Fair Credit and Fair Housing in the Wake of the Subprime and Foreclosure Crisis
1. Fair Housing and Fair Lending Forum
Northwest Justice Project
October 30, 2009
Seattle, WA
Christy Rogers
The Kirwan Institute for the Study of Race and Ethnicity
The Ohio State University
2. Agenda
Morning
Kirwan framing of fair housing and fair credit issues
Small group brainstorming sessions
Report out and discussions
Lunch
Afternoon
Kirwan presents King County “Opportunity Mapping”
project
Training on affirmatively furthering fair housing
6. Research takeaways
Unequal credit markets and segregated housing
happened together…Fair credit and fair housing
(broadly defined) will only happen together.
Global finance has evolved against – and plays out in –
racially and economically segregated neighborhoods.
Fair housing and fair credit is an issue for all of us, but
attention needs to be targeted to marginalized
communities.
Otherwise, policies miss key opportunities and
challenges and miss those most affected by the crisis.
7. Three-pronged approach
Make progress in fair housing in three areas:
Improve access to fair financial options
Affirmative community revitalization
Opportunity-based housing
Ensure that programs and policies responding to the
subprime crisis reach those most affected
Connect and engage diverse stakeholders for cross-
cutting advocacy
8. The Future of Fair Credit and Fair
Housing
How do we best tell the story that we know? This is
important because the framing of the problem shapes
its solution.
How do we climb out of the subprime lending and
foreclosure fiasco without worsening the already
widening opportunity gaps for communities of color?
Home ownership and mortgage lending
Credit access, debt, leverage
Banking, savings
10. Commissioned Research
Access to fair financial options (mortgage and
otherwise)
Banks’ increasing reliance on fees…implications for low-
income customers and communities of color
Discretionary pricing of financial products
Consumer credit for those coming out of foreclosure
Connect and engage diverse stakeholders
What might an advocacy strategy around fair credit and
fair banking look like?
What’s the role for philanthropies?
11. Commissioned Research
Affirmative community revitalization
How has the subprime crisis exacerbated fair housing and
equitable community development challenges? (Minneapolis,
Cleveland, Boston, Sacramento)
How has the subprime and foreclosure crisis affected
immigrants, especially low-income and undocumented
immigrant homeowners?
How might the homeowner/rental balance shift and affect
rental markets?
Ensure that programs and policies responding to the
subprime crisis reach those most affected
How do we assess the current federal policy response with
respect to fair housing and civil rights goals? (TARP, NSP2)
What has the impact been on the AI/AN population (data)?
12. Properties in Foreclosure in North Minneapolis (Mark Ireland)
No Home in Indian Country (Janeen Comenote)
TARP Programs Must Affirmatively Further (DeeDee Swesnick)
13. Properties in foreclosure
Study of North Minneapolis
Subprime lenders did disproportionate lending in the
area
Vast majority of foreclosed mortgages issued through
mortgage broker (unregulated)
CRL study: pay on avg. $35,000 more over life of loan vs.
sub-prime mortgage through retail lender
Prime lenders disproportionately absent
Foreclosed homeowners owed 4-5% more than the
original principal balance
14. Properties in foreclosure
Under-reported, disproportionate affect on rental
families with school-age children
Rental properties accounted for 61% of foreclosures
40% of foreclosed households had children in
Minneapolis public schools; 60% were African American
Yet most foreclosure policies directed to homeowners
Properties lose value and endanger neighbors
Averaged ten months to sell at average loss of $65K
83% of properties had 911 calls post-Sheriff’s Sale, with
an average of 8 calls per property
15. No Home in Indian Country
On-reservation populations
Federal government has legal and trust responsibility to
provide housing for Native people
NAHASDA – Block grants to tribes and tribally
designated housing entities
Currently able to meet 5% of need for housing
Denial rate for conventional home purchase loans of
23% -- twice that of Whites
16. No Home in Indian Country
Off-reservation populations (majority of AI/AN
population in US)
8-state study revealed the following barriers to housing
for urban Native people: credit checks, low income, lack
of affordable housing stock, background
checks, deposit/down payment requirements
Disproportionate number of Natives in homeless shelter
care, but very few projects serving the Native
community
Little known about barriers to fair credit
17. TARP’s duty to affirmatively further
National Fair Housing Alliance paper
Federal programs designed to mitigate the effects of
the financial crisis must meet their obligations under
the Fair Housing Act
TARP scope close to $ 3 Billion (OSIG Report)
TARP funds relate to housing and urban development
TARP funds must be spent in a way to affirmatively
further fair housing
18. Fair Housing Act requirements
Federal programs designed to mitigate the effects of
the financial crisis must meet their obligations under
the Fair Housing Act
“All executive departments and agencies shall administer
their programs and activities relating to housing and
urban development (including any Federal agency
having regulatory or supervisory authority over financial
institutions) in a manner affirmatively to further the
purposes of this subchapter and shall cooperate with the
Secretary [of HUD] to further such purposes.” – Sec.
808(d)
19. Example: Home Affordable
Modification Program (HAMP)
Funded by $75 Billion in TARP funds
Incentivizes mortgage loan modifications to keep
families in their homes
Civil rights & consumer groups advocacy resulted in
the directive to collect and report data on race,
ethnicity & sex of applicants for HAMP loan
modifications
20. CAP report: TARP bank lending
CAP recommendations: No more TARP $$ until special inspector general
for TARP “gives a passing grade on fair lending practices;” Pass CFPA
22. Overdraft fees
Congressional legislation coming…CFPA, or specific
overdraft legislation?
Federal Reserve proposing opt-in, not opt-out
Some banks offering to make some concessions on
fees…(BOA; J.P. Morgan Chase; etc.)
2009 fees: $38.5 billion; fees increased 4% this year;
avg. overdraft fee $35; banks make more on overdraft
fees than credit card fees
In 2006, overdraft fees were roughly 75% of total
consumer fee income
23. Embarrassing fee facts
Half of overdraft fees are from small ATM/debit
purchases (the “$40 cup of coffee”)
Some banks include the overdraft allowance in the
account balance shown at the ATM
In undercover visits, GAO officials often couldn’t get
required disclosures detailing fees
A handful of consumers pay the lion’s share of fees (i.e.
FDIC study showed that customers with 5 or more NSF
transactions – 14% of customers -- accounted for
93.4% of total NSF fees)
24. Civil rights concerns
[Tree] People who overdraft repeatedly are more likely
than the general population to be lower
income, single, non-white, and renters
Center for Responsible Lending. “Quick Facts on Overdraft Loans.” April
9, 2009. http://www.responsiblelending.org/overdraft-loans/research-
analysis/
[Forest] Incomes lag while housing, health care, and
education costs skyrocket…more people get in more
debt, but the picture is uneven.
25.
26. Bank concerns
If overdraft ended overnight, one economist estimated
1,000 banks and 2,000 credit unions would go under
45% of banks and credit unions make more on overdraft fees than
they do in profits
Loan volumes are shrinking while transactional
business increases, and transactions have a cost
What’s a sustainable profit model for banks that builds
wealth for consumers?
27. Remittance flows
Worldwide flows: $320 Billion in 2008
Unrecorded flows through informal channels are
believed to be at least 50% more than recorded flows
In last five years, remittances have grown by 63% and
now represent the largest source of income for many
developing countries
On the horizon: mobile transfers (in developing
countries, more people own mobile phones than have
bank accounts)
28. Global flows
Africa :Total remittances (US$ million) 38,611
Asia and Oceania :Total remittances (US$ million)
113,055
Europe: Total remittances (US$ million) 50,805
Latin America and the Caribbean: Total remittances
(US$ million) 67,905
Near East: Total remittances (US$ million) 28,449
Orozco, Manuel. “Sending Money Home: Worldwide Remittance Flows to
Developing and Transition Countries.” December 2007. Inter-American
development Bank.
30. Remittance market
In 2004, 5% of transfers were done via direct deposit into
accounts at financial institutions (40 million
transactions/year)
Western Union and Money Gram charge $12-50 fee per
transaction
People are suspicious of bank pricing, don’t have needed
ID, or know of hand-to-hand alternatives
Bank of America has offered free remittance service since
2005…banks want new customers
If banks are going to get new customers via the remittance
market, how do we ensure that they subsequently offer
them sustainable options?
31. What’s next for us
Similar policy feedback from small policy
roundtables:
Austin, TX
Detroit, MI
Oakland, CA
New Orleans, LA
Federal policy and advocacy consensus building
meeting in Washington, DC (November 18)
Final policy and advocacy “blueprint” – all papers &
blueprint publicly available (website coming)
32. Fair housing and fair lending
Group A: Barriers to / Best practices for access to fair
financial options, mortgage and otherwise
Group B: Barriers to / Best practices for affirmative
community revitalization
Group C: Barriers to / Best practices for opportunity-
based housing
34. References
Fees
Janneke Ratcliffe. “A Bridge to Somewhere: the road from predatory lending
to good financial services for all Americans.” August 5, 2009. American
Prospect.
GAO. “Federal Banking Regulators Could Better Ensure That Consumers
Have Required Disclosure Documents Prior to Opening Checking or
Savings Accounts.” January 2008.
http://www.gao.gov/new.items/d08281.pdf
FDIC. “Study of Bank Overdraft Programs.” November 2008.
http://www.fdic.gov/bank/analytical/overdraft/
Leverage data
Changes in U.S. Family Finances from 2004 to 2007: Evidence from the
Survey of Consumer Finances. Federal Reserve Board, Survey of Consumer
Finances, February 2009. Page A37.