How Financial Issues Affect Housing Opportunities

1. How Financial Issues Affect HousingOpportunities Julie Kalkowski Financial Hope Collaborative Creighton University Maggie Kalkowski International Center of the Heartland & Refugee Services Lutheran Family Services

2. Recent Headlines Wrong to prey on military families (OWH, September 2010) Record number of foreclosures for 2010 third quarter. (NPR, 2010) Many bankruptcies linked to health costs, report says (OWH, February 3, 2005) Urge for quick cash cuts into refunds for low-income filers (OWH, March 18, 2005) Report details health, wealth gap for blacks (OWH, April 6, 2005)

3. The “Unbanked” • 20% of US Households are unbanked (Federal Reserve Bank, 2010) • 83% of unbanked families earn less than $25,000 annually (Carr and Schuetz, 2004) • 25% of African American and Hispanic families are unbanked (Carr and Schuetz, 2004) • 30-40 million US households are either unbanked or subprime credit consumers (Weissbourd, 2002)

4. The “Unbanked” • Latino population totals 13% of US population and has an estimated purchasing power of $600 billion dollars yet 36% (including 56% of immigrants) is estimated to be unbanked(Aizcorbe, Kennickell & Moore, 2003) • Visa U.S.A. estimates that payroll checks worth $500 billion are issued each year to un-banked employees(Seidman & Tescher, 2004) • Low income families spend 5% of their annual net income on basic financial transactions. (Federal Reserve Bank, 2010)

5. Credit Card problems • Approximately 50% of US households are living paycheck to paycheck. (Center for Financial Services Innovation, 2010) • Average household credit card debt in the U.S. in 2004 was $8,400(Consumer Credit Counseling Services) • In 2004 Americans paid $14.8 billion in credit card penalty fees alone (Hightower & Frazer, 2005)

6. Financial Education Issues • This year more Americans will file for bankruptcy than will graduate from college (Wallwork Winik, 2005) • Research suggest that 15-20% of employees have financial problems severe enough to negatively affect productivity • A financially stressed employee spends an average of 20 hours/month of work time on personal financial problems Source: Federal Reserve Bank of KC & The Federal Reserve Bank of Atlanta

7. Examples of Fringe Financial Services • Payroll Check Cashing • Buy Here, Pay Here loans • Payday Loans • Rent to Own

8. Payroll Check Cashing • Average cost to cash a check at a payroll casher is $12/week x 52 weeks= $624.00 • $624.00 can pay for…. • Car payment • Down payment on a house (NIFA) • At US Bank, without a banking account, it is only $5.00 to cash a paycheck • $5/week x 52 weeks = $260, still leaving $364 in savings annually. • Using mainstream banking services can pay off even without an existing account.

9. Bank Loan @6.7% Monthly Payment: $307.40 Total Interest Paid = $1066.44 Buy Here Pay Here Car Loan @28% Monthly Payment: $413.64 Total Interest Paid = $4890.89 FYI: Sub prime loans account for 8% of new-car financing and 14% of used car loans (Consumer Reports, 1998) “Buy Here, Pay Here”Car Loans$10,000 36 month car loan

10. Payday Loan Industry • There are more Payday Loans businesses than Burger King and McDonalds combined. (Center for Financial Services Innovation, 2010) • As of January, 2009, there were 107 payday loan businesses operating in the metro area----a 28% increase since April 2005.

11. Cost of a Payday Loan • With proof of a checking account, a paycheck stub and a copy of your last utility bill, many people can get an advance on a future paycheck. • The average person rolls over a payday loan 13 times. The average annualized interest rate for payday lenders is 470%. (Source: Annie E. Casey Foundation, Woodstock Institute, sample taken from Illinois.)

12. Ace Rent-to-Own (Saddle Creek) Standard Refrigerator - $499 $12.99/week and if you can purchase appliance within 90 days the appliance cost = $499.00 $12.99 X 12 weeks = $155.88. Week 13 pay $343.12 to equal purchase price of $499. If unable to pay off balance, you are required to continue paying $12.99 for an additional 79 weeks (91 weeks total) $12.99/week x 91 weeks=$1,182.09 NE Furniture Mart Standard Refrigerator = $380.00 This is over 3 times the NE Furniture Mart price Rent to Own

13. Overdrawn Checks Average charge: $35 to $45 is the standard overdraft charge for a bounced check OR $10.00 overdraft charge if you have overdraft protection on your account • Over 50% of the fee based income earned by financial institutions in 2009 came from bounced checks.(Center for Financial Services Innovation, 2010)

14. What Works…Financial Education Benefits to the employer • Reduces absenteeism, increases employee productivity, increases contributions to the company 401(k), increases employee’s allegiance to company, decreases employer costs related to wage garnishments and bankruptcies Benefits to employee • Changes behaviors that negatively affect job performance, builds assets & reduces debt, allows for a higher level of participation in employer-provided benefits Source: Federal Reserve Bank of KC & The Federal Reserve Bank of Atlanta

15. Entering the Economic Mainstream • 6 banks & 3 credit union have agreed to offer Bank on the Heartland Accounts beginning in March 2011. • 15 businesses now offer Workplace Financial Education. • 86% graduation rate for the Financial Success Program in 2010—includes trainer, money management system & one year of financial coaching

16. Promising Ideas • Small Dollar Loan Pilot • Easy Green Pig software: http://easygreenpig.com/ • Employers requiring bank accounts---QLI, Omaha & Cargill in Fort Morgan, CO. • Leveraging EITC returns • Your ideas???

17. Newcomers to Nebraska • Spanish Speakers – Mexicans, Guatemalans, Salvadorans, Cubans • Burmese – Karen, Karenni, Kachin, Chin • Bhutanese • Iraqi • Somali • Sudanese • Eritreans • Chinese - professionals

18. Characteristics of Newcomers • Education level – limited formal education • Agrarian cultures • Concept of ownership • Religious influence on home ownership • Mobility issues • General mistrust/knowledge of banking institutions

19. Characteristics (cont.) • SS# & ITINs – sending $ back home • Undocumented • Banking issues – late fees, debit cards • No history of saving or asset building opportunities • Inability to navigate the “system” • Not able to take advantage of unknown opportunities

20. Impact on Housing • Older apartments/houses • High utility bills • Landlord/tenant rights & responsibilities • Multiple families living together – country of origin traditions

21. Barriers to Home Ownership • Concept of credit – credit scores • Refugees enter the country in debt • Benefits of homeownership • Home maintenance • Undocumented relying on goodness of others • Rules of the game • Language

22. Overcoming Barriers • Education – both newcomers & housing agencies • Partnerships between new communities and housing agencies • Build trust by going to the people – at their community center or place of worship • Establish contact with community leaders • Use interpreters

23. Success Stories • Habitat for Humanity • Due to length of time in the country, Sudanese have taken advantage of this • Burmese – after 5 -7 years, beginning to to access this opportunity • Karen have purchased nearly 15 homes – have found inspector they trust • Individual realtors have hired Spanish speakers to facilitate the process

24. Contact info: Julie Kalkowski Financial Hope Collaborative Creighton University 402.280-3792 juliekalkowski@creighton.edu Maggie Kalkowski International Center of the Heartland & Refugee Services Lutheran Family Services of Nebraska 402.536-3527 mkalkowski@lfsneb.org