December 2018 - For 60 years, Freedom First Credit Union has served the credit and savings needs of individuals who live and work in the Roanoke and New River Valleys of southern Virginia. As a community development financial institution (CDFI), Freedom First is not only dedicated to helping its more than 48,000 members prosper but also committed to investing in ways to help its broader communities thrive.
Paul Phillips, president and chief executive officer of Freedom First, says that as a CDFI, the credit union serves many low- to moderate-income families whose borrowing needs usually far exceed their ability to save. This dynamic creates a liquidity mismatch, where credit demands on Freedom First sometime exceed their ability to raise deposits. Phillips notes that Freedom First’s relationship with FHLBank Atlanta is critical to meeting these credit needs.
“FHLBank Atlanta offers consistency and stability, which are important when considering the funding needs of Freedom First,” said Phillips.
Freedom First uses FHLBank Atlanta advances to support operations as a source of liquidity and deploys long-term advances to help manage interest-rate risk.
“There is a lot of flexibility in the design of advances, allowing us to match structures to our balance sheet and its unique characteristics,” said Phillips. “As a result, we have been able to use advances to mitigate risk effectively and economically.”
Helping Members and Communities Thrive
As it seeks to achieve its mission, Freedom First invests in its members and communities in a number of important ways and works to develop innovative solutions to issues around poverty and personal debt. Notably, Freedom First has developed products and services specifically for low- to moderate-income individuals who, historically, have been underserved by the financial services industry.
These efforts include helping low- to moderate-income members achieve their goals of homeownership. The credit union partners with FHLBank Atlanta to extend grant funds for down payment, closing costs, and home rehabilitation costs that help make these goals a reality. Since 2011, Freedom First has distributed more than $2.3 million in grant funds through FHLBank Atlanta’s Affordable Housing Program (AHP) homeowner assistance products, helping 238 first-time homebuyers and military families purchase a home or make accessibility or energy efficient improvements to their existing home.
Phillips says that in addition to offering conforming mortgages, which are then sold on the secondary market, Freedom First is committed to prospective homebuyers that do not fit into the “Fannie and Freddie box.” Preparing them for homeownership through financial counseling and with the right banking and lending products is a primary focus.
Before purchasing a home, these members often go through financial education and budgeting assistance, using various Freedom First products to help them get their financial houses in order. Freedom First may spend a year or two helping them prepare for homeownership. At the time they are ready to purchase, the credit union will put them into a nonconforming mortgage that remains in portfolio. FHLBank Atlanta’s homeowner assistance funding plays a key role in making these transactions work, both for the homebuyer and for Freedom First.
“AHP is important not only for helping borrowers overcome hurdles to the down payment and closing costs but also helping Freedom First mitigate the risk of those portfolio mortgages,” said Phillips.
“In addition, FHLBank Atlanta’s down-payment assistance product is great because it is not limited geographically like other products, which can be locally focused,” added Phillips. “Freedom First can access funding for households throughout its footprint, which includes rural areas.”
Underlying the use of affordable housing products and advances is a relationship between Freedom First and FHLBank Atlanta that Phillips says is founded on a genuine desire to help one another. The Freedom First and FHLBank Atlanta teams share a comfortable relationship where discussions are personable but can go as technically deep as needed across a range of issues. Phillips adds that it is clear that FHLBank Atlanta seeks to deliver products to Freedom First that support their goals.
“From liquidity to balance sheet management to enterprise risk management, FHLBank Atlanta has many tools in its toolbox that can help Freedom First serve its members,” said Phillips.
The Federal Home Loan Bank of Atlanta is not a registered investment advisor. Nothing herein is an offer to sell or a solicitation of an offer to buy any securities or derivative products. You should consult your own legal, financial, and accounting advisors before entering into any transaction. Advance rates shown are for illustrative purposes only.