Monthly Archives: August 2018

Process of Gutting the Community Reinvestment Act Gains Steam

Little Rock       Any time the head of the American Bankers Association says that it’s a good thing that any part of the government is looking at rewriting and revising the 1977 Community Reinvestment Act, known popularly as the CRA, it’s very bad news for lower-income and racially diverse communities.  Sad, but true, that’s exactly the reality we’re facing now.  According to Payments.com, Rob Nichols, president of the American Bankers Association, said in a statement to Reuters that, “The current framework is holding back investment in communities the law is intended to serve, while failing to account for significant innovations in the banking sector, including the opportunities presented by mobile technologies.”

If that doesn’t sound like a pile of hooey, I’m not sure does.  Mobile technologies?  Trust me on this, there is nothing in the CRA that addresses what platform might be used to facilitate equal lending without discrimination on race, ethnicity or income bias, it just says you can’t do it, and if the Federal Reserve or if any of the regulatory agencies charged with policing the CRA catch you, then there’s trouble coming.  Reading Nichols’ statement Jane Citizen would think that the law in 1977 mandated that you had to be sitting on a leather chair in a branch bank – remember there used to be lots and lots of branch banks in the 70s – but that’s not the case.  So, much for the innovations point, and I can’t imagine what the ABA thinks is holding back investments “in communities the law is intended to serve” other than more conservative restrictions many banks imposed to punish our communities after their reckless greed imploded the real estate market, coming to a head in 2008.

The CRA is more than 40 years old and bankers and their political friends in Congress have been steadily pulling its teeth throughout that period.  The supposed “burden” of CRA is having to keep the records, which they do anyway for their own internal purposes, and, worse for them, transparently reporting the data on borrowers.  Then it is reviewed and compared locally, regionally, and nationally and discrimination is more easily determined by regulators, if they are interested, and they are graded so that consumers know where they are least likely to face discrimination when they apply for a loan.  How hard is that?  The rub for the bankers is that they are supervised, and when the regulators step up and do their job, there can be penalties.  Others want special breaks for so-called community banks to allow them to discriminate more broadly, but lord knows why anyone thinks that would be a good idea?

The Office of the Comptroller of the Currency (OCC) has now put the process of rewriting or revising the CRA in motion by asking for public comment over the next 75 days.  The Federal Deposit Insurance Commission and the Federal Reserve also have critical roles in supervising banks and CRA implementation.  Some published reports indicate that there is less than total consensus between OCC, FDIC, and the Federal Reserve on this process, which, thankfully, has been slowing this gutting job to date.

Our best hope now is that if they stumble long enough and control of Congress changes, community organizations, advocates, and anyone who is committed to a more equitable America may once again prevail in saving not only the letter of the Community Reinvestment Act, but it’s spirit as well.

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The Census and Contracts-for-Deed

Little Rock       One somewhat nagging problem the ACORN Home Savers Campaign has confronted over the last several years, especially when we looked at the frequency of “contracts-for-deed” was the lack of definitive data.  Sure, we knew in Detroit that more contracts-for-deed were being registered under real estate transfers in recent years than were any form of traditional mortgages, but such information was local, not uniform, and decidedly not national.  For some inexplicable reason during the aftermath of the Great Recession in 2008, the Census Bureau under President Obama dropped the question from the 2010 census creating a black hole on a gnawing problem.  We can guess why, but we don’t know definitively.

My comrade and friend, the filmmaker Charles Koppelman, joined ACORN’s “volunteer army” when we were hitting the doors in Pittsburgh in the spring of 2017 trying to get to the heart of these issues with the Home Savers Campaign.  He had his camera rolling when a local Pittsburgh ANEW member and I were visiting with a woman, as she lay on her couch recovering from back surgery, in her home.  At first, she said she didn’t have a contract-for-deed, but the more we talked the clearer in became that she had a 30-year contract with a subsidiary of Harbour Portfolio, that was absolutely a contract-for-deed.  The interest rate was 12%.  The terms were onerous.  The contract was precarious.  If she missed a payment, they could take back the house, and she would lose everything.  Harbour, a Dallas-based hedge fund, had flaunted the fact that it was using such contracts to flip thousands of properties it had acquired at foreclosed property auctions conducted by Fannie Mae and Freddie Mac.  She was ready to organize with the campaign once she got back on her feet.  Charles learned more in talking to us about the situation so knew the information gap created by the Census that was preventing a full understanding of how widespread the return of such contracts might be.

Charles lives in the Bay Area of California.  He sent me a screen shot of something very interesting yesterday.  He had received a Census form to fill out in the mail, and darned if it didn’t have a question – once again – asking whether the household was under a contract-for-deed.  Voila!   Some bureaucrat deep in the bowels of the Census Bureau must have seen the smoke signals about the fact that this often-predatory product is back, and slipped the question back into the queue.

It will help, but it’s no panacea of course.  The visit in Pittsburgh 18 months ago provides that answer.  Too often given the desperation that pushes many families into these kinds of agreements as they search for affordable housing in almost any condition also leaves them uncertain of the details, including what to call the agreements they have signed.  The brokers are often very loose lipped in the way they encourage people to see such agreements as mortgages.  Others agreements that are only different in degree, like Lease-Purchase-Options, Rent-to-Own, Lease-to-Own, etc, etc, aren’t contracts-for-deed that are now actually monitored by Dodd-Frank but should earn a “check” in that Census box as well.

The data won’t be perfect by a long shot, but magically we are somehow back to where we were in 2000 when the numbers were last counted, so on the 2020 Census the inclusion of the contracts-for-deed question is at least something to put in the good news column.

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