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Josh Silver Vice President of Research and Policy 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.

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Josh Silver Vice President of Research and Policy National Community Reinvestment Coalition

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

  2. 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

  3. 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

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

  5. NY and OH were among the first states in which the Program originally operated.

  6. 2004 and 2005 had the most cases in the sample

  7. CRF sample included a disproportionately large portion of borrowers residing in minority neighborhoods

  8. Borrowers in LMI tracts were disproportionately targeted by abusive lenders in the CRF sample

  9. Great majority of CRF borrowers were African-Americans

  10. The great majority of CRF borrowers were low- and moderate- income people

  11. 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

  12. Higher front-end and back-end ratios show that loans were beyond the consumer’s ability to pay

  13. 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

  14. 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

  15. 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

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

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