Money Talk: SBA sets new small lending records in fiscal year 2016

Editor’s note: Each Monday, Talk Business & Politics provides “Money Talk,” a wrap-up of banking and financial news.

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SBA SETS NEW SMALL LENDING RECORDS IN FISCAL YEAR 2016
The U.S. Small Business Administration recently released fiscal year 2016 data showing record levels of small business lending through the 7(a) and 504 loan programs, as well as significant increases in lending to women, veterans and underserved communities. SBA approved more than 70,000 loans in the 7(a) and 504 loan programs in FY16. These programs provided nearly $28.9 billion to small businesses and supported nearly 694,000 jobs.

SBA’s flagship loan program, referred to as 7(a), provides small businesses with comprehensive financial assistance covering the vast majority of small business needs including working capital, fixed and intangible asset financing, as well as refinance and export support through term and revolving loans. In FY16, the 7(a) program supported a record number of loans – more than $24.12 billion combined across 64,073 loans. Both the total number and dollar amount of 7(a) loans increased by 1% and 2.6% respectively over the previous year.

SBA continues to streamline and improve access to its loan program for small loans and underserved markets delivering more than 44,000 small loans of $350,000 or less in FY16. Minority business owners received a record combined $8.65 billion in 7(a) and 504 approved lending. For the fifth consecutive year, 7(a) lending to women-owned businesses (both majority and minority owned) increased in total dollar and volume. FY16 lending was nearly $7.3 billion, an increase of $253 million from FY15.

U.S. TREASURY DEPARTMENT BLOCKS NORTH KOREA’S ACCESS TO U.S. FINANCIAL MARKETS
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) on Friday (Nov. 4) issued a final rule under Section 311 of the USA PATRIOT Act to further restrict North Korea’s access to the U.S. financial system. Specifically, the final rule prohibits U.S. financial institutions from opening or maintaining correspondent accounts for North Korean banks and also requires U.S. financial institutions to apply additional due diligence measures in order to prevent North Korean financial institutions from gaining improper indirect access to U.S. correspondent accounts.

The rule was proposed in June 2016 along with publication of the notice of finding that North Korea is a jurisdiction of “primary money laundering concern” engaged in illicit conduct, including using state-controlled financial institutions and front companies to engage in the proliferation of WMD and ballistic missiles and to evade international sanctions.

While current U.S. law already generally prohibits U.S. financial institutions from engaging in both direct and indirect transactions with North Korean financial institutions, the latest action supports international sanctions already in place against North Korea and provides greater protection for the U.S. financial system from North Korean illicit activity.

BLACK, HISPANIC APPLICANTS TWICE AS LIKELY TO BE DENIED MORTGAGES
White and Asian borrowers are more likely to be approved for a conventional loan than black or Hispanic borrowers, according to the latest federally released data from the Home Mortgage Disclosure Act (HMDA). The disparity persists despite improvements in mortgage access for borrowers over the last few years.

In 2015, 22.4% of black applicants were denied conventional loans according to HMDA data. In 2010, 30.5% of black applicants were denied. Among Hispanic applicants, 17.3% were denied in 2015, down from 25% in 2010. By comparison, 10.4% of all conventional loan applications were denied in 2015, a drop from 14.2% in 2010.

The data on mortgage lending transactions was compiled by The Federal Financial Institutions Examination Council (FFIEC) from 6,913 U.S. financial institutions covered by the Home Mortgage Disclosure Act (HMDA). Covered institutions include banks, savings associations, credit unions, and mortgage companies.

According to the Zillow Housing Confidence Index, 68% of Hispanic respondents and 65% of black respondents considered homeownership necessary to living the American Dream. By comparison, 59% of white respondents and 58% of Asian respondents felt the same. Homeowners are becoming increasingly diverse, but the gap between black and white households is as wide in 2016 as it has been for the past century.