National Community Reinvestment Coalition A Lifetime of Assets Asset Preservation: Trends and Interventions in Asset Stripping Services and Products Josh Silver Vice President of Research and Policy National Community Reinvestment Coalition Marva Williams, Ph.D. Senior Vice President Woodstock Institute

Disparities in Asset Development: Implications for Public Policy Income Disparities Low and stagnating wages Community Impacts: Areas of concentrated poverty Adverse Public Policies Lack of tax advantages for lower-income consumers Inadequate Savings and Investment Products Poor Access to the Financial Mainstream Prevalence of High Cost Financial Services Significant Financial Management Skills Gap

Lower-Income and Minority Consumers Disproportionately Impacted by Asset Stripping Products: Predatory Consumer Loans Payday Loans Auto Title Loans Refund Anticipation Loans Overdraft Protection Credit Cards Subprime and Non-Traditional Loans

Community Impacts Un- Or Under-Employment Less Disposable Income Foreclosures Decrease in Property Values

Distribution of Cases by State NY and OH were among the first states in which the Program originally operated. Distribution of Cases by State State NY OH FL NC TX VA GA MD PA CA IL IN MA NJ NV TN WI N/A Total Number 62 13 4 2 1 7 112 Percent 55.4 11.6 3.6 1.8 0.9 6.3 100

2004 and 2005 had the most cases in the sample

by Minority Level of Neighborhood CRF sample included a disproportionately large portion of borrowers residing in minority neighborhoods Distribution of Cases by Minority Level of Neighborhood Minority Level of Neighborhood Number Percent Not substantially minority 38 33.93% Substantially minority 62 55.36% N/A 12 10.71% Total 112 100.00%

Distribution of Cases by Income Level of Neighborhood Borrowers in LMI tracts were disproportionately targeted by abusive lenders in the CRF sample Distribution of Cases by Income Level of Neighborhood Income Level of Neighborhood Number Percent Low 7 6.25% Moderate 46 41.07% Middle 32 28.57% Upper 15 13.39% N/A 12 10.71% Total 112 100.00%

Great majority of CRF borrowers were African-Americans

Distribution of Cases by Income of Borrower The great majority of CRF borrowers were low- and moderate- income people Distribution of Cases by Income of Borrower Income of Borrower Number Percent less than $15,000 6 9.84% $15,001-25,000 14 22.95% $25,001-35,000 16 26.23% $35,001-45,000 15 24.59% $45,001-55,000 5 8.20% $55,001-65,000 2 3.28% $65,001-75,000 1 1.64% $75,001-85,000 Total 61 100.00%

Analysis of loan terms before and after refinance CRF program helped to: - decrease average mortgage rate by 3.8 percentage points - save on average $276.5 a month, $3,318 yearly, $100,000 over life of loan - 1,000 CRF customers, $100 million in equity saved by CRF program Analysis of loan terms before and after refinance   Principal Amount Prior Mortgage Rate New Mortgage Rate % points difference Old Monthly Payment New Monthly Payment $ Savings Average $156,986.2 9.58% 5.74% 3.84% $1,198.4 $922.0 $276.5 Median $161,280.4 9.38% 6.00% 3.38% $1,165.8 $941.7 $224.1

Higher front-end and back-end ratios show that loans were beyond the consumer’s ability to pay   Front-end Ratio Back-end Ratio Average 40.77% 50.28% Median 35.43% 49.78% Standard underwriting ratios 28% 36%

Multiple Abuses on Abusive Loans Fraud Lack of Tangible Net Benefit Targeting/Discrimination Predatory Appraisal Balloon payment Equity stripping Home improvement scam Misrepresentation Stated income Yield spread premium Abusive servicing practices Unfair terms Fee packing Exotic mortgages (piggyback loans, risk layering) Asset-based lending Forced placed insurance HOEPA loan Mandatory arbitration Prepaid credit insurance Abuse of right to cancel Abusive collection practices Default interest rate Excessive prepayment penalties Insincere co-signers Loans made in excess of 100% LTV Negative amortization Flipping

CRF Influence on Best Practices and Policy Reforms Servicing Best Practices and FTC Guidelines OTS AMTPA Rule – No evading state laws on prepayment penalties Combating Appraisal Fraud Uncovering Broker Abuse and Discrimination

Expansion of CRF Programs Participation of More than One Lender to Support 100% LTV ratios Early Delinquency Intervention Home Preservation Counseling as Well as Home Buying Counseling Pennsylvania’s HEMAP Program CRA credit for banks to participate in programs like CRF and HEMAP

Contact Information NCRC (202) 628-8866 http://www.ncrc.org Woodstock Institute (312) 427-8070 http://www.woodstockinst.org