CREATING NEW FINANCIAL MARKETS AND PRODUCTS FOR ASSISTIVE TECHNOLOGY LENDING

AT ACT ENTITIES ANNUAL CONFERENCE JULY 14-15, 2014

FUNDING INNOVATIONS

PRESENTERS

Michael Morris DirectorNational Disability Institute

John Nelson DirectorWall Street Without Walls

Joey Wallace DirectorRESNA Catalyst Project

OVERVIEW

I. Challenge

II. Build Solutions

III.Who We Are

IV.Next Steps

I. CHALLENGE

•Over 50 percent of assistive technology users need financial assistance to acquire the technology and training assistance to use it.• There are more than 21,000 assistive technology devices currently available• Funding remains the greatest barrier to AT acquisition

ASSISTIVE TECHNOLOGY DEVICES AND SERVICES

• An AT device is any item, piece of equipment or product system, whether acquired commercially off the shelf, modified, or customized, that is used to increase, maintain, or improve the functional capabilities of all persons with disabilities.

• An AT service is any service that directly assists an individual with a disability in the selection, acquisition, and use of an assistive technology device. The term includes evaluation of needs, purchasing, leasing or assisting in acquisition, selection, design, fitting customizing etc., coordination of therapies in program planning, training and technical assistance for the consumer, family or professionals.

CURRENT STATE OF AT LOAN FINANCING

• Currently 36 Programs across 32 states and 4 U.S. Territories

• Each program reflects variations in Lead Agencies, Loan Models, and Lender Relationships

• Types of Loan Models: Direct, Buy-Down, Guarantee, Non-guarantee

CURRENT STATE OF AT LOAN FINANCING

• Federal requirement that programs be sustainable and function in perpetuity • Many programs have expanded their capacity to

include asset development, individual retirement accounts, credit counseling and beyond• Opportunities for additional federal funds have

been limited while both the consumer need and AT advances grow • Annual reporting is provided on specific data

elements to federal government

CURRENT STATE OF AT LOAN FINANCING

Loan Activity Across All States and YearsPrevious Years FY 2012 FY 2013 Total ProgramLoans 2001-2010Value 2001 - 2011 Loans MadeValue of Loans Loans MadeValude of Loans Loans MadeValue of Loans

Total 12509 138,112,216$ 1252 12,821,420$ 953 8,813,998$ 16033 174,554,558$

CURRENT STATE OF AT LOAN FINANCING

Types of AT Purchased by Borrowers FY 2012 FY 2013

Type of DeviceNumber of Devices

% of Total Loans

Dollar Value of Loans

Number of Devices

% of Total Loans

Dollar Value of Loans

Vehicle Modifications 527 41% 10,051,661$ 373 38% 6,516,993$ Hearing 416 32% 1,445,549$ 341 35% 1,240,978$ Environment 89 7% 641,864$ 75 8% 523,827$ Mobility 87 7% 354,173$ 65 7% 264,717$ Computer 61 5% 82,327$ 38 4% 40,075$ Vision 36 3% 51,034$ 30 3% 37,580$ Daily Living 43 3% 111,691$ 27 3% 100,946$ Recreation 22 2% 71,640$ 17 2% 68,369$ Speech 7 1% 8,008$ 10 1% 10,611$ Learning 4 0% 3,473$ 6 1% 9,902$ Other 0 0% -$ 0 0% -$ Total 1292 1 12,821,420$ 982 8,813,998$

CURRENT STATE OF AT LOAN FINANCING

Type of Disability Addressed by AT Purchased by Borrowers FY 2012 FY 2013

Number of Loans

% of Total Loans

Number of Loans

% of Total Loans

Getting around/Mobility 881 45% 541 43%

Hearing 462 23% 338 27%

Interacting with Others, Socializing 302 15% 186 15%

Learning New Information 97 5% 46 4%

Seeing 48 2% 34 3%

Talking/Communicating 95 5% 49 4%

Handling Objects, Reaching 70 4% 61 5%

Remembering 22 1% 10 1%

Total 1977 1265

CHALLENGES FACING LOAN FINANCING PROGRAMS INCLUDE:

• Decreasing Principal and Sustainability

• Lender relationships

• Limited staffing and infrastructure

• Marketing and Outreach

NEW THINKING

• Can technology creatively launch a new online marketplace that connects those in financial need with loans that offer a lower cost of borrowing?• Can impact investors be enlisted to attract new

capital to make AT loans more available and affordable?• Can existing AT loan programs be made more

efficient by standardizing loan documents and underwriting procedures?• Can a secondary market be created that bundles

AT loans and attracts new investors that enhances the availability of capital?

II. BUILD SOLUTIONS

The Financial Innovation Project is anchored by:

•Wall Street Without Walls•National Disability Institute•RESNA Catalyst Project•Pennsylvania Assistive Technology Project•Washington Access Fund

II. BUILD SOLUTIONS

Financial Innovation Four Objectives:1.Identify barriers to meeting target audience needs for AT and home and vehicle modifications that makes financing more available and affordable.2.Improve understanding of current strengths and challenges of available financing options and public and private sector relationships.3.Brainstorm additional financing options including but not limited to expanded access to capital, new sources of impact investment, loan guarantees, securitization, and reframing relationships between manufacturers, lenders, and borrowers.4.Establish a working group(s) to continue the discussion and develop solutions.

II. BUILD SOLUTIONS

• Convened Think Tank session at Kaye Scholer in Washington, DC on November 14th

• Participants included representatives of:• White House Office of Social Innovation• Consumer Financial Protection Bureau (CFPB)• Rehabilitative Services Administration (RSA)• National Cooperative Bank (NCB)• National Federation of Community Development Credit

Unions• Community Reinvestment Fund• Ten Alternative Finance Programs (AFP)• Assistive Technology Industry Association (ATIA)• National Mobility Equipment Dealers Association (NMEDA)

III. MEETING FACILITATORS

•National Disability Institute

•Wall Street Without Walls

• RESNA Catalyst Project

NATIONAL DISABILITY INSTITUTE

• Established in 2005• Exclusive focus on building a better economic

future for individuals with disabilities• Leverages power of public-private sector

collaboration• Real Economic Impact Network• Assisted over 1.9 million low income taxpayers

with disabilities access over 1.5 billion dollars in tax refunds• Promotes asset building strategies through

training and technical assistance with the Disability Employment Initiative (DEI) in 25 states• Lead: Michael Morris

WALL STREET WITHOUT WALLS

Mission & Key Achievements•Founded in 2000, by Greg Stanton, a retired investment Banker•Connects Community Development non-profits and municipal agencies with investment bankers and structured finance experts•Creates versatile, well-structured financing options for catalytic development projects•Leverages large advisory board: leaders from investment banking, CDFIs, government, philanthropy, law, academia•Builds lasting change by mitigating market entry risk for both NGOs and Wall Street professionals, creating long-term partnerships

Accomplishments

Facilitated $1 Billionin CED Transactions

75-Member Board200 Volunteers

10,000 contacts in WSWW Database

Trained2000 professionals,

1000+ organizations

Partnerships with Nat’l Intermediaries, Federal Reserve Bank

$5mm raised in Foundation Support

CONSULTING & FINANCE TECHNICAL ASSISTANCE

• FTA Teams

• Teams of 5-10 investment bankers providing financial technical assistance ideas to structure solutions through conference calls, conferences, and site visits when necessary

• Constructive feedback on bond financing, securitization, and other debt or equity instruments

• Contacts to finance, foundation, and government professions

HISTORY OF WSWW FINANCIAL INNOVATION

• Advised Community Reinvestment Fund on first rated community development securitization. Completed $1B in rated securities.

• Designed products:– Community development financial insurance concept– Individual Tax ID Mortgage Securitization

• Identified opportunities to leverage underutilized municipal assets—REO, tax foreclosed properties, vacant lots

• Promotes Impact Investments by insurance companies, pension funds, foundations, endowments, and individual investors

• Assisting municipalities leverage infrastructure financing from impact investors for social and environmental innovations

• Promoting assisted technology lending at scale with National Disability Institute and national partnership

FUNDING PARTNERS & COLLABORATORS

RESNA CATALYST PROJECT

• Funded under a five year grant from the US Department of Education

• Provide technical assistance to state AT projects and the 36 Alternative Financing Programs

• Lead: Joey Wallace

NOVEMBER 14 MEETING HIGHLIGHTS

Greatest Challenges to Affordable AT Loans:•Cost of small loans•Access to capital•Credit scores and history of potential borrowers•Bank fears of negative publicity if borrower defaults and technology is repossessed•Limited marketing and outreach capacity•Sufficient loan volume to be bundled and securitized•Lack of standardized documentation across AFPs

NEXT STEPS

Created Three Working Groups:•Marketing and Outreach•Technology•Access to Capital

SECURITIZATION

• Financial assets with similar performance characteristics and predictable cash flows are pooled and packaged into securities for purchase by investors• Repayment relies on performance of

financial assets

SECURITIZING OR CREDIT ENHANCING ASSISTED TECHNOLOGY LENDING

• Promoting assisted technology lending at scale with National Disability Institute, RESNA and other partners

• Develop standardized loan documentation, credit levels, performance data to access impact investors

• Increase lending capacity by non-profits, public agencies, commercial banks, and any others for AT products

• Lower costs for borrowers and expand size of loans• Improve opportunities, productivity, quality of life for

disabled• Credit enhancements from manufacturers and

vendors• Appeal to impact investors: insurance companies,

pension funds, university/foundation endowments, individuals

• Create “flow model” of lending through at scale

EXAMPLES OF ASSETS THAT HAVE BEEN SECURITIZED

• Home mortgages• Auto loans• Student loans• Leases• Time shares• Death benefits• Commercial loans• Insurance premiums

HISTORIC ISSUER BENEFITS

• Efficient growth and leverage• Risk transfer• Reduce funding costs

HISTORIC CUSTOMER BENEFITS

• Expands access to credit• Lowers cost of credit• Increases the variety of credit available• Increases competitions among lenders

WHO BUYS SECURITIZATIONS?

• Banks• Insurance Companies• Pension Funds• Corporations• Impact Investors

INVESTMENT PRODUCT CONTINUUM

Charitable Funding Market Financing

Source: F.B Heron Foundation, Community Reinvestment Fund

Grants

Eq

uit

y

Sh

are

hold

ers

&

Loan

s

Loans

Cash

Below-Market Investments

Gua

rant

ees

Priv

ate

Equ

ity

Public E

quity

Fixed

Inco

me

Cash

Market-Rate Investments

PRIsCommunity Impact Note

LIHTC InvestmentsAsset-Backed Securities

LIHTC Investments

Equity EquivalentInvestment

Leveraging Underutilized

Assets for Collateral

“Unsecured”Financing

IV. NEXT STEPS

• Create a Financial Innovation Group of Advisors• Explore feasibility of securitization• Explore feasibility of a cooperative to

improve efficiencies• Meet and brief White House Office of

Social Innovation

IV. NEXT STEPS

You Can Become Involved:

•Join a Working Group•Help Define the Current Market•Offer Financial Innovation Ideas

IV. NEXT STEPS

The Next Twelve Months:

•Identification of impact investors•Establish Financial Volunteer Advisor Team•Pilot and test financial innovations

IV. NEXT STEPS

For more information, please contact:

•Michael Morris(202) 296-2040mmorris@ndi-inc.org

•John Nelson(703) 648-9544john.nelson@wallstreetwithoutwalls.com

•Joey Wallace(703) 524-6686, ext. 304jwallace@resna.org