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Wholesale Bank Retreat from Lending to Lower Income and Minority Borrowers

cra1New Orleans      The Community Reinvestment Act (CRA) passed in 1978, more than 35 years ago, was straightforward. Banks could no longer redline, meaning they could not use the deposits from lower income and minority neighborhoods to finance mansions for the rich in the sprawling suburbs. More plainly stated, they could not discriminate in their lending. As importantly, under the Home Mortgage Disclosure Act (HMDA), they couldn’t hide their lending records, but had to make them transparent enough for regulators and the rest of us to know that they were doing right. Fair enough, and this worked not perfectly, but pretty well, for almost 30 years until the Great Recession by meeting the huge demands in our communities for homeownership.

Without being willing to come right out and say so, banks have gone to war against the CRA and lending to low-and-moderate income and minority communities without formally revealing that they have agreed to a declaration. They don’t want to say they don’t want to loan anymore to lower income working families and minorities, but they just don’t want to do so.

The war is being led by the biggest of the banks, especially JP Morgan and Bank of America. JP Morgan’s Jamie Dimon, indicated that the bank has reduced its exposure in the market for FHA insured loans that are targeted to first-time homeowners with “little wealth, especially minorities, because it allows borrowers to make down payments of just 3.5%.” A year ago Morgan accounted for 12.7% of these loans, but most recently it revealed that its share is down to 2.3%, which is to say, knocking on the door to doing nothing. Bank of America has also retreated, claiming it will focus primarily on servicing his existing customers with accounts at the bank.

And, what is their rationale for the retreat? Well, this is interesting, because it goes to the issue of transparency and accountability for lending, which was at the heart of HMDA as well.  First and foremost is the fact that they don’t want to hold the loans on their books. For right now this is why 80% of their loans are pushed into programs with various federal guarantees. A new accounting rule proposed for 2018 could make this even dicier, because they will be required to write off a portion of the loan at the same time they are making the loan, which you just know will scare the heck of them. Here’s the rub. Dimon is whining because his bank and a pack of the others are now paying fines, $614 million for Chase, because they defrauded FHA by claiming that some loans they packaged met the FHA requirements that didn’t, and even after an internal audit discovered this, they tried to continue the cover-up and not inform the FHA that they had swindled them until an internal whistleblower spilled the beans.

So, let’s all understand, Morgan got caught cheating the government, so now the big whine from CEO Dimon is that they lost money on the scam, because they are having to pay a penalty for doing wrong. They essentially want some kind of do-over rule that allows them to cheat, say I’m sorry without a fine, and keep doing whatever they feel like doing.

And, one thing Morgan, Bank of America, and others don’t feel like doing anymore is lending to first timers, working families, and minorities it seems. Unfortunately the way the CRA has had its teeth pulled over the years makes this possible, along with the fact that the Federal Reserve is the police watching over the banks and their CRA obligations, and they have tended to play patty cake on these lending obligations for years.

We need to look at the coming CRA numbers more and more rigorously, because whether we know it or not, we’re in a fight to keep money in our communities, and we’ve got a huge body count already and no sign of any cavalry coming to save us.

Trolling on Craigslist, A New 419 Internet Scam

craigslistNew Orleans       In many cities Craigslist is the modern go-to site for buying and selling, having decimated its competition years ago in what’s left of the print industry. It’s a clunky site with nothing fancy to it, but, hey, it’s free, and it’s popular, and stuff moves, so many of us are all over it whenever we have to buy or sell, you know, stuff. Which is not to say that Craigslist hasn’t had its problems as an open forum in the modern world. There’s all of this nastiness about predators. There are the shrewd operators that took prostitution off the streets and onto the web until Craig had to finally police some of that stuff. The point is that Craigslist is a wonderful tool, but so is a hammer and that doesn’t mean you can’t still smash your fingers if you’re not careful.

All of which brings me to internet scams.

There are of course the spam scams powered by bots in Russia and around the world that offer a bit of everything, plus $100 million euros, if you are willing to double click your way to trouble. If they have an attachment, you might as well just about throw your computer away. Most of us know to be careful about this stuff, and there are programs that weed out some of this.

Then there are the 419 scams from Nigeria, referring to the section of the Nigerian Criminal Code forbidding mail fraud. A couple of years ago there were very interesting adaptations to the standard inheritance scams. You got an urgent email from an email that looked like it was from a friend. They were desperate and trying to get back home, usually from some foreign country, but their wallet or purse had been stolen, and they needed you to wire money to them to save the day. I can remember my first time, calling a friend in Helena, Montana at 6am to see if they were alive and well. Those were great, but they always broke down when you emailed back for a hotel name so you could call them directly, got the runaround, and ended up being asked to send a grand or so to a Western Union in London or somewhere far from anywhere.

There’s a new twist which seems more “bot” than person, which is disappointing, given how interactive the robbed-in-a-strange-land scam worked. Several of my friends have tried to offer their rooms during the Jazz Fest or rent the other side of their double or whatever, and are getting these great emails almost immediately when they post to Craigslist. It’s almost invariably a young woman who is moving to the city from England (what is it about England and these scams, eh?) and wants to rent for a year for top dollar, seemingly solving all problems the ad placer might have. Reading a couple of these, the money always looks great. I was suspicious because the young woman always looks too “good” in a stereotypical way to be true. You know, devout Christian, no smoking, no drugs, no drinking, clean freak. I mean really, how many of them are left? And, why are leaving London? That and the grammar is a little off with some misspellings, making me think more machine than scam artist here. Once they get a response – and that’s your mistake here – then there’s not much engagement, but a couple of days later there’s this problem wiring you the money, and they have a complicated ask where you would make an extra hundred for writing them back to Western Union the excess amount they tried to send you. Huh?

Well, you get it now. They pick up your listings by trolling on Craigslist. They want you to provide your name and address, which is sketchy. They send you a picture and try to get the same back from you, I guess so that they can pretend to be you to someone else next time around.

I read today that the judge wouldn’t release the names of the people scammed by the Wolf of Wall Street, the true character behind the Leonardo de Caprio movie. Turns out according to AARP and others that scammers like to buy lists of suckers wherever they can find them, because once burned is not necessarily twice learned.

Just saying. We all use Craigslist and no reason not to do so, but there’s mischief around some of these corners. Caveat emptor!

Taking the Affordable Out of the Affordable Care Act

Screen-Shot-2014-07-22-at-11.40.12-AMShreveport          Two different federal appeals courts, one in the notoriously Republican-dominated, 2nd Circuit in Washington, DC, and the other a bit more mainstream in Richmond, Virginia came down with contradictory decisions on whether or not the Affordable Care Act allows subsidies to be given in the 36 states where Governors and state legislators have stood in the hospital door and the feds have run the marketplaces. Without the subsidies administered by the IRS, the mandate for health care coverage would remain, but the “affordable” would be taken out of the Affordable Care Act. There will be no change for now, but this means that Obamacare will be on tender hooks throughout the coming mid-term elections and its fate will rest with the deeply divided Supreme Court next year. I’m not sure there’s enough prayer to protect the American people from the fear all of us now must feel.

Sadly, this seems part of a pattern of pointed and specific attacks on the poorest Americans even while the editorialists try to summon up platitudes about the importance of dealing with the deepening inequality of American society.

Reports have gotten wide publicity that perhaps as many as 2 million of the 10 million applicants for Obamacare may have had defects of one kind or another in their applications. Government Accounting Office investigators reported to a Congressional committee as well that they were able to trick their way into successful applications with fake IDs and income information in 11 of 12 cases when they went undercover.

All of these are tentative indications of problems, so they may or may not indicate deeper issues. Furthermore, there is a mechanism to fix early certifications, so it is unclear whether this is really an issue at all. Any change of income or inaccurate filing is all settled up later with the IRS at tax time where additional charges and adjustments will occur. The back-end corrects any front-end problems.

Nonetheless there can’t be any doubt that Obamacare opponents are pointing their fingers again to paint a picture of an “undeserving” poor ripping off healthcare. The subsidies now at risk, thanks to Congressional polarization that left language in the Act vague without a conference committee to clean it up, also are of course only paid to make the care affordable for the poorest working families who qualified.

Add this to the failure to adopt the Massachusetts-style $2000 cap on deductibles which will penalize millions of lower wage workers once the mandates go into effect in larger companies, and it appears the war on the poor is being waged on all fronts.

Unfortunately without some breaks or a fix, this is a cage match to the death, and the betting odds will be heavily against us.

US Border Crisis is Personal to ACORN Honduras Members

acornhondurasNew Orleans      President Obama has asked for $4 billion to secure the border, speed up deportation hearings, and house some of the more than 50,000 children that have crossed the border from Mexico to the United States having survived a journey on “The Beast,” as the train from Central America is called. The Republicans are hooting and hollering. Texas Governor Rick Perry says he has now activated 1000 National Guard members to do god only knows what at the border. Most of the children are coming from the Central American countries of El Salvador, Guatemala, and Honduras with Honduras far in the lead with half of the top 50 cities sending children coming from that country and San Pedro Sula, the 2nd largest city in the country, accounting for 2200 children identified, leading the list. President Obama has summoned the three country’s presidents to Washington to discuss the crisis.

All of this is sound and fury unless you are an ACORN organizer working in the barrios and colonias of Tegucigalpa and San Pedro Sula like Erlyn Perez and Suyapa Amador and dealing with the families on a daily basis. To ACORN International this is not just policy. It’s personal.

One of ACORN’s members, Luisa Almazan of San Pedro Sula, told us of her 14-year old son, Ermelindo, having been forced to flee to the United States despite the risks when gang recruiters gave him a choice of joining the gang or being killed. ACORN members and mothers, Candida Hernandez of Villa Nueva Cortes in San Pedro Sula, and Maria Antonia Callejas of Barrio Cabanas, told of the dangers to their sons, 18 and 16 respectively, and the fact that to save their lives they had been forced to pay $3000 to $5000 USD – money they didn’t have — to help them flee to the United States from the violence and poverty. Their children made it to the United States safely, but now they are detained by the immigration authorities in Texas. With no resources and already deeply in debt they are being asked to raise more money to transmit documents and get representation in order to secure their children’s release and return. These stories are repeated in every barrio where ACORN organizes, over and over.

In demonstrations in front of the US Embassy in Tegucigalpa and the First Lady’s office in San Pedro Sula this week, ACORN members are asking, “What next?” They are demanding the Honduran President take steps to finally provide security in lower income communities not simply to secure the boundaries from other areas, but to protect families from the gangs and narco-traffickers. They are demanding more support as well for jobs and educational opportunities. ACORN members and mothers don’t want to lose their teenage children to America. They are also demanding that the US spend some of its money to help the children relocate and resettle in Honduras and to actually assist them in getting their children home.

What ACORN understands is that this crisis is all about Honduras and its neighboring countries, and not about the United States. The US needs to get over its internal bickering and politicking and finally come to grips with the truth and the facts on the ground on the dirt streets where ACORN members are living and working in Honduras and stop militarizing the border and forcing the drug addictions of the US population to be paid in blood in our communities in central America. ACORN will demand change this week, but we fear, just as these mothers fear, as they summon the courage to speak out, that we will simply hear more of the same blaming the victims.

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How Can We Get the “Rip Us Off Now” Sign Off Our Back?

student_debtNew Orleans    I just have to wonder why when we are in a period of historic wealth and income concentration at the top, there are so many outfits trying to rip off low-and-moderate income families at the bottom? The hustles keep rolling down on our people like an avalanche.

The Student Debt Project issued a report saying that the average graduate is now leaving school with $29400 worth of debt. Ok, maybe colleges and universities are not rip-off artists, but the evidence is piling up that even if so many of our folks signed the loans willingly, the institutions were predatory, waving a dream with one hand, while pulling out the rug of reality with the other.

Everyone is finally discovering how predatory payday lending is on low-and-moderate income families, as if it were news. Some hope the relatively new, Elizabeth Warren promoted, Consumer Finance Protection Board may zero in on these companies. Their reports are devastating and worth repeating:

 

…of about 12 million payday loans issued across more than 30 states only 15 percent of borrowers could raise the money to repay the entire debt without borrowing again within 14 days. Twenty percent of these borrowers eventually defaulted. Nearly two thirds renewed a loan and were on the hook for fees that could put them on the road to financial ruin; three out of five payday loans were made to people whose loan fees exceeded the amount borrowed.

 

Yes, like student loans, there is no benchmark of affordability being used here.

And, how about auto loans.

Capital One is leading the pack with Wells Fargo right behind in pushing these loans out the door, and, low-and-moderate families are gobbling them up. We made it through the recession on repairs and now in 2014 the old buckets of bolts are just past repair, and people have to have the wheels under them to get to work, school, and wherever. Flooded with money, since banks were not making loans, we have the home financing bubble and securitization schemes coming back along with no interest teasers and high interest balloons creating a new subprime market in auto loans.

 

Wells Fargo, for example, made $7.8 billion in auto loans in the second quarter, up 9 percent from a year earlier with $52.6 billion in outstanding car loans. 17 percent of the total auto loans went to borrowers with credit scores of 600 or less.

 

And, yes, like student loans and payday loans, there is no benchmark of affordability, meaning ability to pay back the loans, being used here.

What does it take to get some real action by the government at the local, state, and federal level to take the “Rip Us Off Now” sign of the back of working families?

Internet Enabled Neighborhood Discrimination?

Syndication2New Orleans   This is our question for the day.  Are people using the supposedly “neutral” tool of the internet to get around fair housing laws that prevent housing discrimination?  An intriguing piece in the New York Times raises this issue in looking at the data explosion that gives exceptionally specific data on individual communities that therefore just might skirt the law.

The National Association of Realtors’ code of ethics prohibits realtors and associates involved in a sale from volunteering information regarding the racial, religious or ethnic composition of any neighborhood, lest they run afoul of the Fair Housing Act, which prohibits steering of clients to or away from neighborhoods out of bias.  But many nonbrokerage real estate websites that act as referral generators for agents readily offer such information.

Whoa!  That sounds like trouble right under our noses and at our doorsteps.

HUD is supposedly looking at the issue but when queried was noncommittal and coy, only saying, “We are aware of the issue and are reviewing it.  It would be premature for us to comment while the review is underway.”  This seems a little bit like the BBC’s “House of Cards” saying, “You might say that, but I couldn’t comment.”

This whole side of the internet that is a tool for hate and division is very troubling, because you can’t blame the internet for providing public information and websites for aggregating it, but what can you do?   We hate to go all “big brother” on people, but it would seem that at least there could be cautions or warnings prompted by searches that could breach the Fair Housing Act.  If you are on YouTube, there are many movies and whatnot that make you prove you are over 18 years of age before letting you go forward into the unknown.  There also seem to be a huge number of scarily accurate algorithms that almost immediately send you an email from Priceline if you checked an airline site for a flight to Managua or from Amazon or a score of others if you looked for a lawnmower on the internet.  No question those folks know how to get into your head.  How about a bunch of warnings from HUD and the government that work like that and send messages to these shoppers looking to walk the line which reminds them of the law and so forth?  Would that be too creepy?

In fact would it be creepy and scary enough to have any impact.  As the kids say, “haters are gonna hate,” so is there any way to stop them?

Maybe not, but it seems to me that we have to at least make it harder for them, and maybe even let them know that somewhere, someone knows what they are up to, even if it’s a computer somewhere crunching data as well and driven by an algorithm that is watching and warning them.

            Better something, than nothing.