Reverse Mortgage Estimates Online

A new Web site allows homeowners to figure out the benefits and costs of a reverse mortgage.

Operated by the nonprofit National Center for Home Equity Conversion, the Web site at www.reverse.org asks users to type in their date of birth, and the value and location of their home.

Then it calculates how much cash they may obtain all at once, every month or whenever they choose. They also see how much the loan costs.

Reverse mortgages are loans taken out on the equity in a home, usually by an older homeowner. They do not have to be repaid for as long as borrowers live in their homes.

No repayment is due until the last surviving borrower dies, sells the home or permanently moves away.

The NCHEC Web site also includes answers to frequently asked questions about reverse mortgages, a glossary of reverse mortgage terms and a current directory of lenders and counselors who pledge to uphold the center’s codes of conduct.

Consumers without Internet access can obtain a copy of a 132-page book published by the center called “Reverse Mortgages for Beginners” by sending a check or money order for $14.95 to NCHEC at 7373 147th St., Suite 115, Apple Valley, Minn. 55124.

(by Terry Nagel. The San Francisco Chronicle. Reprinted with permission.)

Funds For Hmong Farmers

The Central Valley’s hardworking Hmong farmers received their first energizing shot of loan capital from a $500,000 loan program recently established to assist them by Union Bank of California. The first loan, a $20,000 line of credit, will enable one Hmong farmer to increase the crop yield on his ten acres. The remainder of the funds will provide the means for fellow Hmong farmers to buy land, expand crop production, and purchase equipment and supplies.

The loans will create a bridge towards self-sufficiency for many of the Hmong farmers who are struggling to make a living in the Merced-Fresno area. Originally from Laos, the Hmongs are mountain tribal people, primarily farmers, some of whom settled in the U.S. after fleeing their native country after the Vietnam War.

The loan program is the end result of several years of community development groundwork completed by a consortium of banks and utilities.

(Information obtained from The Wall Street Journal)

California’s Revolving Loan Funds � New Study Released

The first comprehensive study of California’s revolving loan funds (RLFs), the California RLF Profile, will be released this summer by the Corporation for Enterprise Development (CFED), a private, nonprofit organization that specializes in economic development policy. The California RLF Profile is part of a national research and policy project, Counting on Local Capital, which aims to document the size, level of activity and significance of revolving loan funds as sources of local capital for business and economic development.

Preliminary findings from surveys of 110 RLFs show that these funds manage $291 million in capital, with 61% of this capital provided by the public sector and $71 million by the private sector. The final report will include detailed information regarding sources of capitalization for RLFs, portfolio performance, economic development and community impact, types of entrepreneurs and businesses served, and the demand for securitization among RLFs.

To order a copy of the California RLF Profile, fax your request to Andrea Levere at (202) 408-9793 or e-mail at cfed@cfed.org. For current information on the Counting on Local Capital project, check CFED’s Web site at www.cfed.org.

A Boost For Rural Businesses From USDA

It’s a relatively new program, yet it has shown dramatic growth. It’s the Business and Industry (B&I) program, a guaranteed loan program administered by the U.S. Department of Agriculture’s (USDA) Rural Development. Through this program, business loans of up to $10 million can receive federal guarantees.

The program is lender-driven. The USDA guarantees the loan rather than lending directly. Commercial lenders request the guarantee and, if approved, they make and service the loan. Currently in California more than 50 banks are participating in the program as lenders.

The guarantees are restricted to business loans in rural areas. These are defined as areas outside of the developed periphery of communities of 50,000 or more based on the 1990 Census.

Most types of businesses are eligible: manufacturing, retail, service, etc. In fact, one of the unique niches of the program is its ability to guarantee loans for new commercial lease space, such as office building and strip center projects. There is no owner-occupancy requirement on such projects. The B&I program can also be used for nonprofit organizations and community facility projects.

For more information about the B&I program, contact USDA Rural Development at (530) 668-2070.

Community Development Investments Guide Available

The Federal Reserve System’s updated Directory: Community Development Investments is a great resource for bankers, community development groups and others interested in community development finance. It is currently available via the Federal Reserve’s Web site or by mail.

The 1998 directory contains 159 profiles of community development investments made through late 1997 by bank holding companies and state-chartered banks supervised by the Federal Reserve System. The profiles highlight the activities of community development corporations, limited liability companies and limited partnerships in which institutions have invested. Each profile describes the amount of initial capital invested by an institution and community development projects undertaken or planned. Also listed are contact persons who can provide additional information on community development corporation organization and operations.

The directory can be downloaded from the Federal Reserve’s Web site: www.bog.frb.fed.us/DCCA/Directory.

Printed copies will be mailed to you by contacting June Yambao at the Federal Reserve Bank of San Francisco. Please fax Ms. Yambao your name, affiliation, address, telephone number, the name of the publication and the number of copies needed to fax number: (415) 393-1920.

Growth Capital Fund for San Diego’s Small Firms

Smaller, early-stage growth businesses in San Diego can turn to a $1 million public revolving loan fund for working capital. The EmTek Fund is a four-year-old loan funding program operated by the City of San Diego’s Economic Development Division. The program provides working capital financing to smaller, early-stage growth firms that are unable to obtain full private financing on their own.

EmTek’s typical borrower is a small firm in a less capital intensive industry seeking growth capital to launch a product. The firm is usually unable to provide the historical debt service coverage or collateral needed to obtain a traditional bank or Small Business Administration loan. Similarly, the firm typically lacks the transaction size and tremendous upside potential needed to obtain venture capital equity. EmTek requires at least a matching amount of new private investment. Participating with either commercial lending institutions or equity investors, EmTek usually provides 20 percent to 50 percent of a financing round of $100,000 to $1 million. EmTek supplies this financing either by subordinating to a bank loan or leveraging angel/strategic partner investor equity funding. EmTek takes its return in two ways -- a nominal 8 percent interest rate and upside participation in the form of royalties or warrants.

For more information about the EmTek Fund, contact Mark Sullivan, business finance manager of the City of San Diego’s Economic Development Division at (619) 236-6235.

Free subscriptions and additional copies are available upon request from the Community Affairs Department, Federal Reserve Bank of San Francisco, 101 Market Street, San Francisco, California 94105, or call (415) 974-2978.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or the Federal Reserve System. Material herein may be reprinted or abstracted as long as Community Investments is credited. Please provide our Community Affairs Department with a copy of any publication in which such material is reprinted.