Iowa credit union members achieve homeownership and escape predatory lending
For years, a young single mother in Iowa with an elementary-age child moved from rental to rental, unable to find stability. Each address meant disruption for her child and rent payments that built no equity.
Then she connected with Community 1st Credit Union and learned about their first-time homebuyer grant program. She qualified and bought her own home. This achievement was so profound that when she told her story to credit union leadership, tears flowed.
"That's the one that resonates the most with me," said Greg Hanshaw, president and CEO of the $1.05 billion credit union headquartered in Ottumwa, Iowa. "That's the kind of impact this program has had."
Her story represents one of nearly 600 Iowa families who have achieved homeownership through Community 1st's CDFI-funded programs, which have distributed almost $2.5 million in down payment assistance since 2018.
Escaping the payday lending trap
Community Development Financial Institutions earn certification from the U.S. Department of the Treasury by demonstrating a mission of serving economically disadvantaged communities. In fiscal year 2024, 135 credit unions received CDFI grants, with $408.2 million distributed to 357 organizations nationwide.
Community 1st received its first CDFI grant in 2018 and its first program through this fund created a payday alternative loan program to help members avoid predatory payday lenders.
More than 6,500 members have borrowed through the program, accessing nearly $5 million in small loans under $1,000. The average loan amount is $400. According to the Federal Reserve’s most recent Economic Well-Being of U.S. Households survey, 37 percent of Americans would need to borrow money, sell something, or be unable to pay if faced with a $400 emergency expense.
Without access to affordable alternatives, members facing emergencies often turn to predatory payday lenders charging annual percentage rates of nearly 400%. According to the Consumer Financial Protection Bureau, 80% of payday loans are not repaid within the initial two-week period, trapping borrowers in a cycle of repeat borrowing. Research by the Pew Charitable Trusts shows the average borrower remains in debt for five months of the year, ultimately paying $520 in fees to repeatedly borrow just $375. For families already struggling financially, these loans create a spiral where the cost of borrowing exceeds the original emergency expense many times over.
One young mother needed to purchase insulin for her child and had no other options. The payday alternative loan from Community 1st provided what she needed without the crushing fees of predatory lenders. Another family wanted to attend a close relative's funeral in Chicago but couldn't afford the trip. A small loan made it possible.
Opening doors to homeownership
Community 1st provides down payment assistance grants of up to $5,000 to first-time homebuyers. The grants have reached more than 110 communities across Iowa, spanning nearly half of the state's 99 counties.
All recipients earn below area median income, with over 30% earning less than 50% of that threshold. Three-quarters had loan-to-value ratios of 95% or greater, making homeownership very unlikely without assistance.
A young teacher who relocated to Iowa for his first teaching position started with an entry-level salary. He was renting and wondering if he could ever afford his own home. Through the grant program, he qualified and bought his first home, building equity instead of paying rent each month.
The program requires recipients to repay a prorated amount if they sell their home within five years. Out of nearly 600 grants, only one member has triggered that provision, Hanshaw said, adding that members view these homes as long-term investments where they plan to build their futures.
Members view these homes as long-term investments where they plan to build their futures.
Equal performance across income levels
The credit union's seven-year experience as a CDFI certified credit union has countered a misconception about serving low-income members. Delinquency rates for both payday alternative loans and first-time homebuyer mortgages match the credit union's overall portfolio performance.
"The payday alternative loan program was pretty concerning to a lot of our staff early on," Hanshaw said. After tracking the data over seven years, the credit union found no difference in delinquency compared to loans made to all members, including affluent borrowers. The credit union includes financial education with each loan.
"They (CDFI-loan qualifiers) always pay us back," Hanshaw said, noting that Community 1st's overall delinquency rates typically fall below national averages.
Why credit unions serve where banks won't
Community 1st serves members in predominantly small, rural Iowa communities. Not a single bank in the state holds a CDFI certification, according to Hanshaw. For members in rural areas, this means the difference between having access to affordable loans and homebuyer assistance, or having no access at all.
The credit union received a $625,000 CDFI grant in October 2024 to expand financial literacy programs and affordable loan products. When members succeed, entire communities benefit.
What communities stand to lose
The programs that helped nearly 600 Iowa families buy homes and enabled more than 6,500 members to avoid predatory lending now face an uncertain future. Recent discussions about potential reductions at the CDFI Fund have created uncertainty about continued funding.
If federal support disappears, Community 1st would need to reduce grant amounts. The first-time homebuyer grant might drop from $5,000 to considerably less. "It still might help some folks, but it won't be nearly as much help as it has been with that federal funding," Hanshaw said.
For members, the math is straightforward. A smaller CDFI grant means fewer families can bridge the gap to homeownership. Members who once had access to affordable small loans might find fewer options when emergencies arise and need to turn to predatory lenders.
For members, the math is straightforward. A smaller CDFI grant means fewer families can bridge the gap to homeownership.
Congress appropriated CDFI funds to serve Main Street America. For thousands of credit union members nationwide, these programs often represent the difference between homeownership and continued renting, or between affordable credit and predatory lending traps that can take years to escape.
Hanshaw's concern extends beyond his institution. "Congress appropriated those funds year after year to go to Main Street America and to be put to good use. And that's exactly how those funds have been utilized," he said.
The credit union would be "extremely disappointed" if the fund disappears, "not because it impacts us as a financial institution so much,” but because of what it means for members nationwide. Federal CDFI funds "have really done something incredibly good"—putting resources into the hands of people who need them most.
America's Credit Unions has a Government Shutdown Assistance webpage with resources and will continue to engage with Congress on getting funding restored.
