1. A New Day for Housing
The Annual Conference of the CT Housing Coalition
October 7, 2009
Hartford, CT
Christy Rogers
The Kirwan Institute for the Study of Race and Ethnicity
The Ohio State University

2.  Fair credit and fair housing (broadly defined)
will only happen together
 Global finance has evolved against – and plays
out in – racially and economically segregated
neighborhoods
 Fair housing and fair credit is an issue for all of
us, but attention needs to be targeted to
marginalized communities – African American,
Latino, Immigrant, Native American…

4. Diagram courtesy of Chris Peterson, University of Utah Law

5. Pre-Depression:
The Two Party Housing
Market
Party
1 Party Post-Depression FHA
2
Homebuyer
Era:
Seller
(and/or) The Three Party
Lending
Institution Mortgage Market
Party
Party 3
Party 2
Government
1 Sponsored
Lending Institution
purchases, insures
Homebuyer Institution or underwrites
loan
Based on research by Chris
Peterson, University of Utah Law School

6. After
securitization

8. “If a neighborhood is to retain stability, it is necessary that
properties shall continue to be occupied by the same social
and racial classes. A change in social or racial occupancy
generally contributes to instability and a decline in values.”
–Excerpt from the 1947 FHA underwriting manual
8

9. From Redlining
to Reverse
Redlining

10.  How do we climb out of the subprime lending
and foreclosure fiasco without worsening the
already widening opportunity gaps in:
 Home ownership and mortgage lending
 Credit access, debt, leverage
 Banking, savings

11.  Make progress in fair housing in three areas
 Improve access to fair financial options (mortgage
and otherwise)
 Affirmative community revitalization
 Opportunity-based housing
 Ensure that programs and policies responding
to the subprime crisis reach those most affected
 Connect and engage diverse stakeholders for
cross-cutting advocacy

12.  Access to fair financial options (mortgage and
otherwise)
 Proliferation of non-bank financial institutions
(unregulated mortgage brokers; payday lending;
refund anticipation loans)
 Banks’ and non-banks’ increasing reliance on fees
(overdraft, credit card, remittances)
 Separation of risk origination from risk bearing
 …implications for low-income customers and
communities of color

13.  Congressional legislation coming…CFPA, or
specific overdraft legislation?
 Federal Reserve proposing opt-in, not opt-out
 Some banks offering to make some concessions
on fees…(BOA; J.P. Morgan Chase; etc.)
 2009 fees: $38.5 billion; fees increased 4% this
year; avg. overdraft fee $35; banks make more
on overdraft fees than credit card fees
 In 2006, overdraft fees were roughly 75% of
total consumer fee income

14.  Half of overdraft fees are from small
ATM/debit purchases (the “$40 cup of coffee”)
 Some banks include the overdraft allowance in
the account balance shown at the ATM
 In undercover visits, GAO officials often
couldn’t get required disclosures detailing fees
 A handful of consumers pay the lion’s share of
fees (i.e. FDIC study showed that customers
with 5 or more NSF transactions – 14% of
customers -- accounted for 93.4% of total NSF
fees)

15.  [Tree] People who overdraft repeatedly are
more likely than the general population to be
lower income, single, non-white, and renters
 Center for Responsible Lending. “Quick Facts on Overdraft Loans.”
April 9, 2009.
 [Forest] Incomes lag while housing, health care,
and education costs skyrocket…more people
get in more debt, but the picture is uneven.

17.  If overdraft ended overnight, one economist
estimated 1,000 banks and 2,000 credit unions
would go under
 45% of banks and credit unions make more on
overdraft fees than they do in profits
 What’s a sustainable profit model for banks?

18.  Worldwide flows: $320 Billion in 2008
 Unrecorded flows through informal channels
are believed to be at least 50% more than
recorded flows
 In last five years, remittances have grown by
63% and now represent the largest source of
income for many developing countries
 On the horizon: mobile transfers (in
developing countries, more people own mobile
phones than have bank accounts)

19.  Africa :Total remittances (US$ million) 38,611
 Asia and Oceania :Total remittances (US$
million) 113,055
 Europe: Total remittances (US$ million) 50,805
 Latin America and the Caribbean: Total
remittances (US$ million) 67,905
 Near East: Total remittances (US$ million)
28,449
 Orozco, Manuel. “Sending Money Home: Worldwide Remittance
Flows to Developing and Transition Countries.” December 2007. Inter-
American development Bank.

20. Inter-American Development Bank map

21.  In 2004, 5% of transfers (of total 40 million per
year) were done via direct deposit into
accounts at financial institutions
 Western Union and Money Gram charge $12-50
fee per transaction
 People are suspicious of bank pricing, don’t have
needed ID, or know of hand-to-hand alternatives
 Bank of America has offered free remittance service
since 2005…banks want new customers
 If banks are going to get new customers via the
remittance market, how do we ensure that they
subsequently offer them sustainable options?

22.  Affirmative community revitalization
 How has the subprime crisis exacerbated fair
housing and equitable community development
challenges? (Mpls, Cleveland, Boston, Sacramento)
 How has the subprime and foreclosure crisis affected
immigrants, especially low-income and
undocumented immigrant homeowners?
 What has the impact been on the urban Indian
population (data)?
 How might the homeowner/rental balance shift and
affect rental markets?

23.  Study of North Minneapolis (M. Ireland)
 Subprime lenders did disproportionate lending
in the area
 Vast majority of foreclosed mortgages issued
through mortgage broker
 CRL study: pay on avg. $35,000 more over life of
loan vs. sub-prime mortgage through retail lender
 Prime lenders disproportionately absent
 Foreclosed homeowners owed 4-5% more than
the original principal balance

24.  Under-reported, disproportionate affect on
rental families with school-age children
 Rental properties accounted for 61% of foreclosures
 40% of foreclosed households had children in
Minneapolis public schools; 60% were African
American
 Yet foreclosure prevention only for homeowners
 Properties lose value and endanger neighbors
 Averaged ten months to sell at average loss of $65K
 83% of properties had 911 calls post-Sheriff’s Sale,
with an average of 8 calls per property

25.  Ensure that programs and policies responding
to the subprime crisis reach those most affected
 How do we assess the current federal policy
response with respect to fair housing and civil rights
goals? (TARP, NSP2)

26.  Federal programs designed to mitigate the
effects of the financial crisis must meet their
obligations under the Fair Housing Act
 “All executive departments and agencies shall
administer their programs and activities relating to
housing and urban development (including any
Federal agency having regulatory or supervisory
authority over financial institutions) in a manner
affirmatively to further the purposes of this
subchapter and shall cooperate with the Secretary [of
HUD] to further such purposes.” – Sec. 808(d)

27.  TARP scope close to $ 3 Billion (OSIG Report)
 TARP funds relate to housing and urban
development
 TARP funds must be spent in a way to
affirmatively further fair housing

28.  Funded by $75 Billion in TARP funds
 Incentivizes mortgage loan modifications to
keep families in their homes
 Civil rights & consumer groups advocacy
resulted in the directive to collect and report
data on race, ethnicity & sex of applicants for
HAMP loan modifications

29.  Make greater use of principal reduction to
achieve affordability
 Make interest rates reductions permanent, not
short term
 Increase transparency of decision-making
process w/r/t eligibility for loan modifications
and the terms of those modifications
 Expand program to all loans serviced/ owned
by past, current, or future TARP recipients

30.  Offer responsible, sustainable loans that enable
people to choose where they want to live
 Assure that homes are marketed without
discrimination (including REO homes)
 Sponsor foreclosure prevention efforts that
affirmatively further fair housing and do not
discriminate
 Finance fair economic development and mixed-
income housing

31. CAP recommendations: No more TARP $$ until special inspector
general for TARP “gives a passing grade on fair lending practices;”
Pass CFPA

32.  Similar policy feedback from small policy
roundtables:
 Seattle-Portland
 Austin, TX
 Detroit, MI
 Oakland, CA
 New Orleans, LA
 Federal policy and advocacy consensus building
meeting in Washington, DC (November)
 Final policy and advocacy “blueprint” – all papers
& blueprint publicly available (website coming)

35.  ?
 ?
 ?

36.  Fees
 Janneke Ratcliffe. “A Bridge to Somewhere: the road from predatory lending to
good financial services for all Americans.” August 5, 2009. American Prospect.
 GAO. “Federal Banking Regulators Could Better Ensure That Consumers Have
Required Disclosure Documents Prior to Opening Checking or Savings
Accounts.” January 2008. http://www.gao.gov/new.items/d08281.pdf
 FDIC. “Study of Bank Overdraft Programs.” November 2008.
http://www.fdic.gov/bank/analytical/overdraft/
 Center for Responsible Lending. “Quick Facts on Overdraft Loans.” April 9,
2009. http://www.responsiblelending.org/overdraft-loans/research-analysis/
 Leverage data
 Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey
of Consumer Finances. Federal Reserve Board, Survey of Consumer Finances,
February 2009. Page A37.