SBA Creates Secondary Market Guaranty Program for 504 First Mortgage Loan Pools

Regulations published by the U.S. Small Business Administration will create a secondary market guarantee program to provide greater liquidity for lenders and expand access to capital for small businesses. Funded through the American Recovery and Reinvestment Act, the new program would encourage sales into the secondary market of the “first mortgage” portion of small business financing made possible through the SBA’s 504 Certified Development Company (CDC) program. As a result of the economic recession and the disruption in the credit markets, there has been a significant decline in secondary market activity for 504 first mortgage loans.

“This new program will stimulate activity in the secondary market, ensuring lenders have a place to sell first mortgage loans on their books and in turn have liquidity to make more loans to small businesses,” SBA Administrator Karen Mills said. “This is another tool in our Recovery toolbox that will expand access to the capital small businesses need to drive economic growth and create jobs.”

The 504 CDC program provides credit for the purchase of real estate and other fixed assets tied to a business’ expansion. Financing under the program includes three components: 1) a first mortgage or lien, which is made by a private commercial lender for 50 percent of the total project and does not come with a government guarantee, 2) a second mortgage or lien, which is made by a CDC for 40 percent of the total project and guaranteed fully by the SBA, and 3) borrower equity for the remaining 10 percent of the total project.

Under the new program, portions of eligible 504 first mortgages pooled by originators or broker dealers could be sold with an SBA guarantee to third-party investors in the secondary market. Lenders will retain at least 15 percent of each individual loan, pool originators will assume 5 percent of the risk, and the SBA will guarantee the remaining 80 percent. To be eligible to be included in a pool, the first mortgage must be associated with a 504 loan disbursed on or after Feb. 17, 2009. The program will be in place until Feb. 16, 2011, or until $3 billion in new pools are created, whichever occurs first.

SBA will begin accepting applications to become a pool originator from banks and broker dealers immediately, and expects to be operational for the settlement of pools in about 60 days.

For more information, lenders or broker/dealers can contact James W. Hammersley, Deputy Assistant Administrator for Policy and Strategic Planning at james.hammersley@sba.gov.

Austin Urban Market Focus of November 9 Economic Perspectives

Don and Sharon Ellerby, owners of Austin Urban Market, are the November 9 guests on Economic Perspectives on KAZI 88.7 FM, 5:30-6 p.m. Austin Urban Market was started in 2009 to encourage cooperative economics by providing Austin area artists and other entrepreneurs a showcase to market their products and services to the local community.  Austin Urban Market will be showcasing local entrepreneurs on November 14, 10 a.m. – 4 p.m. at the Villager Newspaper, 1223 Rosewood Ave. as part of the 2009 E.A.S.T. Austin Studio Tour.

Sharon Ellerby

Don and Sharon are also owners of African Visions which provides handmade natural & organic hair and skin care products and African and African American artwork, jewelry and accessories.

Don Ellerby is a native of Austin who has been involved with numerous community organizations and activities.  His volunteer work has included working on the City of Austin Parks and Recreation Department Black History Month Heritage Festival, Texas Legislative Black Caucus, and Texas Senate Black Caucus.

Sharon Ellerby is also a native of Austin.   She has been featured in Southern Living Magazine’s People & Places Making a Difference (March 2009) and the Villager Newspaper (March 2009) and won the Big Austin’s Citibank Foundation/Women & Co. Award in April 2009.

African American Unemployment Continues to Rise

Despite news of an improving economic picture for the nation, national unemployment continued at historic highs coming in at 15.7 percent for African Americans, 13.1 percent for Hispanics, and overall unemployment of 10.2 percent for the month of October according to the U.S. Bureau of Labor Statistics monthly update on employment.

The 15.7 unemployment rate for African Americans was the highest since August 1984 when it reached 16 percent.  The overall unemployment rate of 10.2 percent was the highest since April 1983 when it also was 10.2 percent.

African American male unemployment was 17.1 percent and African American female unemployment was 12.4 percent in October.

Industry Employment

Total nonfarm payroll employment declined by 190,000 in October. In the most recent 3 months, job losses have averaged 188,000 per month, compared with losses averaging 357,000 during the prior 3 months. In contrast, losses averaged 645,000 per month from November 2008 to April 2009. Since December 2007, payroll employment has fallen by 7.3 million.

Health care employment continued to increase in October (29,000). Since the start of the recession, health care has added 597,000 jobs.

Construction employment decreased by 62,000 in October. Monthly job losses have averaged 67,000 during the most recent 6 months, compared with an average decline of 117,000 during the prior 6 months. October job losses were concentrated in nonresidential specialty trade contractors (-30,000) and in heavy construction (-14,000). Since December 2007, employment in construction has fallen by 1.6 million.

Manufacturing continued to shed jobs (-61,000) in October, with losses in both durable and nondurable goods production. Over the past 4 months, job losses in manufacturing have averaged 51,000 per month, compared with an average monthly loss of 161,000 from October 2008 through June 2009. Manufacturing employment has fallen by 2.1 million since December 2007.

Retail trade lost 40,000 jobs in October. Employment declines were concentrated in sporting goods, hobby, book, and music stores (-16,000) and in department stores (-11,000). Employment in transportation and warehousing decreased by 18,000 in October.

Temporary help services has added 44,000 jobs since July, including 34,000 in October. From January 2008 through July 2009, temporary help services had lost an average of 44,000 jobs per month.

The average workweek for production and nonsupervisory workers on private nonfarm payrolls was unchanged at 33.0 hours in October. The manufacturing workweek rose by 0.1 hour to 40.0 hours, and factory overtime increased by 0.2 hour over the month.

In October, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls rose by 5 cents, or 0.3 percent, to $18.72. Over the past 12 months, average hourly earnings have risen by 2.4 percent, while average weekly earnings have risen by only 0.9 percent due to declines in the average workweek.

Economic and Job Trends Focus of November 2 Economic Perspectives

The state of the economy and job trends will be the focus of the November 2 Economic Perspectives’ interview with Brian Kelsey, Director of Community and Economic Development at the Capital Area Council of Governments (CAPCOG) on KAZI 88.7 FM.  Kelsey will discuss local, state, and federal trends in the economy, where job opportunities will be in the future, and racial disparities in unemployment.

Brian Kelsey

Kelsey has worked in economic development at the local, regional, and federal levels, focusing on research and data analysis. His work at CAPCOG involves tracking regional competitiveness issues and providing consulting services to cities, counties, and local economic and workforce development organizations.

Before joining CAPCOG in 2005, Brian worked for the Council on Competitiveness in Washington DC, where he co-authored a popular guidebook on regional economic development. Brian started his career in a local economic development fellowship program in Sonoma County, California.

Brian earned a master’s degree from the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin. His bachelor’s degree in economics and history is from the University of North Carolina at Chapel Hill, where graduated Phi Beta Kappa with highest distinction.

Recovery Act Stimulates Increase in SBA Loans

Changes under the American Recovery and Reinvestment Act to U.S. Small Business Administration loan programs led to a rebound in SBA-backed loans for small businesses and greater access to much-needed capital.

Since the Recovery Act was signed on Feb. 17, SBA has supported more than $11.3 billion in lending to small businesses through its two largest loan programs and seen its average weekly dollar volume increase by more than 60 percent in comparison to the weeks before the Recovery Act.  Additionally, the average number of loans approved per week has increased by more than 50 percent. The dollar volume for September 2009 ($1.9 billion) was the highest single-month total since August 2007.

“These numbers, along with our conversations with lenders and small business owners around the country, show that the Recovery Act hit the mark,” SBA Administrator Karen Mills said. “The Recovery Act was critical to unlocking the market and as a result we’ve helped put billions of dollars of much needed capital in the hands of small business owners during this tough economic time, and brought more than 1,200 lenders back into SBA’s loan programs.  With half the nation’s workforce either working for or owning a small business, these dollars played a critical role in driving economic recovery across the country.”

Karen Mills

As a result of the credit crunch, SBA lending saw a significant decline in the fall of 2008 and early 2009. For the seven weeks prior to the Recovery Act being signed, SBA’s average weekly dollar volume was $165 million.  The average weekly average since the Recovery Act was signed, through Sept. 25, was $275 million.  

Mills cited Recovery Act provisions that reduced fees on SBA loans and raised SBA guarantees to 90 percent, as well as actions that reinvigorated the secondary markets for SBA-guaranteed loans as especially helpful in improving access to SBA-backed credit. 

Overall, SBA loan approvals for the fiscal year amounted to a combined 50,829 loans (preliminary number) worth $13.1 billion under the 7(a) and 504 loan programs.  The comparable figures for fiscal year 2008, which ended just as the nation’s economy entered the financial crisis, were 78,317 and $17.96 billion.  

The dollar volume totals for SBA loans in fiscal year 2009, which ended Sept. 30, do not include loans made under the agency’s ARC, (America’s Recovery Capital) loan program.  Launched on June 15, the agency has approved 2,715 ARC loans worth more than $88 million as of September 29.  Thus far, nearly 740 lenders have made ARC loans, and the number of participating lenders is increasing by an average of about 50 per week.

For more information about these and other SBA programs, visit the SBA Web site at www.sba.gov, or contact your local SBA field office.  You can find contact information for your local SBA office at http://www.sba.gov/localresources/index.html .

Financial Services Committee Approves Maloney-Frank bill to Speed Up Credit Card Reforms

The Financial Services Committee unanimously passed H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, which would move up the effective date for credit card reforms from February 22 to December 1. The bill, sponsored by Rep. Carolyn Maloney (D-NY) and Financial Services Committee Chairman Barney Frank (D-MA), changes the date by which banks and credit card issuers would have to comply with the remaining provisions of the Credit CARD Act, new consumer-friendly legislation signed by President Obama earlier this year. The bill now moves to the House floor for consideration.

Rep. Carol Maloney

Rep. Carolyn Maloney (D-NY) said: “This marks a step forward in bringing consumers badly-needed relief,” Maloney said. “Just in time for the holidays, Congress can lock in a ban on interest rate hikes on existing balances and the tricks that have kept far too many consumers trapped in a never-ending cycle of debt: tricks like double-cycle billing, due-date gamesmanship, and applying payments to lowest rates first.”

“The card companies brought this on themselves, by using the time between when the bill was signed by President Obama and when it goes into effect to ‘get in under the wire’ with a last gasp of unfair practices,” Maloney said. “Today’s action shows Congress can act with speed when necessary to provide consumers the protection they need.”

In reporting the bill out, the committee voted to keep the original effective date of February 22, 2010 for prepaid gift cards (which are now all printed and on the way to retailers for the holiday season), and for small credit card issuers with under 2 million cardholder accounts. The six largest card issuers control over 80% of the credit card market.

Strategies for Career Success Focus of October 26 Economic Perspectives

In this time of economic and job insecurity, people need to make their mark and prove that they are essential and indispensable to their company. According to Carla Harris, a twenty year veteran of Wall Street, knowledge and diligence simply aren’t enough to successfully climb the corporate ladder in today’s competitive work environment.  The October 26 edition of Economic Perspectives on KAZI 88.7 FM features an interview with Harris, author of EXPECT TO WIN: Proven Strategies for Success from a Wall Street Vet.   In her book Carla looks closely at her own ascent to the top and offers strategies that will ensure career advancement and success in any industry.

During her twenty-year career on Wall Street, Harris she’s executed the IPO’s for UPS, Martha Stewart Living Omnimedia, and Redback, as well as the $3.2 billion common stock transaction for Immunex, one of the largest biotechnology offerings in United States History. While climbing the competitive corporate ladder, Harris sought guidance from her mentors and superiors, but found some of their career advice too general. As her own career advanced, Harris built her “key survival tools” or “pearls,” and vowed when she reached upper management and people looked to her for advice, she would provide them with what they needed to do to fulfill their true career potential.

In EXPECT TO WIN is Harris offers advice in an easy-to-read format using “Carla’s Pearls.” Her proven strategies of success include:

• You Are the Captain of Your Career: The 90 Day Rule
• Leveraging Your Voice: Articulate Your Views and Expectations
• Power in the Network: Competitive Advantage
• Expect to Win: Show Up With Your Best Self Every Day

Carla Harris

Carla Harris is currently a managing director for Morgan Stanley and has spent over seventeen years of her career in capital markets. She has been the recipient of numerous honors and awards, including Black Enterprise’s “75 Most Powerful Women in Business” (2006), Black Enterprise’s “50 Most Powerful Women in Business” (2006), Fortune’s “The Most Influential List” (2005), Ebony Magazine’s “15 Corporate Women at the Top” (2004), Essence Magazine’s list of “The 50 Women Who Are Shaping the World” (2003), and Fortune’s list of “The 50 Most Powerful Black Executives in America” (2002).

The Silent Depression: How are Minorities Faring in the Economic Downturn

On Wednesday, September 23, 2009 at 10:00 a.m., the House Oversight and Government Reform Committee held a hearing titled “The Silent Depression: How are Minorities Faring in the Economic Downturn.” The hearing examined the disparate effects of the current economic downturn on minority populations in the United States, with particular attention on the recent increases in unemployment and home foreclosures. Additionally, the hearing explored the effectiveness of Federal government initiatives in ensuring that minority populations are adequately included in the nation’s efforts toward economic recovery.  Enclosed below is an excerpt from the written testoimony provided by Marc Morial, President of the National Urban League.

The State of Africans Americans in Our National Economy

I do not say this to alarm or inflame.  I am just stating a plain fact based upon our experience that includes decades of service delivery and research.  We see it in the faces of the people who come to us for help each year.  We hear it in the voices of the men and women seeking jobs that just aren’t there.  We feel it in the pain of those who come to us for help in keeping a roof over their heads.

Marc Morial

And our direct experience is borne out by our empirical research.  Each year, the National Urban League publishes the Equality Index as part of our annual State of Black America report.  The Equality Index is an indicator of the relative status of blacks and whites in America.  It consists of five sub-indices: economics, education, health, social justice and civic engagement. Equality is indicated by an index of 100%, therefore an Equality Index less than 100% suggests that blacks are doing worse relative to whites, and an Equality Index greater than 100% suggests that blacks are doing better than whites. 

According to our 2009 Equality Index, African Americans are at about 71% compared with white Americans.  The Economic Index is 57.4%.

According to our 2009 State of Black America Report: nationally, the typical African-American family today possesses less than 10 percent of the net worth of the average white family; almost 30 percent of black families have zero or negative net worth; and far fewer blacks than whites benefit from inherited wealth or assets.

While this is but a snapshot, it paints a dire picture.  Among other things, it illustrates that African Americans just don’t have the cushion that protects us from economic catastrophe when an economy goes into freefall.  

We are starting to see some hopeful signs in other areas of the economy that indicate we may be turning course.  Of course, the job numbers are a lagging indicator, so we hope that they will begin to improve as other areas of the economy begin to point to recovery.

However, even if this is the case, it does not necessarily mean that the African American community will be out of the woods.  In fact, our long-term research indicates a troubling trend that must be proactively reversed.

Catching Up From the End of the Line

According to our State of Black America 2009, African Americans have been doing progressively worse in each economic expansions.  For example, median household income increased during the 1991 expansion, but declined in the 2001 expansion.  

During the first six years of the 1991-2001 recovery, real median income for African-American households grew by 15.6 percent while the real median income of white households grew by 8.9 percent.   Poverty rates declined by 19 percent and 8.5 percent, respectively.  For the duration of the 1992 expansion, real median household income grew by 23.6 percent for African Americans and by 13 percent for whites, while poverty rates declined by 30.6 percent and 17 percent, respectively.  

Although unemployment declined for both groups during each of the most recent expansions, the six-year decline for African Americans during the 1991-2001 expansion was nearly six times greater than the decline during the 2001-2007 expansion.  For whites, the magnitude of the difference was thirteen times.

Between 2001 and 2007, whites saw a net gain in the rate of homeownership (1.2 percent) while African Americans experienced a net loss (-1.0 percent)

To read the entire written testimony of Morial go to: http://groc.edgeboss.net/download/groc/fullcommittee/testimony-marcmorial.pdf.

To peruse all the written testimony provided at the haring go to http://oversight.house.gov/story.asp?ID=2604.

Strategies for Fostering Equitable Economic Growth in Central Texas Focus of October 12 Economic Perspectives

Ayleen Perez and Cloteal Haynes will discuss the PeopleFund Conference on Economic Opportunity on the October 12 edition of Economic Perspectives on KAZI 88.7 FM.  Perez is the communications and outreach manager of PeopleFund and Haynes is a long-time board member.  The Conference will be held October 24 at Austin Community College’s Eastview Campus.

Every year, the Conference unites community leaders, business owners, policy makers, developers, and artists to discuss the changes in the region and effective ways to further positive and equitable growth. From adult education and job opportunities to affordable housing options, the Conference addresses the key issues facing low- to moderate-income communities, and highlights strategies for creating opportunity for Central Texans. The program includes a regional and local economic snapshot, as well as breakout sessions addressing both community and business issues.

Ayleen Perez

Cloteal Haynes

The Conference will feature two keynote addresses.  The morning address will be delivered by Kenia Davalos, Los Angeles County Commissioner and Latino Business Advocate.  The afternoon keynote address will be delivered by President Obama’s newly appointed National Director of the U.S. Minority Business Development Agency, David Hinson.

PeopleFund provides affordable loans and counseling to ventures that create jobs, generate wealth, provide care for our children, and develop green technologies. It has invested over $20 million in underserved areas of Central Texas.

Ayleen Perez joined the PeopleFund staff in July 2009 as the Communications and Outreach Manager. In addition to community outreach and brand recognition, Ayleen’s responsibilities include planning and implementing public forums, such as our Conference on Economic Opportunity, that address critical economic needs in Central Texas. Born in Caracas, Venezuela but raised in Miami, Florida, Ayleen moved to Austin in November 2001 and has worked within the Latino community ever since.

Cloteal Haynes is managing partner of Hayes-Eaglin-Waters.  She has has over 30 years of planning and construction experience and has a masters degree from LBJ School of Public Affairs at The University of Texas at Austin.  Cloteal is a graduate of Leadership Austin and a board member of the Austin Black Contractors Association.

African American Unemployment Rises in September, Healthcare Job Gains Continue

African American unemployment grew from 15.1 percent in August to 15.4 percent in September according to the latest report of the U.S. Bureau of Labor Statistics. Overall unemployment was virtually unchanged increasing slightly from 9.7 percent in August to 9.8 percent in September.

Unemployment rates in September were 9.0 percent for whites and 12.7 percent for Hispanics. The unemployment rate for Asians was 7.4 percent, not seasonally adjusted.

Among the unemployed, the number of job losers and persons who completed temporary jobs rose by 603,000 to 10.4 million in September. The number of long-term unemployed (those jobless for 27 weeks and over) rose by 450,000 to 5.4 million. In September, 35.6 percent of unemployed persons were job-less for 27 weeks or more.

Industry Data

Employment in health care continued to increase in September (19,000), with the largest gain occurring in ambulatory health care services (15,000). Health care has added 559,000 jobs since the beginning of the recession, although the average monthly job gain thus far in 2009 (22,000) is down from the average monthly gain during 2008 (30,000).

In September, construction employment declined by 64,000. Monthly job losses averaged 66,000 from May through September, compared with an average of 117,000 per month from November to April. September job cuts were concentrated in the industry’s nonresidential components (-39,000) and in heavy construction (-12,000). Since December 2007, employment in construction has fallen by 1.5 million.

Employment in manufacturing fell by 51,000 in September. Over the past 3 months, job losses have averaged 53,000 per month, compared with an average monthly loss of 161,000 from October to June. Employment in manufacturing has contracted by 2.1 million since the onset of the recession.

In the service-providing sector, the number of jobs in retail trade fell by 39,000 in September. From April through September, retail employment has fallen by an average of 29,000 per month, compared with an average monthly loss of 68,000 for the prior 6-month period.

Government employment was down by 53,000 in September, with the largest decline occurring in the non-education component of local government (-24,000).

Employment in transportation and warehousing continued to trend down in September. The number of jobs in financial activities, professional and business services, leisure and hospitality, and information showed little or no change over the month.