Diversity Insight: How Hope CU Makes Loans in Economically Challenged Areas

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Contributing Writer

5 minutes

This community development financial institution works to counter racial disparities in the Deep South that deepen the pandemic’s impact.

The economic hammer of the COVID-19 pandemic has fallen especially hard on the Deep South, which only recently climbed back from the Great Recession, says Pearl Wicks, chief operating officer of $350 million/36,000-member Hope Credit Union, Jackson, Mississippi.

Total employment in Mississippi did not recover to pre-recession levels until October 2019, just months before the outbreak led to widespread business shutdowns. The United States as a nation crossed that threshold in May 2014, Wicks notes.

For Hope CU and the economically distressed communities it serves in Alabama, Arkansas, Louisiana, Mississippi and Tennessee, persistent racial disparities and the need for racial and economic justice amplify the impact of the pandemic. Through the end of August, 8% of the credit union’s consumer portfolio, 16% of mortgages and 10% of commercial loans, in total dollar amounts, were in active forbearance.

As an added burden, from March through the end of May, Hope CU members collectively paid out more than $100,000 to payday lenders, Wicks says. In fact, one member was forced to pay the full amount of the household’s stimulus check to one of those lenders.

“We believe the effects of all of these challenges facing our members will be long-lasting,” she cautions.
Wicks sums up her credit union’s approach to serve its member community through this latest crisis in simple terms: “We meet members where they are.” Its means to accomplish that aim encompass a strong network of community partners, an embrace of government support programs, and a continued commitment to individual counseling to help members build and rebuild their credit standing.

In a normal year, Hope CU makes 40 to 50 business loans. Since April, the credit union has processed more than 7,000 Paycheck Protection Program applications, with more than 2,900 loans approved for $85 million supporting more than 10,000 employees and their families. The majority of those borrowers were businesses owned or led by people of color and women “and, unfortunately, many of them were turned away by traditional lenders,” Wicks says. The loans went to hospitals, historically black colleges and universities, non-profit service providers and many sole proprietorships.

At one point, half of Hope CU’s staff had been redirected to help process PPP loan applications, and the credit union worked with StreetShares to get the applications processed through the system.

Another component of the federal stimulus program was designed to support consumers until the economy rebounds, but those checks did not reach all U.S. residents. Immigrants without a social security number did not qualify for those benefits, even though they pay federal income taxes, Wicks notes.

For those members and others who needed additional financial assistance, Hope CU reinstated its Power of Hope loan program, originally created to help sustain members in the aftermath of Hurricane Katrina. The program offers $1,000 loans for 12 months at 2% interest with no payments for the first 90 days.

“The loans are fully guaranteed by philanthropic resources and so, if needed, Hope can pay down the loan for borrowers experiencing ongoing COVID-related economic hardship,” she explains. “These loans are keeping cash in the hands of members during a critical time and also helping to protect their credit scores.”

Hope CU employees reached out proactively to members in the early stages of the pandemic “to gauge what their needs might be and to share with them some programs we were going to put in place to help them,” Wicks says. Requests for forbearance and other types of assistance have rolled in throughout the long months of the pandemic.

Its financial inclusion officers continue to work with community partners—the schools, churches and employer groups that make up its Hope Affinity Network—to offer financial education through webinars, phone conversations and other remote channels.

Through its sponsor, the Hope Enterprise Corporation, the credit union has led advocacy efforts to increase investment in community development financial institutions and formed partnerships with corporate giants like Netflix, which made a $10 million “transformational deposit” in June to fund business, mortgage and consumer loans. Another investor, Wells Fargo, recently awarded a $13.5 million grant to the Expanding Black Business Credit Initiative, formed by a consortium of seven community development financial institutions, including Hope CU.

CDFIs like Hope CU “have a long track record of meeting the needs of people in black communities, and those funds are going to stay in those communities,” Wicks notes. “Eighty-four percent of our mortgage borrowers are borrowers of color, compared to 26% nationwide. Our members want good homes to provide shelter for their families, good schools to educate their children and good communities to raise their families in. And those investments are what we’ve been using to make those loans to strengthen our communities.”

Looking ahead to 2021, Wicks anticipates that Hope CU will work through a steady demand for financial counseling and consultations for loan modifications as forbearance periods end. Auto loan volume was slow in the fall of 2020 but, as the economy starts to reopen, she expects demand to grow as members seek reliable transportation to get back to work in a region where public transportation is nonexistent.

Some borrowers will have a longer runway to qualify for auto loans, starting with credit builder products and savings accounts, she acknowledges. Offering those products and counseling have been among Hope CU’s consistent strategies to build long-term financial relationships.

“Hope has been doing this work for better than 25 years to strengthen communities, build assets and improve lives for people who have been economically distressed for so long,” she adds. “That’s why we’re here, and that’s what we’re going to continue to do.”

Karen Bankston is a long-time contributor to Credit Union Management and writes about lending, operations, technology and membership growth. She is the proprietor of Precision Prose, Eugene, Oregon.

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