mortgages with rates locked in before 2022 are shying away from selling because they want to keep their historically low rates. That means less existing home inventory on the market, making new homes more of a hot commodity.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
As a result, sales of new homes have been ticking up to make up the slack. The most recent new home sales data for May showed that sales rose 12.2% to a seasonally adjusted annual rate of 763,000, according to the U.S. Census Bureau, far above the number expected by forecasters.
The lack of inventory has also had the effect of lifting home construction. In June, it was revealed that the number of multifamily units under construction hit a record in May — 994,000. That surge in supply should hopefully help lower rent pressures for families across the country.
The core of the GEM is serving founders. Beyond being in the know about industry developments, a big part of founders’ lives is fundraising. We help on that front in three primary ways:
Practice Pitches: Usually a 5-7 minute pitch and 20-30 minutes of Q&A/feedback with 8-12 peers (Rabbu was the most recent “hot seat” participant)
Office Hours: Discussion about raising seed / Series A capital among peers.
Investor-Founder Connections: We put investment opportunities in front of the 30+ VCs and angel investors in the GEM (and, sometimes, to relevant investors outside of the community).
We’re holding our next early-stage fundraising office hours next week (Tuesday, December 8th) and have room for a few non-GEM members to join. In addition to founders in the VC/angel trenches, Jonathan Bednarsh and Mark Hurst will be attending to lend their experience and perspective to the conversation.
Logistics:
Google Meeting. Note this is NOT a webinar.
Tuesday December 8th at 11 AM PST / 2 PM EST.
Limited to 15 participants.
Are you a founder actively raising a pre-seed, seed, or Series A interested in attending? Email me your pitch deck (drew at geekestatelabs dot com) and I’ll provide a calendar invite. We have room for about 5 more.