Protecting Fair Lending Is Key To Our Economic Recovery

Most Americans correctly understand that the economic meltdown was caused by a perfect storm of misconduct in the lending and financial industries and inadequate rules and enforcement.  A 2010 Pew Financial Reform Project poll, for example, found that American likely voters overwhelmingly blamed banks for making unsustainable mortgages (42%) and too little regulation of Wall Street (24%) for the crisis.

Fewer are aware, however, of the role that racial bias and discrimination by lenders and brokers played in creating the crisis.  Understanding that role and the tools available to correct it is key to ensuring our nation's full economic recovery.

Despite the progress we've made as a nation toward the goal of equal opportunity for all, significant barriers remain, especially when it comes to mortgage lending by banks and brokers.  In a 2005 report using federal data that presaged the current crisis, for example, The Opportunity Agenda, the National Community Reinvestment Coalition, and the Poverty and Race Research Action Council warned that-even controlling for income-African-American and Latino borrowers were significantly more likely to be sold high cost, subprime loans than whites, despite the fact that as many as 50% of those borrowers qualified for prime loans. Racial inequity in lending actually increased with borrower income levels, and with the degree of neighborhood segregation.

Loans in these communities were more costly, and were frequently predatory, carrying hidden fees and conditions or marketed through deceptive practices.  Some, for example, were designed with built-in rate adjustment features making them unsustainable over the loan's lifespan.

More recently, a series of lawsuits and settlements have revealed pervasive patterns of racial discrimination in home lending.  In December 2011, for example, the U.S. Department of Justice reached the largest fair lending settlement in its history with the lender Countrywide.  The Department says that Countrywide discriminated on the basis of race and national origin against qualified African-American and Hispanic borrowers between 2004 and 2008, charging more than 200,000 of these borrowers higher fees and interest rates than non-Hispanic white borrowers, and steering borrowers of color into subprime loans.

The Justice Department has settled similar discrimination cases against AIG Federal Savings Bank, Wilmington Finance Inc., PrimeLending, C&F Mortgage Corporation, Midwest BankCentre, Citizens Republic Bancorp, Inc., and others, reinforcing the reality that these practices are pervasive.

Why would subprime lenders disproportionately target minority communities for risky loans and, often, deceptive and predatory lending practices?  There are several possibilities.  Many minority neighborhoods, even middle-classed ones, lack banks or other traditional lending institutions, making them more susceptible to exploitation.  People of color are more likely to be first generation homebuyers, with fewer sources of information, experience, or advice.  Many lenders assume them to be poor credit risks, even when they are well qualified for traditional loans.

Lenders' discriminatory treatment toward communities of color previewed and paralleled exploitative practices that they visited upon moderate-income white communities, senior citizens, military servicemembers, and more broadly. Today, consequently, we are all in it together, with some two million homes in foreclosure.  In addition to homeowners, the mortgage crisis is displacing millions of renters whose landlords are in default.

Fortunately, solutions exist that can put homeownership back on track, repair devastated communities, and restore the promise of equal opportunity and fair housing for all Americans.  Just as the Obama administration has correctly insisted on a review of loans to servicemembers, for instance, they should demand a review of loans in communities with high concentrations of discriminatory and predatory loan practices.  The administration should direct the Treasury Department to issue long-overdue civil rights and fair housing regulations for programs it oversees.  And Congress should modernize the Community Reinvestment Act to reach a wider range of institutions and to strengthen equal opportunity protections.

Other needed reforms include increasing homeowners' access to financial counseling, reducing the principal of loans owned or backed by Fannie Mae and Freddie Mac, and maintaining a government role in the secondary mortgage market to ensure that qualified working Americans of all races have access to 30-year fixed mortgages going forward.

Acknowledging the role that racial bias has played in the financial and mortgage crisis is crucial to understanding the scope and scale of that crisis.  Concrete steps toward greater and more equal opportunity for all are important to ending it.

Protecting Fair Lending Is Key To Our Economic Recovery

Most Americans correctly understand that the economic meltdown was caused by a perfect storm of misconduct in the lending and financial industries and inadequate rules and enforcement.  A 2010 Pew Financial Reform Project poll, for example, found that American likely voters overwhelmingly blamed banks for making unsustainable mortgages (42%) and too little regulation of Wall Street (24%) for the crisis.

Fewer are aware, however, of the role that racial bias and discrimination by lenders and brokers played in creating the crisis.  Understanding that role and the tools available to correct it is key to ensuring our nation's full economic recovery.

Despite the progress we've made as a nation toward the goal of equal opportunity for all, significant barriers remain, especially when it comes to mortgage lending by banks and brokers.  In a 2005 report using federal data that presaged the current crisis, for example, The Opportunity Agenda, the National Community Reinvestment Coalition, and the Poverty and Race Research Action Council warned that-even controlling for income-African-American and Latino borrowers were significantly more likely to be sold high cost, subprime loans than whites, despite the fact that as many as 50% of those borrowers qualified for prime loans. Racial inequity in lending actually increased with borrower income levels, and with the degree of neighborhood segregation.

Loans in these communities were more costly, and were frequently predatory, carrying hidden fees and conditions or marketed through deceptive practices.  Some, for example, were designed with built-in rate adjustment features making them unsustainable over the loan's lifespan.

More recently, a series of lawsuits and settlements have revealed pervasive patterns of racial discrimination in home lending.  In December 2011, for example, the U.S. Department of Justice reached the largest fair lending settlement in its history with the lender Countrywide.  The Department says that Countrywide discriminated on the basis of race and national origin against qualified African-American and Hispanic borrowers between 2004 and 2008, charging more than 200,000 of these borrowers higher fees and interest rates than non-Hispanic white borrowers, and steering borrowers of color into subprime loans.

The Justice Department has settled similar discrimination cases against AIG Federal Savings Bank, Wilmington Finance Inc., PrimeLending, C&F Mortgage Corporation, Midwest BankCentre, Citizens Republic Bancorp, Inc., and others, reinforcing the reality that these practices are pervasive.

Why would subprime lenders disproportionately target minority communities for risky loans and, often, deceptive and predatory lending practices?  There are several possibilities.  Many minority neighborhoods, even middle-classed ones, lack banks or other traditional lending institutions, making them more susceptible to exploitation.  People of color are more likely to be first generation homebuyers, with fewer sources of information, experience, or advice.  Many lenders assume them to be poor credit risks, even when they are well qualified for traditional loans.

Lenders' discriminatory treatment toward communities of color previewed and paralleled exploitative practices that they visited upon moderate-income white communities, senior citizens, military servicemembers, and more broadly. Today, consequently, we are all in it together, with some two million homes in foreclosure.  In addition to homeowners, the mortgage crisis is displacing millions of renters whose landlords are in default.

Fortunately, solutions exist that can put homeownership back on track, repair devastated communities, and restore the promise of equal opportunity and fair housing for all Americans.  Just as the Obama administration has correctly insisted on a review of loans to servicemembers, for instance, they should demand a review of loans in communities with high concentrations of discriminatory and predatory loan practices.  The administration should direct the Treasury Department to issue long-overdue civil rights and fair housing regulations for programs it oversees.  And Congress should modernize the Community Reinvestment Act to reach a wider range of institutions and to strengthen equal opportunity protections.

Other needed reforms include increasing homeowners' access to financial counseling, reducing the principal of loans owned or backed by Fannie Mae and Freddie Mac, and maintaining a government role in the secondary mortgage market to ensure that qualified working Americans of all races have access to 30-year fixed mortgages going forward.

Acknowledging the role that racial bias has played in the financial and mortgage crisis is crucial to understanding the scope and scale of that crisis.  Concrete steps toward greater and more equal opportunity for all are important to ending it.

Protecting Fair Lending Is Key To Our Economic Recovery

Most Americans correctly understand that the economic meltdown was caused by a perfect storm of misconduct in the lending and financial industries and inadequate rules and enforcement.  A 2010 Pew Financial Reform Project poll, for example, found that American likely voters overwhelmingly blamed banks for making unsustainable mortgages (42%) and too little regulation of Wall Street (24%) for the crisis.

Fewer are aware, however, of the role that racial bias and discrimination by lenders and brokers played in creating the crisis.  Understanding that role and the tools available to correct it is key to ensuring our nation's full economic recovery.

Despite the progress we've made as a nation toward the goal of equal opportunity for all, significant barriers remain, especially when it comes to mortgage lending by banks and brokers.  In a 2005 report using federal data that presaged the current crisis, for example, The Opportunity Agenda, the National Community Reinvestment Coalition, and the Poverty and Race Research Action Council warned that-even controlling for income-African-American and Latino borrowers were significantly more likely to be sold high cost, subprime loans than whites, despite the fact that as many as 50% of those borrowers qualified for prime loans. Racial inequity in lending actually increased with borrower income levels, and with the degree of neighborhood segregation.

Loans in these communities were more costly, and were frequently predatory, carrying hidden fees and conditions or marketed through deceptive practices.  Some, for example, were designed with built-in rate adjustment features making them unsustainable over the loan's lifespan.

More recently, a series of lawsuits and settlements have revealed pervasive patterns of racial discrimination in home lending.  In December 2011, for example, the U.S. Department of Justice reached the largest fair lending settlement in its history with the lender Countrywide.  The Department says that Countrywide discriminated on the basis of race and national origin against qualified African-American and Hispanic borrowers between 2004 and 2008, charging more than 200,000 of these borrowers higher fees and interest rates than non-Hispanic white borrowers, and steering borrowers of color into subprime loans.

The Justice Department has settled similar discrimination cases against AIG Federal Savings Bank, Wilmington Finance Inc., PrimeLending, C&F Mortgage Corporation, Midwest BankCentre, Citizens Republic Bancorp, Inc., and others, reinforcing the reality that these practices are pervasive.

Why would subprime lenders disproportionately target minority communities for risky loans and, often, deceptive and predatory lending practices?  There are several possibilities.  Many minority neighborhoods, even middle-classed ones, lack banks or other traditional lending institutions, making them more susceptible to exploitation.  People of color are more likely to be first generation homebuyers, with fewer sources of information, experience, or advice.  Many lenders assume them to be poor credit risks, even when they are well qualified for traditional loans.

Lenders' discriminatory treatment toward communities of color previewed and paralleled exploitative practices that they visited upon moderate-income white communities, senior citizens, military servicemembers, and more broadly. Today, consequently, we are all in it together, with some two million homes in foreclosure.  In addition to homeowners, the mortgage crisis is displacing millions of renters whose landlords are in default.

Fortunately, solutions exist that can put homeownership back on track, repair devastated communities, and restore the promise of equal opportunity and fair housing for all Americans.  Just as the Obama administration has correctly insisted on a review of loans to servicemembers, for instance, they should demand a review of loans in communities with high concentrations of discriminatory and predatory loan practices.  The administration should direct the Treasury Department to issue long-overdue civil rights and fair housing regulations for programs it oversees.  And Congress should modernize the Community Reinvestment Act to reach a wider range of institutions and to strengthen equal opportunity protections.

Other needed reforms include increasing homeowners' access to financial counseling, reducing the principal of loans owned or backed by Fannie Mae and Freddie Mac, and maintaining a government role in the secondary mortgage market to ensure that qualified working Americans of all races have access to 30-year fixed mortgages going forward.

Acknowledging the role that racial bias has played in the financial and mortgage crisis is crucial to understanding the scope and scale of that crisis.  Concrete steps toward greater and more equal opportunity for all are important to ending it.

Regulating For-Profit Colleges: A Much-Needed Reform

By: Inoljt, http://mypolitikal.com/ 

Recently the Department of Education unveiled new regulations for colleges. These regulations are aimed at for-profit colleges such as Kaplan University and the University of Phoenix, although they apply to all forms of higher education in general.

The rules stop federal funding for programs whose graduating students consistently default on their student debt. Specifically, this happens only if ”fewer than 35 percent of its graduates are repaying principal on their student loans three years out, and, for the typical graduate, loan payments exceed 30 percent of discretionary income as well as 12 percent of total earnings.”

Those are some pretty lenient conditions. If 65% of students default upon their debt, and said debt is more than 30% of their free income – well, that’s a lot of debt for what appears to be a very, very poor program. Certainly a program in which 65% of its graduates are failing ought to be called a failure. It probably doesn’t deserve federal funding.

The outraged reaction of for-profit colleges to these regulations also tells a pretty revealing story. For-profit colleges spent a load of money hiring lobbyists to fight the regulations and were able to successfully soften them up (for instance programs only start losing money by 2015). They also got much support amongst the Republican Party, and the Republican-controlled House of Representatives actually passed an amendment to stop the regulations.

It is quite baffling, and very sad, that Republicans did this. Indeed, Republican opposition to these type of common-sense reforms in education seems to be part of a puzzling pattern. Republicans also opposed reforms to student loans, a bill which increased aid to college students and put pressure on private, subprime-type, student loan companies. Under Republican control, the House of Representatives has targeted the Pell Grant as one of its top targets for spending cuts. The Pell Grant gives (far too little) money to low-income college students. Surely something else – perhaps the $450 million F-35 back-up jet engine which Defense Secretary Robert Gates calls an “unnecessary and extravagant expense” -better deserves these spending cuts.

All in all, curtailing the activities of for-profit colleges is a very good endeavor. For-profit colleges are akin to a form of legalized scamming. They take in often poor, often desperate Americans, promise them jobs and hope, but end up just giving them tens of thousands of dollars in tuition debt (which the federal government then picks up).

There is a much better option for poor Americans looking for a college education: community colleges, which are far less expensive but actually are legitimate institutions. Unfortunately, community colleges are quite bureaucratic, and their fees are rising. More funding could fix this problem. Yet here again one finds Republicans advocating cuts to community college funding; their opposition to President Barack Obama’s student loan reform reduced community college funding from the original $10 billion to a mere $2 billion. Why do they do this?

Nevertheless, this reform does represent a step in progress. It definitely will curb some of the excesses that cause so much student loan debt. It won’t solve everything, but it’s much better than nothing.

 

 

Big Banks Scam Students Out of Opportunity

The American Dream is perhaps our most powerful and enduring story. Through booms and busts, we insist (oftentimes in the face of overwhelmingly contrary evidence) that anyone who is willing to work hard can succeed. To the extent that the American Dream is a reality, it is due in large part to our secondary education system and the patchwork of loans, scholarships, and grants available for students. As sky-rocketing rates of student debt show us, though, these tools for expanding access to secondary education need retuning. There is talk of reform in Washington but, in a story that has become all too familiar, large financial institutions are standing in the way, protecting their profits at the expense of young people’s hopes and dreams.

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