How Self-Help's Financial Soundness Supports its Community Development Work
January 6, 2009
Myth: Self-Help has amassed financial resources for its own benefit.
Fact: Self-Help has built its financial soundness in order to continue its community development work.
Self-Help has strict policies that prevent insider loans or other self-gain by executives. Self-Help does not allow ANY senior official or board member (or their family members) to borrow AT ALL from Self-Help. It is the only retail financial institution we know of that does not allow its senior officials to even get personal credit cards. CR League has resurrected the false allegation of insider loans—even though they know it was refuted by state and federal regulators[i]— in an attempt to damage Self-Help's reputation.
In addition, all Self-Help executives are subject to a company-wide salary cap: currently $71,000 annually for North Carolina.[ii] Self-Help's management works there for many reasons, but getting rich isn't one of them.
Self-Help uses grants from government and private funders to support lending —at reasonable rates—to higher-risk borrowers and in communities that are underserved by conventional lenders. For example, grants help support Self-Help's loans to childcare facilities in North Carolina, which carry only a 5 percent interest rate on average. Similarly, Self-Help makes loans to public charter schools that are often at below-market rates and with less-than-full collateral. At the same time, Self-Help provides many hours of (free) technical assistance to small business owners, and makes small business loans for as little at $2,000; both are things that conventional lenders cannot afford to do. Grant funds also provide downpayment assistance for families to become homeowners without putting substantial money down, and support Self-Help's work to revitalize neighborhoods by fixing up dilapidated houses and reselling them to first-time homebuyers.
Self-Help only forecloses on loans as a last resort. Its low loss rate (well under 1% per year throughout a 24-year lending history) shows this is a rare occurrence. Self-Help is a lender and not a government give-away program. Self-Help tells borrowers very clearly up front that it will collect and foreclose if they do not repay their loans; otherwise it would not be able to help other borrowers in the future. With 60,000 Self-Help loans financed by Self-Help Credit Union and its nonprofit affiliate, Self-Help Ventures Fund, to higher-risk borrowers, it is inevitable—although still unfortunate—that some foreclosures would occur. Self-Help works closely with its home and commercial borrowers so that foreclosure is an absolute last resort.
Self-Help's commercial real estate investments support its work and help other small businesses and nonprofits. When finding office space for staff, Self-Help has found it often makes economic sense to own rather than rent—it's a better use of limited resources and protects against rising rents—and has followed this practice in North Carolina for the last 20 years. Many nonprofits own their buildings, including nonprofit industry associations such as the Mortgage Bankers Association.[iii] Further, Self-Help makes space in its buildings available at attractive rents to other nonprofits and small businesses in North Carolina and D.C.
[i] Fight Between North Carolina Credit Union and Payday Lenders Gets Uglier, Aims For A Bigger Audience. Credit Union Times (November 2005). Available at http://www.cutimes.com/2005/10/19/fight-between-north-carolina-credit-union-and-payday-lenders-gets-uglier-aims-for-a-bigger-audience and Frank Norton. Report criticizes credit union. The News & Observer (November 4, 2005). Also, Badge of Honor (editorial). The News & Observer (November 8, 2005).
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