By Elizabeth Zach, RCAC staff writer
Oakland, Calif. – In 2008, collapsing home values addled Americans across the nation, bankers were drawing scrutiny and the stock market was collapsing. It was difficult to understand the cause and to know where to keep one’s investments safe.
At the time, Sister Corinne Florek OP (Order of Preachers), a Dominican Sister of Adrian, Michigan, managed a community development fund as part of a larger investment portfolio, the returns of which would cover nuns’ retirement costs.
Rural Community Assistance Corporation (RCAC) is part of that investment portfolio, which started in 2001. Back then, a religious order called the Sisters of the Holy Family provided RCAC with a $100,000 loan, which was renewed in 2006. Meanwhile, in 2004, another order, the Sisters of St. Dominic, Congregation of the Most Holy Name, also made a $100,000 loan to RCAC. The orders, and several others, banded together in 2009 to form the Religious Communities Investment Fund (RCIF) and RCAC’s loans were combined and increased to $350,000. RCIF makes loans to organizations like RCAC that have a focus on long-term community investing. According to the fund’s mission statement, the idea is to empower “through access to affordable capital, whether through housing, small business development, childcare, or helping nonprofits that (provide) services.” RCAC uses its RCIF investment to provide low-interest financing in multiple states in its service region, excluding small business loans.
“We invest in the real economy, real people and in real mortgages,” Sister Corinne says.
“The loan went to support our Loan Fund programs, and has been fully deployed,” says Juanita Hallstrom, RCAC’s assistant director of Lending and Housing.
Although 2009 was a period of great uncertainty in the market, Sister Corinne’s portfolio yielded positive returns while many others suffered losses. For several years prior her track record had been equally on target. Her explanation for this is simple.
“We invest in the real economy, real people and in real mortgages,” she says. “There was easy money in derivatives. But that wasn’t investing in real people in real homes and in real businesses.” Derivatives are complex financial products and transactions that provide little benefit to average borrowers, and trading them was one major cause of the housing crisis and recession.
Today, Sister Corinne is RCIF’s executive director. RCIF’s investment returns are minimal but reliable and enough so that the fund is self-sufficient. This is intentional to keep projects affordable for those who need it most. The impetus for such investments stretches back nearly a half-century to social unrest in urban America, but Sister Corinne is also clear that the fundamental Christian teachings on equality and justice guide the fund’s investments.
Charity has always been a tenet of the Catholic faith. But as members of religious orders age and retire, the orders must also be diligent and savvy about investing to be able to support their own, particularly in an era of escalating healthcare costs.
“They (religious women’s orders) earn poverty level wages, which they share in a community fund,” says Mark Pinsky, former CEO of the Opportunity Finance Network. He has worked with Sister Corinne since the late 1980s and is now president of Five/Four Advisors in Philadelphia. “When institutional religious investors such as the national Roman Catholic, Episcopal and Presbyterian Churches started investing in things like affordable housing in the 1970s and early 1980s, it at first didn’t go so well. They lost money. But they didn’t say community investing doesn’t work. They said (instead) that they didn’t know how to do it and set out to work with people who did know how to do it.”
Investing was necessary, but it also was necessary to do it well and still remain faithful to the vow of poverty and helping the less fortunate.
“This idea began because religious women were looking at a need to fund their retired sisters, and therefore there was a need to invest in the stock market,” explains Sister Corinne, adding that a nun’s average age in the U.S. today is 78. “But this posed some moral questions, especially around serving the vulnerable and the poor. We asked ourselves, ‘Should we give this money away or care for ourselves?’ We found a compromise. We needed to save money to care for our sisters because no one else would. So we agreed to invest it, but in a way to serve both our retirement needs and those in need.”
This required some financial acumen, and there seems to be no one better suited in that respect than Sister Corinne. She graduated in 1980 from the University of Notre Dame with a master’s degree in business administration, but jokingly adds that her studies were “difficult until I knew that credits and debits meant right side and left side.”
Her curriculum vitae to date varies from administering a 50-member craft cooperative in Kentucky to managing an international loan fund. She also spent 12 years as director of the Mercy Partnership Fund, a community investment fund for the Sisters of Mercy. In 2010, the Opportunity Finance Network awarded her the Ned Gramlich Lifetime Achievement Award, and noted that many community development loan funds actually got their start thanks to the sisters’ loans.
“We were often the first investors in new and emerging funds. These were funds with very few reserves and limited track records,” Sister Corinne says.
Community development financial institutions (CDFIs), like RCAC’s Loan Fund, and credit unions are attractive investments, Sister Corinne says.
Cliff Rosenthal, who is now a visiting scholar at the New School’s Milano School of International Affairs, Management and Urban Policy in New York City, is working on a book about the history of community development financial institutions. From the 1980s until 2012, he was the CEO of the National Federation of Community Development Credit Unions. It was a time, he recalls, when many religious orders were at the forefront of calling for social justice. The federation was struggling.
“Somehow the Adrian Dominicans,” the order which Sister Corinne belongs to, “found out about us and we applied for a $30,000 loan, which they made at below-market rates. This was at a time when interest rates were in the double digits, and we had no security. We were essentially bankrupt, had no track record as a national organization, but we did have a vision.”
The loan, made in 1982, was the federation’s first investment in its new Capitalization Program for Community Development Credit Unions. Two years later, the fund’s value was $1.5 million, and by 1991 it was worth $2 million.
“We’re not alone,” says Rosenthal. “This is a story you will hear from many small loan funds. It was incredibly difficult to do. So these orders took on risk but they did not do it blindly or foolishly or irresponsibly.”
“We were often the first investors in new and emerging funds. These were funds with very few reserves and limited track records,” Sister Corinne says.
During the years, writes Rosenthal, the socially responsible investment movement has coalesced and become very effective in its work. But it all started with trust on the religious orders’ part that nonprofit organizations could be a force for good.
“The sisters are saying that there needs to be more risk-taking, that the risk nowadays is borne by the poor and vulnerable, not those who have money, because their livelihoods are not at stake,” Rosenthal says. “The sisters have remained a moral compass for social investment.”
Along with this, the Adrian Dominicans, the congregation to which Sister Corinne belongs, wanted to establish a relationship with their borrowers. They wanted to see what their money was actually doing, and also help borrowers that ran into trouble paying back their loans. They wanted a return on their investments, to be sure, but they “also had a realistic understanding of the risks,” Rosenthal notes.
“CDFIs can be flexible and patient in coming up with solutions to both help the borrower manage while protecting our loan repayment,” Michael Carroll says.
According to Michael Carroll, RCAC’s director of Lending and Housing, CDFIs take the time to understand the borrower and the situation beyond just the numbers and can make loans that highly regulated banks would not make. RCIF’s loans support essential projects in the rural West, including Kunia Village, Hawaii an 82 unit low-income farmworker rental housing project; Crescent City, California, Harbor District reconstruction; City of Whitebird, Idaho, wastewater system feasibility; and Sierra Vista, Arizona interim financing for site development costs for single-family homes.
“When problems arise,” he says. “CDFIs can be flexible and patient in coming up with solutions to both help the borrower manage while protecting our loan repayment. For example, we can temporarily defer payments, stretch out repayments, or connect the loan recipient with advisors.”
Making financial decisions, in other words, requires both wisdom and patience, both of which seem to guide Sister Corinne’s judgement.
“My track record is pretty good,” she says. “The reason why is because we say, if I give you a grant, that’s my belief in you today. With a loan, I believe you have a future. And we are partners in creating that future.”
“Sister Corrine and RCIF and related organizations have been RCAC’s reliable partners for many years even through the Great Recession and remain the backbone of our funding,” Carroll said.
