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Charlene Crowell

Debt and Rising Home Costs Continue to Defer Homeownership

NNPA NEWSWIRE — Whatever happened to the American Dream of owning a home and giving your children a better life than you experienced as a child? Is this ‘dream’ being deferred or denied?

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Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

By Charlene Crowell, Center for Responsible Lending’s Communications Deputy Director

Do you ever get the feeling that when it comes to news about the nation’s economy you’re in a different world?

I certainly do. And what’s more, I think much of America – especially Black America — feels the same.

A decade has passed since the housing collapse. In that time, bank profits are back and continue to rise. Despite occasional trading fluctuations, the stock market remains profitable for most investors. Then there’s the low rate of unemployment that is often cited as if economic strides have included nearly everyone.

But unemployment data does not reflect the vast number of people who today are working and earning less, otherwise known as the underemployed.

People who toil at jobs that pay less than in previous years often have a work ethic that is bigger than their paycheck. Even for those who take a second job, the extra and modest earnings seldom free them from hoping they have enough money to make it through each month.

I also think about the families who sacrificed retirement or building savings to give their children a college education. Both new college graduates, their parents and sometimes grandparents are startled at the amount of debt they share and how long it will take to fully repay it.

Whatever happened to the American Dream of owning a home and giving your children a better life than you experienced as a child? Is this ‘dream’ being deferred or denied?
The stark reality is that between the rising cost of college and the equally rising costs of homeownership, much of the country that works for a living is in a financial catch-22.

This contention is borne out by an updated consumer survey that annually measures profiles of both home buyers and sellers. Each year, the National Association of Realtors (NAR) surveys consumers who purchased a primary home in the past year. For 2018, NAR used a 129-question survey of consumers who purchased a home between July 2017 and June 2018.

Summarizing results, NAR concluded that current housing trends are affected by “mounting student debt balances”, along with rising interest rates, higher home prices and larger down payments.

“With the lower end of the housing market – smaller, moderately priced homes – seeing the worst of the inventory shortage, first-time home buyers who want to enter the market are having difficulty finding a home they can afford,” said NAR Chief Economist Lawrence Yun. “Homes were selling in a median of three weeks and multiple offers were a common occurrence, further pushing up home prices.”

Despite the financial hurdles noted by the NAR survey, there was a single glimmer of encouraging news. For the second year in a row, single female buyers are successfully pursuing their own American Dream. While married couples comprise 63 percent of home buyers, single females represent 18 percent, purchasing homes at a median price of $189,000.

But for the rest of the home buying market, NAR found that the past year meant a median home purchase price of $250,000 required a median household income of $91,600 for a successful mortgage application. Additionally, the nation’s median home down payment now is 13 percent, or $32,500 for that $250,000 priced home.

How long does it take for families to amass $32,000 for a home down payment? Longer than most families would want to wait, I’m certain. According to new research by the Urban Institute, median wealth for Black parents is $14,400 compared to white parents at $215,000, and $35,000 for Hispanic parents.

“As the NAR report shows, the share of first-time homebuyers continues to lag far behind historical norms,” commented Mark Lindblad, a Senior Researcher with the Center for Responsible Lending (CRL). “Efforts should be directed toward pairing low-down payments with affordable and responsible mortgage products so that low-income households and borrowers of color have equal access to the opportunities that come from owning a home of one’s own.”

Lisa Rice, President and CEO of the National Fair Housing Alliance shared a similar view to that of Lindblad.

“The NAR’s survey underscores the persistent difficulty under-served communities face when trying to purchase housing,” said Rice. “With a median purchase price of $250,000 and down payment of $32,500, homeownership remains out of reach for far too many and this exacerbates stress on rental housing prices.”

The most recent figures from the Census Bureau report that nation’s 64.4 percent homeownership rate in the third quarter of 2018 was not statistically different from that of 2017 when it tallied 63.9 percent. Geographically, homeownership in the Northeast, Midwest and South remained the most stagnant.

In stark contrast, the financial outlook for the 64 percent of Americans who already own a home brought a hefty median equity gain of $55,000 when they sold their residence over the past year. Additionally, after selling their homes, 44 percent traded up to a large home.

In other words, if you can find a way to become a homeowner, the costs incurred will likely be outweighed by the economic gains.

But making that important financial transition from renter to homeowner will become harder as mortgage interest rates climb from the historic lows of recent years.

Additionally, should home inventories remain low, the likelihood of ‘supply and demand’ economics will keep driving prices higher as well.

“Now more than ever,” added Rice, “we need radical policies that will spur the development of affordable housing in all communities.”

Charlene Crowell is the Center for Responsible Lending’s Communications Deputy Director. She can be reached at Charlene.crowell@responsiblelending.org.

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COMMENTARY: Capitol Hill hearing takes up the war between the needy and the greedy

NNPA NEWSWIRE — “Any universe with payday lending is answering the question of how to make poverty a sustainable profitable enterprise,” noted Boston’s Rep. Ayanna Pressley (D-MA). “Well a lot of people are getting rich off of keeping people poor. And so how do we reform anything that’s based on that premise? The short answer is, we don’t.”

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With the average borrower earning $25,000 to $30,000 a year, whatever difficulty led them to a payday loan store or web site, made their lives even worse. (Photo: iStockphoto / NNPA)

By Charlene Crowell, NNPA Newswire Contributor

At an April 30 Capitol Hill hearing, the multi-dimensional problems wrought by small-dollar, high-cost loans were brought to the attention of lawmakers serving on the powerful House Financial Services Committee. A witness panel representing bankers, consumers, clergy, and public policy organizations taught, recounted, reasoned and preached to lawmakers on the rippling and disastrous effects of debt-trap loans.

Each addressed the industry that reaps billion-dollar profits from the poor: payday, car-title, and other triple-digit interest small-dollar products. The average annual interest rate for payday loans in the United States is 391% although in more than 17 states, many of them home to consumers of color, the APR is even higher.

As consumers suffer financially, it’s a different story for payday lenders: $4.1 billion in fees every year in the 33 states that allow these debt traps, according to the Center for Responsible Lending (CRL). Similarly, the annual fees generated on car-title loans was found to be $3.8 billion.

The session occurred as the current Administration seeks to permanently reverse a payday rule that was developed over five years of public hearings, research and comments that sought the input of consumers, financial institutions and other stakeholders. Announced by the first Consumer Financial Protection Bureau (CFPB) Director, the rule would require lenders to determine if a consumer could repay the loan, also known as the ability-to-repay standard.

With a new CFPB Director, the rule’s suspension was accompanied by an announcement of an intent to begin rulemaking anew. For the industry, the suspension provides yet another opportunity to take the teeth out of financial regulation. For consumers, long-awaited consumer protection that would have taken effect this summer is now indefinite.

With the average borrower earning $25,000 to $30,000 a year, whatever difficulty led them to a payday loan store or web site, made their lives even worse.

For Detroit resident Ken Whittaker, the hearing was a high-profile opportunity to share his personal experience with a $700 payday loan that wound up costing him $7,000, in addition to debt collections, a court judgment, and his tax refund garnished.

“I found I could not afford to pay off the first loan without taking out another one. Then I began a cycle of debt which lasted over a year,” testified Whittaker. “Soon I was paying $600 per month in fees and interest. I eventually closed my bank account to stop payments from being drawn out and leaving me without cash for my family’s rent, groceries and other essential bills.”

In the hearing’s most poignant moment, Whittaker appealed to the lawmakers saying, “Please support strong reform of predatory payday and car title lending for people like me. We work hard to support our families and make our finances stable, and this kind of lending only makes it harder.”

For one lawmaker, Boston’s Rep. Ayanna Pressley, Whittaker’s plea was heard loud and clear.

“Any universe with payday lending is answering the question of how to make poverty a sustainable profitable enterprise,” noted Rep. Pressley. “Well a lot of people are getting rich off of keeping people poor. And so how do we reform anything that’s based on that premise? The short answer is, we don’t.”

Todd McDonald, Senior Vice President and Board Director of the New Orleans-based Liberty Bank and Trust, a Community Development Financial Institution (CDFI) spoke at the hearing from the perspective of community banks. His own firm operates in eight states through 15 branches. He is also a board member of the National Bankers Association, the leading trade association for the nation’s Minority Depository Institutions.

“As a CDFI that serves a largely low and moderate-income consumer base that often utilizes these high-cost, small dollar loans,” testified McDonald, “Liberty often works to help our customers get out of these predatory loans and into more manageable products.”

Since 2008, Liberty Bank has offered a payday and car-title loan alternative known as Freedom Fast loans that averages just over $6,000 and comes with an average interest rate of 12.6%. Liberty provides these loans to customers with credit scores ranging from a low of 500 to higher than 700. It also reports payments to the credit bureaus so that customers can also build their credit ratings.

For the Rev. Dr. Frederick Douglass Haynes III, senior pastor of Dallas’ Friendship West Baptist Church and a leading partner in the Faith and Credit Roundtable facilitated by the Center for Responsible Lending, predatory lending is a matter of economic justice that deserves actions and not just hearings.

“Payday predators are a part of a hostile takeover of the economy of the unbanked and underserved. This exploitative industry targets and saturates communities that are already suffering from economic apartheid,” said Rev. Haynes to the lawmakers. “When the vulnerable are drowning in desperation the payday industry throws a ‘life preserver’ weighted with the iron of usurious interest rates.”

“We are calling for strong protections so that those who experience an emergency don’t end up drowning in debt they cannot repay,” added Rev. Haynes.” The pastor forcefully called for the CFPB to implement its “common sense rule” and for enacting legislation, like a bill introduced by Illinois’ Senator Richard Durbin, that would establish a national 36% interest rate cap while allowing states to have lower rate ceilings.

“Borrowers have described the debt trap, in their own words, as ‘a hole that you can’t get out of’, ‘soul-crushing’, and a ‘living hell’, Diane Standaert, a CRL EVP testified. “And research has shown time and time again, that these high-cost lending storefronts are disproportionately situated in Black and Latino communities, even when they have the same or higher incomes than white communities.”

The good Reverend Haynes agreed, adding, “The Bible teaches that nations will be judged by how they treat ‘the least of these’. It must not be said of this nation, “I was hungry, and you gave me a payday loan… I was given a bad hand and you gave me a bad plan.”

Amen, Reverend!

Charlene Crowell is the Communications Deputy Director with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

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COMMENTARY: Black families have a dime for every dollar held by Whites

NNPA NEWSWIRE — Recent research by the National Low-Income Housing Coalition on housing affordability found that more than 8 million Americans spend half or more of their incomes on housing, including over 30 percent of Blacks, and 28 percent of Hispanics.

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Charlene Crowell is the Center for Responsible Lending’s Deputy Communications Director. She can be reached at Charlene.crowell@responsiblelending.org.

By Charlene Crowell, NNPA Newswire Contributor

If you’re like me, every time you hear a news reporter or anchor talk about how great the nation’s economy is, you wonder what world they are living in. Certainly, these journalists are not referring to the ongoing struggle to make ends meet that so much of Black America faces. For every daily report of Wall Street trading, or rising corporate profits, you’re reminded that somebody else is doing just fine financially.

To put it another way, ‘Will I ever get past my payday being an exchange day…when I can finally have the chance to keep a portion of what I earn in my own name and see how much it can grow?’

When new research speaks to those who are forgotten on most nightly news shows, I feel obliged to share that news – especially when conclusions find systemic faults suppress our collective ability to strengthen assets enough to make that key transition from paying bills to building wealth.

Ten Solutions to Close the Racial Wealth Divide is jointly authored by the Institute for Policy Studies, Ohio State University’s Kirwan Institute for the Study of Race and Ethnicity, and the National Community Reinvestment Coalition. This insightful and scholarly work opens with updates on the nation’s nagging and widening racial wealth divide. It then characterizes solutions offered as one of three approaches: programs, power, and process.

According to the authors, programs refer to new government programs that could have a major impact on improving the financial prospects of low-wealth families. Power refers to changes to the federal tax code that could bring a much-needed balance to the tax burden now borne by middle and low-income workers. Process refers to changes to the government operates in regard to race and wealth.

“For far too long we have tolerated the injustice of a violent, extractive and racially exploitive history that generated a wealth divide where the typical black family has only a dime for every dollar held by a typical white family,” said Darrick Hamilton, report co-author and executive director of the Kirwan Institute for the Study of Race and Ethnicity at The Ohio State University.

From 1983-2016, the median Black family saw their wealth drop by more than half after adjusting for inflation, compared to a 33 percent increase for the median White households. Keep in mind that these years include the Great Recession that stole nearly $1 trillion of wealth from Black and Latinx families, largely via unnecessary foreclosures and lost property values for those who managed to hold on to their homes.

Fast forward to 2018, and the report shares the fact that the median white family had 41 times more wealth than the median Black family, and 22 times more wealth than the median Latinx family. Instead of the $147,000 that median white families owned last year, Black households had $3,600.

When Congress passed tax cut legislation in December 2017, an already skewed racial wealth profile became worse.

“White households in the top one percent of earners received $143 a day from the tax cuts while middle-class households (earning between $40,000 and $110,000) received just $2.75 a day,” states the report. “While the media coverage of the tax package and the public statements of the bill’s backers did not explicitly state that it would directly contribute to increasing the racial wealth divide, this was the impact, intended or otherwise.”

With the majority of today’s Black households renting instead of owning their homes, escalating rental prices diminish if not remove the ability for many consumers of color to save for a home down payment.  As reported by CBS News, earlier this year, the national average monthly cost of fair market rent in 2018 was $1,405.

Recent research by the National Low-Income Housing Coalition on housing affordability found that more than 8 million Americans spend half or more of their incomes on housing, including over 30 percent of Blacks, and 28 percent of Hispanics.

Homeownership, according to the Center for Responsible Lending, remains a solid building block to gain family wealth. But with an increasing number of households paying more than a third of their income for rent, the ability to save for a home down payment is seriously weakened. CRL’s proposed remedy in March 27 testimony to the Senate Banking Committee is to strengthen affordable housing in both homeownership and rentals. To increase greater access to mortgages, CRL further advocates low-down payment loans.

“The nation’s housing finance system must ensure access to safe and affordable mortgage loans for all creditworthy borrowers, including low-to-moderate income families and communities of color,” noted Nikitra Bailey, a CRL EVP. “The lower down payment programs available through FHA and VA, provide an entry into homeownership and wealth-building for many average Americans.”

“Government-backed loans cannot be the only sources of credit for low-wealth families; they deserve access to cheaper conventional mortgages,” added Bailey. “Year after year, the annual Home Mortgage Disclosure Act data reveals how consumers of color, including upper-income Black and Latinx households are disproportionately dependent on mortgages that come with higher costs. Our nation’s fair lending and housing finance laws require that the private mortgage market provide access for low-wealth families.  We need additional resources for rental housing to address the affordability crisis that many working families face.”

There’s really no point in continuing to do the same thing while expecting a different result. When the status quo just isn’t working, change must be given a chance.

Charlene Crowell is the Center for Responsible Lending’s deputy director of communications. She can be reached at Charlene.crowell@responsiblelending.org.

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COMMENTARY: CFPB Denies Duty to Enforce Military Lending Act

NNPA NEWSWIRE — Despite this abundance of complaints and warranted enforcement, CFPB’s first Trump-appointed leader, Mick Mulvaney as Acting CFPB Director, turned an about face on our military families by halting its use of its supervisory powers to fulfill its mandate of MLA enforcement.

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According to the Pentagon, military members can and do lose security clearances and/or less than satisfactory discharges each year. Every discharged soldier’s separation costs the government an estimated $58,000. (Photo: iStockphoto / NNPA)

By Charlene Crowell, NNPA Newswire Contributor

America’s 1.29 million member-strong, all-volunteer military includes men and women from all 50 states, according to the U.S. Council on Foreign Relations.  Regardless of race or ethnicity, each made a choice and swore an oath to protect our nation. Together, they wear our nation’s uniforms and carry our flag on assignments and deployments in times of both peace and war.

I’d like to believe that our entire nation respects and appreciates their sacrificing service that takes them away from families, our stateside, and deployments. Further, while these brave men and women protect us, the nation should also protect them – including the clutches of predatory lending.

It was that kind of perspective that led to strong bipartisan enactment in 2006 of the Military Lending Act (MLA), a reform that was strongly supported by the Department of Defense. At the time, DoD warned how severe financial stress diminished “military readiness.” Years later, with the creation of the Consumer Financial Protection Bureau (CFPB), MLA enforcement was assigned to the new agency along with other laws, and MLA was updated to include the phrase, “shall be enforced by the CFPB”.  That kind of language eliminates discretion or interpretation, thereby ensuring appropriate actions when warranted.

For years, CFPB’s enforcement levied fines against businesses that broke consumer finance laws and made consumers financially whole with proportional restitution. From July 2011 through September 2017, CFPB’s Office of Servicemember Affairs delivered $130 million of financial relief as a result of actions taken on 91,482 military complaints filed. In just one lending area — payday loans — CFPB projected that servicemembers saved $35 million every year as a result of MLA rules.

Justification for continued aggressive enforcement is attested to in CFPB’s own reports. From 2016 to 2017, CFPB recorded a 47% increase in the number of servicemember complaints. The following year, 2017 to 2018, the number of complaints were still rising at 12%.

According to the Pentagon, military members can and do lose security clearances and/or less than satisfactory discharges each year. Every discharged soldier’s separation costs the government an estimated $58,000.

Despite this abundance of complaints and warranted enforcement, CFPB’s first Trump-appointed leader, Mick Mulvaney as Acting CFPB Director, turned an about face on our military families by halting its use of its supervisory powers to fulfill its mandate of MLA enforcement.

CFPB’s new Director Kathleen Kraninger made it clear that she supports the same policies and practices begun under her predecessor in a March 8 letter to Ranking Members of the Senate Armed Services Committee and the Committee on Banking, Housing and Urban Affairs, Further in a recent Capitol Hill hearing, Director Kraninger went even further, advising, as reported by POLITICO, Director Kraninger went even further, claiming that Congress via legislation should provide CFPB with appropriate authority.

Confused? You’re not alone.

Last October, a bipartisan group of 33 states attorneys general (AGs) wrote then Acting CFPB Director Mulvaney following his announcement that the Bureau would no longer ensure that lenders would comply with MLA as part of its supervisory examinations.

“We are perplexed by reports indicating that the CFPB has determined that it needs further statutory authority in order to conduct examinations for MLA violations,” wrote the AGs. “We are disappointed to learn that CFPB did not consult the Defense Department in developing its new examination policy, even though Congress specified that the Defense Department – not the CFPB – is the primary federal agency responsible for interpreting the MLA.”

The officials signing the letter to Mulvaney represent states as far west as Alaska and Hawaii, to as far east as Massachusetts and New York, and southward to Mississippi and North Carolina. Together, these state officers understood and embraced that when it comes to consumer finance, predatory lenders make no partisan distinction.

“There’s no utility in arguing the fine questionable difference between enforcement and supervision,” said Scott Astrada, the Center for Responsible Lending’s Federal Advocacy Director. “The bottom line is that consumers – especially those serving in the military – need their government’s protection against those who would exploit their personal finances and at the same time, jeopardize their military service and careers. Our nation should protect them with just as much dedication as they give to protect all of us.”

Charlene Crowell is the Center for Responsible Lending’s deputy director of communications. She can be reached at Charlene.crowell@responsiblelending.org.

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COMMENTARY: After 51 Years, Fair Housing Still an Unfinished Journey

NNPA NEWSWIRE — “According to the National Fair Housing Alliance, individuals filed 28,843 housing discrimination complaints in 2017,” said Waters. “Under the Trump Administration, fair housing protections are under attack…. According to news reports Secretary Carson proposed taking the words ‘free from discrimination’ out of HUD’s mission statement,” the Chair of the House Financial Services Committee, Rep. Maxine Waters (D-CA)

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“How do we ensure that future generations of all backgrounds live in neighborhoods rich with opportunity?” said Debby Goldberg, Vice President of Housing Policy and Special Project with the National Fair Housing Alliance (NFHA). “Fair housing. Fair housing can ultimately dismantle the housing discrimination and segregation that caused these inequities in the first place.” (Photo: iStockphoto / NNPA)
Charlene Crowell is the Center for Responsible Lending’s Deputy Communications Director. She can be reached at Charlene.crowell@responsiblelending.org.

Charlene Crowell is the Center for Responsible Lending’s Deputy Communications Director. She can be reached at Charlene.crowell@responsiblelending.org.

By Charlene Crowell, NNPA Newswire Contributor

Fifty-one years ago, this month, the Fair Housing Act (the Act) was enacted to ensure that housing discrimination was illegal. Yet, just days before the annual observance of Fair Housing Month began, headline news articles reminded the nation that housing discrimination still exists.

For example, on March 19, the Office of the Comptroller of the Currency (OCC) fined Citibank $25 million for violations related to mortgage lending. At issue was Citibank’s “relationship pricing” program that afforded mortgage applicants either a credit on closing costs or a reduced interest rate. These cost breaks were intended to be offered to customers on the basis of their deposits and investment balances. According to OCC examination at Citibank, these ‘relationships” did not include all eligible customers – particularly people of color. The regulator’s conclusion was that the bank’s practices led to racial disparities.

The settlement calls for all 24,000 consumers affected to receive $24 million in restitution.

Days later on March 28, the federal department of Housing and Urban Development (HUD) charged Facebook with violating the Act by enabling its advertisers to discriminate on its social media platform. According to the lawsuit, Facebook enabled advertisers to exclude people based on their neighborhood – a high tech version of the historical redlining of neighborhoods where people of color lived.

With 210 million Facebook users in the United States and Canada alone, the social media mogul took in $8.246 billion in advertising in just the last financial quarter of 2018.

As April’s annual observance of Fair Housing Month began, the Chair of the House Financial Services Committee used that leadership post to bring attention to the nagging challenges that deny fair housing for all. In her opening statement at the hearing held April 2, Chairwoman Maxine Waters set the tone and focus of the public forum.

“According to the National Fair Housing Alliance, individuals filed 28,843 housing discrimination complaints in 2017,” said Waters. “Under the Trump Administration, fair housing protections are under attack…. According to news reports Secretary Carson proposed taking the words ‘free from discrimination’ out of HUD’s mission statement.”

“He also reportedly halted fair housing investigations”, continued Waters, “and sidelined top advisors in HUD’s Office of Fair Housing and Equal Opportunity. These are unprecedented attacks on fair housing that must not go unanswered.”

Several committee members posed similar concerns and offered comments that echoed those of Waters. Additional issues raised during the hearing spoke to a lack of enforcement, data collection, gentrification, racial redlining, restrictive zoning, and disparate impact.

A panel of housing experts provided substantive testimony that responded to many of these issues, while also acknowledging how many fair housing goals have not yet been achieved.

Cashauna Hill, the Executive Director of the Greater New Orleans Fair Housing Action Center provided additional information on delays encountered with HUD’s Fair Housing investigations.  Although HUD set a standard for these complaints to be investigated within 100 days, many complaints go well beyond the agency’s own guidelines. Cases older than 100 days are categorized as “aged” in HUD parlance.

“In 2017, HUD had 895 cases that became aged during that same year, and it had 941 cases that were already considered aged at the beginning of the fiscal year,” noted Hill. “During that same time period, Fair Housing Assistance Program agencies had 3,994 cases that became aged and 1,393 cases that were already considered aged at the beginning of the fiscal year.”

“Practically, what this means for groups like the Fair Housing Action Center,” continued Hall, “is a delay in making victims of discrimination whole, and a delay in correction of housing providers’ discriminatory behavior.”

Speaking on behalf of the Zillow Group, Dr. Skylar Olsen, its Director of Economic Research cited additional data that underscored racial disparities and problems that continue with access to credit.

“Homeownership is a key tool for building wealth, and more than half the overall wealth held by American households is represented by their primary residence,” said Olsen. “But access to homeownership is not shared equally. In 1900, the gap between black and white homeownership rate was 27.6 percentage points. Today it is 30.3 percentage points.”

Further according to Olsen, the Home Mortgage Disclosure Act (HMDA) shows that “black borrowers are denied for conventional home loans 2.5 times more often than white borrowers.”

Even among renters, Skylar noted racial disparities in major metro areas like Atlanta, Detroit, Houston and Oakland, California adding, “local establishments and amenities including banks, health institutions and recreational facilities are less prevalent in communities of color than white communities.”

Debby Goldberg, Vice President of Housing Policy and Special Project with the National Fair Housing Alliance (NFHA) was also a panelist.

“Not all neighborhoods were created the same,” testified Goldberg. “The long history of housing discrimination and segregation in the U.S. has created neighborhoods that are unequal in their access to opportunities. They are not unequal because of the people who live there. They are unequal because of a series of public and private institutionalized practices that orchestrated a system of American apartheid in our neighborhoods and communities, placing us in separate and unequal spaces.”

Goldberg also stated that racial discrimination included consumers of color with varying incomes.

“While many low-income communities, no matter their racial composition, suffer from disinvestment and lack of resources, even wealthier, high-earning communities of color have fewer bank branches, grocery stores, healthy environments, and affordable credit than poorer white areas.”

Ms. Goldberg also posed a core question that was as basic as it was direct.

“How do we ensure that future generations of all backgrounds live in neighborhoods rich with opportunity?” said Goldberg. “Fair housing. Fair housing can ultimately dismantle the housing discrimination and segregation that caused these inequities in the first place.”

Charlene Crowell is the Center for Responsible Lending’s Deputy Communications Director. She can be reached at Charlene.crowell@responsiblelending.org.

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COMMENTARY: Education Department helps loan servicers instead of borrowers

NNPA NEWSWIRE — …a newly-released audit report finds fault with how the Department of Education (Department) is managing both its loan funds and its 15 contract student loan servicers. According to an Office of Inspector General (OIG) report released on February 12, “borrowers might not have been protected from poor services, and taxpayers might not have been protected from improper payments.”

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Charlene Crowell is the Center for Responsible Lending’s communications deputy director. She can be reached at Charlene.crowell@responsiblelending.org. (Photo: iStockphoto / NNPA)

By Charlene Crowell, NNPA Newswire Contributor

In an increasingly competitive global economy, highly skilled workers have a sharp advantage in securing and keeping employment. And as technological advances result in life-long learning in many occupations, many worker-students turn to federal student aid, the largest source of funding for higher education, to expand and/or hone their value in the marketplace.

But a newly-released audit report finds fault with how the Department of Education (Department) is managing both its loan funds and its 15 contract student loan servicers. According to an Office of Inspector General (OIG) report released on February 12, “borrowers might not have been protected from poor services, and taxpayers might not have been protected from improper payments.”

That statement covers a range of student loan concerns and include loan payments, loan consolidation, principal and interest payments and repayment options like income-driven repayment plans and forbearance. But its content takes direct aim at the Federal Student Aid (AID) division of the Department, charged with being a thrifty steward of the billions of dollars dedicated to higher education.

Could it be that the current student loan crisis is facing the same threat today that was rampant a decade ago during the mortgage crisis? Are borrowers’ payments being properly applied? Or are unchecked and unaccountable loan servicers bilking consumers into unwarranted costs and payments?

I’m betting that the 44 million borrowers who together owe more than $1.4 trillion in student loan debt seriously want to know.

“FSA’s not holding servicers accountable could lead to servicers being paid more than they should be (the contracts with servicers allow FSA to recover amounts paid for loans not serviced in compliance with requirements),” states the report.

“FSA management rarely used available contract accountability provisions to hold servicers accountable for instances of noncompliance,” continued the report. “By not holding servicers accountable for instances of noncompliance with Federal loan servicing requirements, FSA did not provide servicers with an incentive to take actions to mitigate the risk of continued servicer noncompliance that could harm students.”

According to OIG, all student loan servicer contracts are supposed to be awarded on the basis of performance measures in five weighted areas.  Two factors, borrower satisfaction and the percentage of borrowers who were not more than five days delinquent, together account for up to 60 of the contractors overall score. Servicers are also evaluated on the percentage of borrowers whose loans were more than 90 days late but less than 271, and a percentage who were more than 270 days delinquent but less than 361, and an FSA employee satisfaction survey.

Although the Department has 15 student loan servicer contracts, four were the biggest beneficiaries during the OIG’s audit period. As of September 30, 2017, federal student loan debt was $1.147 trillion with 93 percent of those loans assigned to PHEAA ($319 billion), Great Lakes ($236 billion), Navient ($215 billion), and Nelnet ($180 billion).

In February 2017, the Consumer Financial Protection Bureau (CFPB) sued Navient Corporation and two of its subsidiaries for allegedly using shortcuts and deception to illegally cheat 12 million borrowers out of their rights to lower loan repayments. These practices, according to CFPB, led to an additional $4 billion in borrower costs.

Much of the unnecessary costs were the result of Navient’s widespread use of forbearance that boosted corporate profits by minimizing time spent advising distressed borrowers. For example, three-years of deferment on $30,000 in student loans would cost a borrower an additional $6,742.

Navient also had another dubious distinction. In 2017, more consumers filed complaints about Navient than any other student loan servicer. Complainants identified dealing with the servicer or lender as the key issue, compared to only 34 percent whose problems were based on an inability to pay their loans.

“The Inspector General’s damning revelations that the Department of Education failed to track all instances of non-compliance or to hold servicers accountable for errors demonstrates its lack of commitment to protecting student loan borrowers,”, said Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “Unfortunately, this revelation is consistent with the Department’s prior actions, which have repeatedly put the interests of big business ahead of the interests of student loan borrowers.

Many consumer advocates would agree with the Trump Administration’s mounting actions that favor businesses before consumers. The recently-announced rule reversal on payday loans is another example. In 2018, guidance that protected people of color from discrimination in auto loan financing is yet another.

“Policies and practices must assure student success while minimizing costly debt errors that become unnecessary burdens,” said Whitney Barkley-Denney, a policy counsel with the Center for Responsible Lending.

“In this past year, Department of Education has justified its aggressive steps to shield student loan servicers from liability by claiming that it rigorously oversees its servicers,” added Yu. “This report from the Inspector General demonstrates that claim is false.”

Charlene Crowell is the Center for Responsible Lending’s communications deputy director. She can be reached at Charlene.crowell@responsiblelending.org

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COMMENTARY: House Chair Waters leads charge to return consumer protection to CFPB

NNPA NEWSWIRE — Although Director Kraninger announced a plan to suspend the payday rule, changes in how the Bureau operated with regard to these lenders began under Mulvaney. While at CFPB, he urged Congress to repeal the rule and joined a lawsuit brought by a payday lender that sought to indefinitely suspend the rule.

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Charlene Crowell is the Center for Responsible Lending’s Deputy Communications Director. She can be reached at Charlene.crowell@responsiblelending.org.

By Charlene Crowell, Deputy Director, The Center for Responsible Lending

On March 7, the House Financial Services Committee, chaired by Congresswoman Maxine Waters marked the first time that the new Director of the Consumer Financial Protection Bureau (CFPB) appeared for a hearing in this capacity. Entitled, Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau,” the session is the first of two mandated by the Dodd-Frank Wall Street Financial Reform and Consumer Protection Act. Twice a year, CFPB’s Director must report to each chamber of Congress.

But before the hearing, other actions signaled that Director Kathy Kraninger would likely be forced to defend both the Bureau’s actions and inactions that occurred at the hands of Trump political appointees. Under Mick Mulvaney, CFPB’s former Acting Director, a series of actions turned the agency’s focus away from consumers, regulation and enforcement to make its policies and structure more favorable to deregulation and business.

One day before the hearing, Congresswoman Waters and other majority members of the Financial Services Committee held a news conference to announce the reintroduction of the Consumers First Act. Initially filed in 2018 by Waters, the 2019 version has the same intent: to block and reverse the Trump Administration’s anti-consumer agenda. This year, Waters has the support of co-sponsoring lawmakers representing 19 states as diverse as California, Florida, Michigan, North Carolina and Virginia. Another boost – the bill is also supported by 51 consumer, civil rights, and labor advocates.

“The bill reverses the harmful structural changes Mulvaney and his deputies made to damage the agency one-by-one,” said Chairwoman Waters at the news conference. “We will be asking all of the questions that our members deem necessary to find out whether or not she is on the road to restoring much of the damage that was done by Mr. Mulvaney.”

Ohio’s Rep. Joyce Beatty, one of the bill’s co-sponsors, took direct aim at the Bureau’s changed perspective on payday lending adding, “Under Trump’s CFPB director Mulvaney, the CFPB has reduced transparency and accountability, weakened enforcement…and became more interested in helping payday lenders who allegedly misled consumers and charged exorbitantly high interest rates, rather than protecting the American consumers they were sworn to serve.”

Readers may recall that during Black History Month, Director Kraninger announced the Bureau’s intent to suspend the August 2019 effective date of the long-awaited payday rule. After more than five years of public forums, rulemaking, research and thousands of public comments, Director Kraninger still intends to begin the rulemaking process anew.

In response, consumer, clergy, and civil rights advocates received updated information from the Center for Responsible Lending that pinpoints state by state, how current triple-digit interest rates (APRs) continue to harm consumers across the country. Regardless of a state’s population size or average incomes, the cost of borrowing payday loans remains a debt trap. Further, in states where these loans remain legal, lenders continue to squeeze billions of dollars of fees from borrowers whose annual average earnings are $22,500.

Prepared by Charla Rios, a researcher with the Center for Responsible Lending, the updated payday map reveals that in 2019, 31 states charged 200 percent APRs or higher on payday loans. Of these, 18 states have APRs of 400 percent or more, three more – Idaho, Nevada, and Texas charge in excess of 600 percent.

The Lone Star State can rightfully claim one other distinction: its 661 percent APR is the nation’s highest. That claim becomes even more curious when that figure is compared to the actions of more than 40 cities that have adopted some kind of regulation on these predatory loans. In 2011, the City of Dallas led the municipal curbs with an ensuing unsuccessful legal challenge. Fortunately, the Texas Supreme Court upheld the city’s restriction.

Despite these disappointing numbers, there have been recent and notable consumer victories on payday lending. Colorado and South Dakota successfully approved by voter referenda 36 percent payday rate caps. In each of these referenda, voters supported rate caps by 75 percent majorities.

“When no rate caps exist, payday lenders become more predatory as they charge even higher triple-digit interest rates that financially bury people in debt,” said Rios. “The 2019 map shows just how much real reform is needed at the state and federal levels.”

Although Director Kraninger announced a plan to suspend the payday rule, changes in how the Bureau operated with regard to these lenders began under Mulvaney. While at CFPB, he urged Congress to repeal the rule and joined a lawsuit brought by a payday lender that sought to indefinitely suspend the rule. Earlier and as a member of Congress representing South Carolina, Mulvaney opposed the idea of creating the CFPB and counted payday lenders among his top donors.

The 2017 payday rule was promulgated after five years of hearings from a variety of stakeholders and everyday citizens. There was also extensive research, and a public comment period where literally thousands of statements documented this financial exploitation wrought by payday loans.

“Eliminating this protection is plain and simple a huge gift to predatory lenders so they can keep borrowers trapped in unaffordable debt with interest rates exceeding 300 percent,” concluded Diane Standaert, a CRL EVP and Director of State Policy.

Charlene Crowell is the Center for Responsible Lending’s Communications Deputy Director. She can be reached at Charlene.crowell@responsiblelending.org

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