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A HUD program to sell its most delinquent mortgages to private investors is producing modest returns when it comes to keeping those struggling borrowers in their homes. To date, 2,049 mortgages sold to investors under the program have been reworked to allow the delinquent borrowers to remain in their homes and start making payments again, although the overwhelming majority of the 73,000 sold troubled mortgages have been foreclosed on. Roughly half of the loans remain delinquent and have yet to be reworked, sold or foreclosed. HUD began selling the mortgages to private investors in an attempt to reduce the federal government’s potential exposure. Officials have said private buyers have a better chance of reworking the mortgages because the loans are bought at a significant discount.
The New York attorney general's office has filed a lawsuit against regional lender Evans Bank, accusing it of denying mortgages to African-Americans regardless of their credit. Prosecutors claim the bank created a map that defined a “trade area,” places in the Buffalo region where the bank would make mortgages and other loans. The map excluded much of Buffalo’s East Side, with its large minority population. From 2009 to 2012, Evans received 1,114 applications for residential mortgages, but only four came from African-American applicants. The charges come amid a spate of discriminatory lending lawsuits. Providence, R.I., sued Santander Bank in May, accusing it of refusing to lend in predominantly minority neighborhoods and the Los Angeles city attorney sued JPMorgan Chase in May, accusing it of both reverse redlining and traditional redlining.
A federal bankruptcy judge has told OneUnited Bank that it must wait for $2.9 million raised in a real estate auction by its borrower, the Charles Street African Methodist Episcopal Church, until the two sides have resolved their remaining legal disputes. The legal fight has dragged on since the church filed for bankruptcy in March 2012. The Charles Street AME church owes nearly $5 million to OneUnited after falling behind on a $3.4 million construction loan in 2008 and 2009 while building a community center. It also owes $1.3 million on a loan secured by the church building itself. In April, the church finally gave up hope of completing the community center and proceeded to auction it off, raising the $2.9 million currently at issue.
An ambitious 25-year social mobility study illustrates the strong effect of children's socioeconomic background in their adult lives. Starting in 1982, researchers kept track of 790 Baltimore first graders from diverse social and economic backgrounds as they matured and entered adulthood. Less than half of the group graduated high school on time. At age 28, more than 10 percent of the black men in the study were incarcerated. A mere 4 percent of the first-graders classified as the “urban disadvantaged” had by the end of the study completed the college degree. Just 33 of 314 raised in the low-income category managed to escape it. The only exception was among low-income white boys, whose inherited job networks facilitated entry into solid blue-collar jobs. They earned higher incomes than other urban disadvantaged despite attaining some of the lowest levels of education.
The CFPB has announced that David Reiling, CEO of Minneapolis-based Sunrise Banks, and Monica Thomas, Executive Vice President of Illinois Service Federal Savings and Loan Association in Chicago, Ill. will join the CFPB’s new Community Bank Advisory Council. The Dodd-Frank Act charges the CFPB with establishing the Consumer Advisory Board to advise and consult with the Bureau’s Director on consumer protection, financial services, community development, fair lending and civil rights. “These new members of our advisory board and councils will provide valuable input to help us better understand the consumer financial marketplace,” said CFPB Director Richard Cordray.
San Francisco-based Lending Club Corp. has filed for an initial public offering. The online peer-to-peer lender is yet to determine the number of shares and price range, but expects its initial fundraising target to be $500 million. It said it may use a portion of the IPO proceeds to repay a term loan it used to fund an acquisition earlier this year. Other web-based lenders are expected to follow in Lending Club's footsteps. OnDeck Capital Inc., an online lender to small business, is preparing to file for an IPO that could value the business at roughly $1.5 billion. Executives from Kabbage Inc., another small-business lender, earlier this year indicated an IPO may be on the agenda in 2015.
A new study by the Russell Sage Foundation finds that household net worth declined steadily between 2007 and 2013. Households in the lowest income quartile were hardest hit, losing 60% of their wealth. The culprit, advocates say, has been slow mortgage lending to low income and minority borrowers. Twenty-five percent of Americans' wealth comes from the increased value of homes and nearly 50% for people of color. But since 2007, one-quarter of all Latino and African-American borrowers have lost their homes to foreclosure or are seriously delinquent, compared to 12% of white borrowers. Making matters worse, millions of people who lost their homes will have to wait up to seven years to rehabilitate their score just to be eligible to apply for a mortgage.
Proposed requirements on private mortgage insurers under consideration by the Federal Housing Finance Agency would protect Fannie Mae and Freddie Mac from another financial crisis, but could end up raising mortgage costs for thousands of borrowers according to a new report from Moody's Analytics and the Urban Institute. The report authors say that the new rules would lead borrowers to pay an extra 0.15 percentage point in mortgage insurance premiums. Borrowers with low credit scores who make a 5% down payment could pay an extra 0.7 percentage point. At issue are how much liquid assets insurers should have to hold against their liabilities and what the insurers should be allowed to count as capital. The authors believe mortgage insurers should be allowed to count a portion of future insurance premiums, which the draft requirements don’t allow.
The CDFI Fund awarded 185 organizations more than $195.4 million in the FY 2014 round of the CDFI and NACA Programs. The award announcement included more than $160.8 million in Financial Assistance and Technical Assistance awards to 152 organizations through the CDFI Program, and more than $12.2 million to 33 organizations through the NACA Program. Twelve awardees received $22.4 million in Healthy Food Financing Initiative awards. Eight CDBA members were among the awardees, including BankPlus ($1,750,000), Beneficial State Bank ($1,500,000), Carver State Bank ($306,000), Central Bank of Kansas City ($1,088,666), City First Bank of D.C. ($1,700,000), Community Capital of Va. ($2,000,000), Guarantee Bank & Trust ($1,100,000) and CheckSpring Community Corporation (holding company of Spring Bank, $700,000)
Bronx-based Spring Bank is launching “Borrow and Save,” a credit building product designed to help borrowers bridge income gaps without resorting to payday loans. "Borrow and Save" is a 6 to 12 month loan of up to $1,500 with no minimum credit score requirement. The loan is underwritten on the basis of an individual’s demonstrated ability to cover payments. One quarter of the loan is placed in a free savings account that is available when the loan is repaid. The goal is to help borrowers break the cycle of unsustainable borrowing, improve their credit scores and move toward healthier savings habits.