Monday, May 27, 2024

Silicon Valley Bank in Kendall Square seen March 22, during its failure. (Photo: Marc Levy)

Cambridge affordable-housing developers and a spokesperson for a city program that helps low- and moderate-income residents buy homes here say the March 10 collapse of Silicon Valley Bank hasn’t hurt projects and borrowers to which it provided major support.

Still, it’s not certain whether the North Carolina bank that bought most of Silicon Valley’s business, First Citizens Bank & Trust, will duplicate the failed bank’s enthusiasm for affordable housing.

“The question is, are they going to remain an important player?” said Sara Barcan, executive director of Homeowners Rehab, which builds, operates and rehabilitates housing for low- and moderate-income tenants and homeowners. She said Silicon Valley Bank not only helped fund low-income housing by providing loans and buying federal tax credits that pump cash into projects, but also gave mortgages to lower-income borrowers and donated to developers such as Homeowners Rehab. “The commitment they had went well over what they needed” to win top grades from bank regulators for community investment, Barcan said.

Silicon Valley Bank became an important player in affordable housing when it acquired Boston Private Bank & Trust Co. in 2021. The Boston bank had catered to wealthy customers but also turned its attention to the other end of the income scale starting in the 1990s, after regulators had panned its community reinvestment efforts. The acquisition didn’t dampen that trajectory. As Cambridge Housing Authority executive director Michael Johnston said after Silicon Valley Bank collapsed, “The Cambridge Housing Authority and other affordable-housing developers throughout the state relied heavily on Silicon Valley Bank” to help finance projects.

The bank also provided loans and down payment assistance to lower-income borrowers. Silicon Valley was on a list of recommended banks given to applicants for the city’s HomeBridge program, which provides grants of 40 percent to 50 percent of the purchase price to help low- and moderate-income residents buy homes on the open market.

“A few days of uncertainty”

The Community Development Department runs HomeBridge and other city affordable-housing programs that involve homebuying. Sandra Clarke, Community Development Department spokesperson, said in an email: “While there were a few days of uncertainty, the changes with SVB have not impacted buyers in the City’s affordable homeownership programs (which include HomeBridge).”

One family “had a closing scheduled the week after SVB collapsed” and completed the transaction through the Silicon Valley Bank “bridge bank” that the federal government set up to take care of customers while officials tried to sell pieces of the failed bank, Clarke said. The FDIC said the bridge bank would honor all commitments that Silicon Valley Bank had made and that its deposit insurance would apply to all accounts, including those exceeding the $250,000 limit.

Clarke said First Citizens had stepped into Silicon Valley’s shoes. “First Citizens Bank has continued to offer low interest rates to first-time homebuyers, making them a competitive option in this market and continuing the work started by Boston Private Bank in providing favorable loan terms to income-eligible homebuyers,” Clarke said.

Not dependent on the bank

It may be too soon to find evidence of that in mortgages recorded at the Middlesex South Registry of Deeds. First Citizens has recorded one Cambridge transaction connected to the failed bank: a mortgage discharge on April 13. The loan, made by Silicon Valley Bank, was for $713,330, unlikely to involve affordable housing.

Silicon Valley Bank made many loans on property in Cambridge, and a substantial number included $15,000 allocations to help lower-income buyers make down payments or meet closing costs, according to mortgage documents. The bank said the small loans, which could be forgiven in five years, were made under its D-Cap program. The program was intended to help borrowers with lower than median income, according to mortgage documents.

The Cambridge Housing Authority, Homeowners Rehab and Just A Start, the city’s major affordable-housing developers, had loans and accounts with Silicon Valley when it failed, but none were depending on the bank for funds, according to descriptions by officials. Their accounts with the bank funded items such as reserves, and the bank held permanent loans for some projects.

Business as usual

For example, Silicon Valley held the permanent loan and related reserve accounts for the acquisition and rehabilitation of Putnam Square by Homeowner’s Rehab from Harvard University in 2013. The 94-unit building for lower-income elderly and younger disabled tenants is at 2 Mount Auburn St., where Putnam Avenue intersects with Mount Auburn Street.

“When the news came out about Silicon Valley Bank we were certainly very concerned about the fate of those [reserve] accounts. We were very glad and relieved when the FDIC announced depositors would be protected,” Barcan said.

Just A Start had accounts at Silicon Valley related to Boston Private Bank’s financing of its Bishop Allen Apartments project, spokesperson Maggie Woodward said. After Silicon Valley failed, “the property and all our accounts were not affected,” she said. But it’s been “business as usual” with the new owner of Silicon Valley Bank, First Citizens.

Most of $190 million moved

The housing authority had reserve and replacement accounts at Silicon Valley related to three completed rehabilitation projects; the bank was also servicing the loans for those projects and handling requisitions and drawdowns from bond funds for the upgrade of CHA’s Putnam School development for elderly and disabled tenants, which is under construction. Johnston said First Citizens has taken over reserve accounts for the three completed projects, but the Silicon Valley bridge bank was servicing loans and performing the requisition and drawdowns for Putnam School as of mid-April.

According to the Housing Authority’s chief financial officer, John Filip, the authority has $2.4 million in restricted accounts – the reserves – at First Citizens and can’t move those funds because of loan requirements. Most of the authority’s $190 million in bank accounts was moved or was already at Bank of America, Filip said at an authority board meeting April 5.

The affordable-housing agencies have bank accounts above the FDIC insurance limit of $250,000, but officials said the federal agency has promised that deposits will be protected. Johnston said banks with large deposits, including Silicon Valley Bank, also provide “cash sweep” and similar programs that divided deposits among other banks to keep them under the $250,000 limit.