New and Better Mortgage Lending Standards Maybe

rs-2New Orleans               The press is making a big deal of Mel Watt’s comments as the chief housing regulator at the Federal Housing Finance Agency to the Mortgage Bankers Association’s convention in Vegas.  He claims he has a new plan to loosen up the rules so that banks finally lend some money to first-time buyers and lower-and-middle income borrowers.  There’s a problem though.  The bankers are applauding, but there are no real details to the plan available, so what’s the story here?  Frankly, I don’t trust this.

Too much of this seems like a suck-up to the bankers and the equivalent of a “get out of jail” quickly ticket for them to blame their fast and loose behavior on the borrowers, which has been part of their narrative since the meltdown of the Great Recession.  Under the so-called “plan,” the housing finance agency would ease up on the rules that require the banks to buyback mortgages “that show evidence of fraud or other flaws in the underwriting process.”  Supposedly the buyback now would be based on the ability of the feds and the prosecutors to prove a “pattern of misrepresentations and inaccuracies.”  Furthermore the bank rip-offs would have to be “significant” enough to have disqualified the borrower from a Fannie Mae or Freddie Mac guarantee on the loan.

There’s a rumor of approving loans with as little as 3% down payments, and maybe that’s a good thing, but who really knows without the details.

To me this looks like a bank stickup with the bankers holding the gun against the government’s head and refusing to make loans until they get enough promises that they are not going to have to pay billions in fines and buybacks if they rip-off their borrowers yet again.  My argument would once again focus on one of the least corrected causes of the meltdown:  brokers.

As long as lenders refuse to supervise their broker networks even while all of the incentives are left in place for brokers to act independently and to be paid at the point of production regardless of affordability of the loan to the borrower, the conditions remain in place for fraud and predatory behavior.  Allowing this much finger pointing away from themselves, lets the bankers juice up the market without any accountability.  Even better, but only for them, they’ll get to still blame the victims, rather than take responsibility for their own thievery.

We need a subprime market.  We need for low-and-moderate income families to have the choice of buying a home, if it makes sense for them financially.  But, do we really want to make it easier for bankers to look the other way and claim their hands are clean when they are financing the fraudsters?

Many of the advocates are applauding this so-called plan.  I’m hoping they know a lot more of the down-low than has been made public, because at this point it looks like a deal made on our knees with the bankers where we’re once again begging for money for our people and they, once again, are dictating the terms and setting the table for more mischief and mayhem.

Blacklisting by Banks

bank-of-america-steve-rhodesNew Orleans      The Federal Consumer Protection Bureau is looking into the issue of “blacklisting” by banks when some consumers try to open checking accounts.  If you are lucky, you may ask, what are they talking about, aren’t banks in the business of providing customer service through individual checking accounts?  Oh, child, you are so “old school,” 1980’s, and yesteryear.

Many big banks argue that they lose money on personal checking accounts.  At best it’s a loss leader of sorts.  They want them because they need the deposit base in some cases, but in most instances checking accounts have become little more than the way banks access your money to charge excessive fees for every little thing.    It starts with the monthly service charges that suck out your minimum balances and then there are the overdraft charges that can range up to and over $35, and that’s not counting the fact that many banks are all too willing to let scammers hit your account for predatory and multiplying charges, sell your info for credit card solicitations, many of them from their own subsidiaries, and often nearly rob you blind.

An FDIC survey reveals 65% of banks deny checking account applicants who have prior mismanagement in their consumer reports.  “A consumer who bounced a check once is not a deadbeat, a consumer who bounced a check once may not even have made a conscious mistake,” said Ed Mierzwinski of the National Association of State Public Interest Research Groups.  Mierzwinski said potentially millions of Americans are “blacklisted from banks” and consumer advocates worry financial institutions could be shutting out some people whose records were dinged by accident.  “There could have been an automatic payment that the consumer had canceled but the company by mistake continued to try to take out of their account, and that is happening more and more often today,” Mierzwinski said.  Federal law says you can request a free banking history report each year, and dispute any incorrect information. Chex Systems said if consumers find errors it is “committed to resolving all such disputes as quickly as possible.” Early Warning declined comment.

            This is a good thing for the FCPB to investigate.  Who reads the fine print, but when you open an account you give the bank the right to reject you as a customer unilaterally without cause or explanation.  With the huge databases out there, banks who are pre-screening new accounts might take a bounced check or overdue payments from your teenage years and block you from an account for years.  And, despite the fact that the devil lives in these details, as predatory as banks have become, not having an account at all exposes a consumer to even more difficulties in bill payment, establishing credit, and even receiving their paychecks electronically in many companies.

            Damned if you do, damned if you don’t.  Some protection and minimal, enforceable, easily accessible rights would be welcomed because the news everyday proves repeatedly that we need help and protection in dealing with banks.


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.

Nickeled and Dimed By Both Wall Street and Main Street

bank_feeNew Orleans   In the wake of the Great Recession and general financial meltdown we all like to think we’ve got our eyes peeled to all of the slick shenanigans devised by Wall Street wheeler-dealers.  With billion dollar bank settlements still regularly reported in the daily papers and with a new governmental body, the Consumer Financial Protection Bureau, in place that has our backs, we can finally relax.  Not!  I’m increasingly convinced that it’s not the big heist that will get most of us, but the fact that we’re now nickeled and dimed every day and in almost unimaginable ways once we relax even the tightest grip from our hard earned money.   The answer in banking to new regulations and restraints and lower interest rates seems to be rather than the big score, just to suck us dry, bit by bit, day by day.

When we worry about the unbanked, we keep looking for ways to achieve citizen wealth or income security with more safety and less cost.  Generally, most of us would believe that it’s better to put your money in a bank than to wad it up and hide it under your mattress or in a crack in the wall.  I’m just not sure that’s true anymore.

Minimum service fees are so expensive that their main purpose seems to be to suck the money out of your accounts in exchange for nothing.  In the wave of support for credit unions a couple of years ago, some of us opened accounts in the local credit union in our neighborhood, called ASI, because they seemed committed to the area.  The whole point of a credit union used to be savings.  You put some money in, and they get to invest it, but you were able to build a relationship for the future.  Boy, is that old school, gramps!  Once you discover there are minimum balance fees ever month and quarter, a couple of hundred necessary to open the account, becomes not an inducement to savings and security, but a bank donation, because when you’re not watching, it’s gone in a couple of years.

And, not just credit union accounts either.   For years Local 100 had a petty cash account with JP Morgan Chase in Little Rock.  We had forgotten we had it, until a visit to the office several years ago stumbled on a statement.  They were sucking out $20 or more a month to maintain an account with hardly $300 bucks in it.  Over a two year period we wrote, called, and cajoled Chase to close the account and transfer the money out to Capital One where we had our main account.  They delayed.  They promised.  They assured us.  We never saw a dime before it was gone.  For a couple of hundred here or there, the small fry and the big boys know you won’t sue, so they make what’s called a “business decision” to simply steal your money figuring they can get away with it.

It’s not just bank accounts either.  They treat anyone small, even their shareholders the same way.  This week I got a weird letter from Citi, as in Citibank, Citicorp, etc.  They wanted to know how I was going to pay $45 bucks and change for some kind of investment account they had me in.  It’s a long boring story, but 30 odd years ago on an office bet among other things I bought 10 shares of Citi for less than $100 with no brokerage fee.  It goes up and down as they get caught doing good or evil, and now it’s worth $700 or so, many decades later.   This is not Warren Buffet look out time, if you know what I mean, but what was a $45 annual charge all about?  They had an 800 number for questions, so I called.  What a hustle!  So, it seems after having signed us little fish up on one of their accounts, she told me they had started attaching a fee a year or two ago, unbeknownst to me.  So, I said, take me out of this now.  Not so easy, cowboy, she said.  I would still have to pay $45 for last year and $45 for this year out of my small holdings.  Well, all you’re doing is holding my certificates.  Send them to me, I’ll hold them myself.  Oh, no, dude, she claimed they would cost something on the order of $500 apiece, which surely is a big fib!  She claimed they could transfer my shares electronically to a depository of some kind, but that would also cost about one-hundred-and-a-half and when I asked what that outfit would charge annually, she would neither give me the name nor the cost for 5 minutes or more.  Oh, and to transfer out, I would have to sign a form and get it notarized by my bank, which she would supposedly mail to me.  Come on, man!  My Citi shares are hardly worth anything with miniscule dividends, but as a small fish to a Wall Street shark the message was clear, I was either going to have to agree to let them blood suck me for fifty or more every year or they were going to try and take a third or more of the little I had with Citi so that they could bleed me out now.

Modern finance, whether Wall Street or Main Street, is about billions and billions of dollars in transaction costs ripped from the hands of all of us small fry, not shrewd deals gaining value and building the nation’s economy.   We’re the grease on their wheels.  While the government and others try to watch them at the front door, they are stealing us blind and with impunity out of the backdoor in every nook, cranny, and alleyway they can find.

Banks Shirking Responsibility for Foreclosed Property Maintenance

bank-owned-foreclosures-12New Orleans  I woke up to headlines indicating that the National Fair Housing Alliance has accused Minneapolis-based U.S. Bank of effectively “red lining” blight into largely African-American and Latino neighborhoods in 35 different cities in 15 metropolitan areas.  Recently the alliance added New Orleans, Dallas, New Haven, and Hampton Roads, Virginia to an amended complaint charging that US Bank had not maintained foreclosed properties in minority neighborhoods compared to what it does in white areas.  Similar complaints have been filed against Bank of America and Wells Fargo, though reportedly Wells Fargo settled with the group.

            So, what says U.S. Bank?  Their defense is that they are simply the corporate trustee for a security pool of investors and claim that they have no legal right to maintain the properties.   Well, I’ve been there and heard that, so at best U.S. Bank and the rest of these banks are hiding behind half-truths.   They are the legal trustee for the properties though and it’s their name on the property titles.  In reality at best U.S. Bank is trying to have its cake and eat it too.  They get paid to be the holder of the investment pool and the named owner of the mortgage properties, but they are essentially trying to sing a verse with the old rock group, Dire Straits, and “get money for nothing and get their chicks for free.” 

ACORN struggled with this problem for years and interestingly in negotiating with Deutsche Bank, which at the time in 2007-2008 was a trustee for a huge number of mortgage security pools, we learned quite a bit about how it really works. The bottom line is that the banks know the owners, and in a wink-and-nod in those days, Deutsche agreed to give us the information on specific properties that were problems in our neighborhoods when they became issues.  My point in that U.S. Bank and the other bankers are in effect earning their money by allowing the real owners and their lack of maintenance to hide behind their corporate veil, so they deserve to go down.

And, their problem just gets bigger when the fair housing alliance and others do the ground work around the country and bust them for not lifting a finger to take care of properties that are foreclosed in black and brown neighborhoods, while in fact making sure that properties are maintained in white areas. 

Call it redlining or just flat out racial discrimination, U. S. Bank and the boys can keep whining about it, but they are just shucking and jiving for the real owners and it is past time for them to do right and stop ruining our neighborhoods with callous disregard, while they count their money for doing nothing.  They can either name out the real owners or take the weight and step up.

Bank Mortgage and Foreclosure Problems Won’t Go Away

zombies1-300x237New Orleans  No matter how many billions banks pay to try to whitewash their devastatingly destructive behavior in milking home owner mortgages and turning homeowners every way but loose, they can’t make the mess go away.  The stains and scandals are indelible and their refusal to change their culture or their standard operating practices guarantees that no matter how much they run, the stench – and headlines – will surely follow.

            Here are yet more recent examples.

·      A judge has refused to allow Wells Fargo to offload $49 billion worth of home mortgage servicing to Ocwen Financial of Florida, because the judge is not convinced that Ocwen will not make a mess of it.

·      A nonprofit, public interest group called Better Markets, Inc. sued the Department of Justice claiming that the $13 billion with JP Morgan Chase, just doesn’t get it.  Better Markets argues that there should have been criminal charges and the bill of particulars should have been presented in court where everyone could view the full range of conduct. 

But, my favorite is the action being taken by New York’s Attorney General, Eric Schneiderman, who has signaled that he is going after banks for their failure to take responsibilities for what the industry affectionately calls “zombies.”  So what are zombies in this modern banking nightmare of the walking dead?   After banks foreclose and push a family out of their homes or a family just realizes there is no hope and abandons the property, the banks don’t do what it takes to maintain the property, thereby extending the damage past the affected family to the entire community.  Numerous studies have found that an abandoned house can lower the property values in an entire neighborhood from 1 to 2% if such a house is located within blocks of your home up to a half-mile away. 

The response from bank spokespeople?  The long whine!   They claim they do their best.  They claim that they keep boarding up, but it is those damn vandals.   But, who believes this?  It is well established that the maintenance and security of a property can cost a bank $50,000 or more, and in negotiating with banks about modifications, we were always careful to remind them that pushing a family out of their home was not a free ticket to ride.  They know there are costs, but here’s rooting for New York, and then all of the rest of states to make them pay.

The real reason we have zombie properties rather than homes where families live, is because we still have ghost banks protecting the inflated values of their supposed assets on home values before the recession rather the reality of the market now.  But in the land of the walking dead, where ghosts and zombies are now part of American communities, banks need to learn that there is no running from them or themselves, until they finally, simply do right.