Housing Discrimination is Back! Did it Ever Leave?

hudson-city-savings New Orleans      The Community Reinvestment Act (CRA) was passed in 1978 banning racial discrimination in lending.  The Home Mortgage Disclosure Act (HMDA) was passed as well, forcing banks to supply the data on where they approved mortgages and the racial and ethnic information on the borrowers.  Reporting and enforcement is under the jurisdiction of the Federal Reserve banking system.

            This is called redlining.  There have been recent settlements in this area in Buffalo, Milwaukee, Providence, Rochester, and St. Louis.  Hudson City Savings Bank, the 7th largest savings bank in the US and the largest in New Jersey with offices in New York and Connecticut as well, and a merger candidate for the larger M&T Bank Corporation, settled a case with the Department of Justice and the Consumer Financial Protection Bureau without admitting guilt but by agreeing to a fine of over $30 million for discrimination.  The New York Times reported that that “In 2014, Hudson approved 1886 mortgages in the market…federal mortgage data show.  Only 25 went to black borrowers.”  Hudson claimed innocence, arguing that it bought mortgages on the secondary market, that the bank felt was sufficient to satisfy its CRA obligations.   Attention to the discrimination was brought to the authorities by New Jersey Citizen Action and that’s about the only good news in any of this.

            The bank’s argument is perverse.  They seem to believe that racial discrimination can be handled like climate change with a “cap-and-trade” type agreement where it is alright to discriminate in your home markets, just like you can pollute in your home countries, as long as you purchase an offset in some other way by buying mortgages or helping protect a rain forest.  What a load of hooey!  I’m also troubled about the non-existent role of the Federal Reserve in the Hudson story, especially because any pending merger like the one playing out with M&T would have triggered a review by the Fed on the CRA banking record and requirements.  Without a doubt the CRA has been steadily weakened over the last almost forty years, but has the Federal Reserve decided to be completely derelict in their duty and shuffle this over to no one or by luck have some other agencies like the CFPB and the DOJ pick up the slack.  This is not reassuring.

            Nor is it uncommon.  Without data or taking the time to collect and study it when it is available, it becomes easy to simply say with the banks that there is no discrimination.  I heard that repeatedly in the United Kingdom when discussing the need for a CRA and HMDA for British banking.  Data now exists that allows some evaluation of credit, mortgage, and small business loans in the UK, but the initial reactions have been ho-hum, indicating no surprise that there is more action on lending in higher income areas than lower income ones.  The finer data is not available, and the raw data is deliberately opaque.

            As long as there are bankers that will welcome deposits from lower income families and minorities and still maintain that they have no community responsibility, even though they are chartered with such obligations, and justify their practice based on aversion to risks rather than embracing more robust and generalized rewards, there will be discrimination. There’s always smoke, we just need to make sure that many are still also continually looking for the inevitable fire hidden beneath the smokescreens.

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Courts Become Gateway to Debtors Prison

NDebtew Orleans A harrowing article in the Wall Street Journal documented the success that bottom fishing debt collection agencies are having at ripping the last pennies from working families being crushed in court over relatively small claims.  I wish this were news, but of course the story is all too familiar.

The big debt predator companies are buying the debt for 3 and 4 cents on the dollar and then almost immediately going into court where borrowers are virtually defenseless.  In most cases the debtors do not appear in court since they have no representation and instead find themselves victimized by the so-called “system of justice” with more fines, court fees, penalties and an added burden of cumulative costs that may lead the original debt to increase by anywhere between 25% and 100%.  In effect judges and courts are becoming the screws for a new kind of debtors’ prison where people are on “permanent parole” and tethered to the escalating debts that are increasing even when they are being paid, little by little.

Journal reporter, Jessica Silver-Greenberg, does a service by at least naming names, not that they would feel much embarrassment over their tactics and tools:

The four largest publicly traded debt buyers—Encore, Asta Funding Inc., Asset Acceptance Capital Corp. and Portfolio Recovery Associates Inc.—purchased $19.6 billion in distressed debt last year. They typically recover three times what they spend buying debt, according to the Association of Credit and Collection Professionals, a trade group.

Behind the screen not surprisingly we find more Wall Street raptors:

Wall Street has taken notice. J.C. Flowers & Co. LLC, the private-equity firm, has a 24% stake in Encore. BlackRock Inc. owns 6.9% of Portfolio Recovery Associates, a Norfolk, Va., company. In October, the company reported its highest quarterly revenue ever.

In 2006, One Equity Partners, the private-equity arm of J.P. Morgan Chase, purchased Pennsylvania-based NCO Group, which posted $1.56 billion in revenue last year, making it the largest debt-collection company.

Analysts say that this raid on the last vestiges of citizen wealth will only become more intense in coming years given the debts of the recession.

Is there any hope for the consumer?  It seems that the Debt Protection Act says that if you haven’t paid eventually there is a statute of limitations of 5 to 7 years after you have been sued, if you can wait the collectors out and live with the consequences.

I’m not arguing that we celebrate deadbeats, but the system has to be fair and now it’s not.   Advocates and Actions has argued that we need to be ready to appear with the consent of the debtor family in court to advocate for relief from the judge, so there is at least some chance of allowing a family to get back on its feet and come back to dry land.

This is a misuse of the judicial system where no representation only equals more debt and intimidation.

Years ago when I was on the board of the GNO AFL-CIO when we would interview the countless judges that would come before us at every interview the story of a long deceased past president, Lindsay Williams of the Seafarers, would be told to one candidate after another.  Brother Williams, as the tale was told, would explain patiently to each candidate that we represent our members and what we need from a judge is an open door policy because sometimes a situation requires “not only justice, but mercy.”

These are situations that cry for mercy, but we have to organize the ability to raise up the voices to ask for both justice and mercy.

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