Community and Economic Development Loans:
Securitization Faces Significant Barriers
GAO-04-21: Published: Oct 17, 2003. Publicly Released: Oct 17, 2003.
Additional Materials:
- Highlights Page:
- Full Report:
- Accessible Text:
Contact:
(202) 512-4325
contact@gao.gov
Office of Public Affairs
(202) 512-4800
youngc1@gao.gov
Community economic development (CED) lenders serve the credit needs of nonconventional borrowers and economically distressed areas across the nation. However, little is known about this industry, its ability to tap private sources of capital, and loan performance and volume in the industry. To provide information that would be helpful in considering the role that the federal government might play in facilitating the creation of a secondary market for CED loans, GAO was asked among other items to (1) determine the barriers to more widely securitizing CED loans and (2) identify options for overcoming these barriers and the likely implications of these options.
CED lenders rely on multiple federal programs that offer grants, loans, guarantees, and other support to help fund lending activities. Some of these lenders have expressed an interest in finding alternative sources of funding, including securitizing the loans that they make. However, the volume of CED loans potentially available for securitization is not known. In addition, the community economic development industry is characterized by nonstandard underwriting, loan documentation and loan performance information, and limited mechanisms for securitizing loans. Without greater understanding of available loan volume, the capital markets have little interest in developing standards or mechanisms for securitizing CED loans. CED lenders also face barriers to securitizing their loans. Some of these barriers are unique to CED lending, including: limited lender capacity to manage a securitized portfolio of loans; the external legal and regulatory limitations and requirements governing the use of the funds that these lenders receive; and the high cost of originating and servicing CED loans. This report describes options that the federal government might exercise to address the identified barriers. This report also describes the implications that implementing each option might have, including the potential for increased federal costs and changes in lenders' missions. Ultimately, securitization may not be a significant alternative for CED lenders until the volume of loans available for securitization is better known and lenders are convinced of the benefits of participating.
Nov 17, 2020
-
Puerto Rico Electricity:
FEMA and HUD Have Not Approved Long-Term Projects and Need to Implement Recommendations to Address Uncertainties and Enhance ResilienceGAO-21-54: Published: Nov 17, 2020. Publicly Released: Nov 17, 2020.
Jul 16, 2020
-
Targeting Federal Funds:
Information on Funding to Areas with Persistent or High PovertyGAO-20-518: Published: Jul 16, 2020. Publicly Released: Jul 16, 2020.
Jun 25, 2020
-
National Flood Insurance Program:
Fiscal Exposure Persists Despite Property AcquisitionsGAO-20-508: Published: Jun 25, 2020. Publicly Released: Jun 25, 2020.
Jun 11, 2020
-
American Samoa:
Economic Trends, Status of the Tuna Canning Industry, and Stakeholders' Views on Minimum Wage IncreasesGAO-20-467: Published: Jun 11, 2020. Publicly Released: Jun 11, 2020.
Apr 28, 2020
-
Priority Open Recommendations:
Small Business AdministrationGAO-20-501PR: Published: Apr 21, 2020. Publicly Released: Apr 28, 2020.
Mar 9, 2020
-
La Agencia Federal para el Desarrollo de la Pequeña Empresa:
el Procesamiento de Préstamos para Desastres Fue Más Puntual, Pero Mejoramientos en la Planificación y la Evaluación del Programa Piloto son NecesariosGAO-20-369: Published: Feb 7, 2020. Publicly Released: Mar 9, 2020. -
Small Business Administration:
Disaster Loan Processing Was Timelier, but Planning Improvements and Pilot Program Evaluation NeededGAO-20-168: Published: Feb 7, 2020. Publicly Released: Mar 9, 2020.
Jan 28, 2020
-
Innovative Technologies in Manufacturing:
Commerce Has Stopped Efforts to Implement Loan Guarantee ProgramGAO-20-326R: Published: Jan 28, 2020. Publicly Released: Jan 28, 2020.
Oct 8, 2019
-
Puerto Rico Electricity Grid Recovery:
Better Information and Enhanced Coordination Is Needed to Address ChallengesGAO-20-141: Published: Oct 8, 2019. Publicly Released: Oct 8, 2019. -
Recuperación De La Red Eléctrica En Puerto Rico:
Se Necesita Mejor Información y Coordinación para Enfrentar DesafíosGAO-20-143: Published: Oct 8, 2019. Publicly Released: Oct 8, 2019.
Looking for more? Browse all our products here