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Frustrated with lending gaps, Waterloo woman starting Iowa’s 1st Black-owned bank | Local News

Frustrated with lending gaps, Waterloo woman starting Iowa’s 1st Black-owned bank | Local News

WATERLOO — ReShonda Young started Popcorn Heaven without the loan she wanted from her own financial institutions, instead building it up little by little with her own money.

When it came time to sell, she sold it to a white woman — and found those same financial institutions had suddenly changed their minds about her business.

“She was able to go into the exact same bank, and she was able to get a loan for, like, double what I could get to buy my business, and do the expansion that I had wanted to do,” Young said.

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Not only could the first-time business owner get a bigger loan than the seasoned one, she got more favorable terms: While Young’s repayment was around $3,600 a month, the new owner’s was a third of that.

“That’s just blatant, in your face,” Young said. “I mean, how do you even come up against that?”

It wasn’t exactly a shock to Young that financial institutions in the community didn’t treat her and other entrepreneurs of color as fairly as they treated her white counterparts. It also was happening to her father, to other entrepreneurs she mentored, forcing them to start businesses with less or not at all.

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Young won a lawsuit forcing the Consumer Financial Protection Bureau to do more about discriminatory lending practices across the country in 2020. After that summer’s racial justice protests, lending institutions locally made commitments to increasing the number of Black applicants receiving home loans.

But Young wasn’t sure it would last.

“To try and change that culture and think that’s going to be smooth and easy and everybody’s going to be … doing this whole big switch to being inclusive, that’s not even realistic,” Young said.

Just 31{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} of Black residents own a home; new workshop, with banks' buy-in, hoping to change that

That’s when she first heard the voice — she calls it the “voice of God” — pushing her to do something about it. If the banks didn’t care, start a new bank that would.

“I’m like, ‘Nope,’” Young recalled.

Starting her own business was one thing. Starting the first Black-owned bank in Iowa, in Waterloo especially, seemed quixotic — but sorely needed.

Iowa is the third-worst state for Black Americans to live, according to a 24/7 Wall St. report that came out last month, while the Waterloo/Cedar Falls area remains in the top 10 metros areas listed as the worst places for Black Americans to live. Those rankings have less to do with things like overt racism and discrimination — something that’s hard to quantify — and more to do with one thing: Money.

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White residents as a group are more likely to secure employment — they have just a 3.1{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} five-year unemployment rate — while Black residents are five times less likely to be hired. That sets off a chain reaction into several other areas, leading to Black residents making an average of just $29,150 per year, or 47.7{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} of what white residents make. That contributes to more Black residents facing poverty, more than one-third compared with less than 12{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} of white residents.

Not having enough money or a stable job means the likelihood of home ownership goes down, too: While white people own homes at a rate of nearly 73{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b}, the rate is just 32{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} for Black residents.

Bank of Jabez would join at least 19 other Black-owned banks and credit unions across the U.S., according to the FDIC, which insures banks and categorizes minority depository institutions. That number was down from 44 such banks before the 2008 recession, which hit Black communities particularly hard.

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It’s those financial institutions, not their white-owned counterparts, that are moving the needle on racial disparity nationally: 67{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} of mortgage loans at Black-owned banks went to Black people, compared with less than 1{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} of mortgages at other banks, former FDIC chairman Martin Gruenberg said in 2013.

“I just think it’s easier — even though creating a bank is not easy — but creating culture from the start is easier than changing a culture that’s been ingrained for decades,” Young said.

Bank of Jabez will join the ranks of Community Development Financial Institutions, or CDFIs, that primarily serve low- and moderate-income and rural communities. Just 32 banks around the country are both minority-owned and a CDFI.

Between meetings with consultants and FDIC regulators, and raising money — donations now may later on be converted to stock once the bank opens, she noted — she tries to remember that she’s starting the organization she hopes will be the change.

“I think it’s a way to show banks that, yeah, it is worth investing into these various communities of people, because at the end of the day, I know there is no one institution that can fix all the problems,” she said.