Category Archives: Responsible Lending
Our future economic prosperity could depend on mortgage lending discrimination
America is becoming more and more diverse. Given how much middle class wealth depends on home ownership and home values, if we do not significantly reduce mortgage lending discrimination, then we are placing our future economic prosperity at risk.
HOME CEO Heather Crislip writes about mortgage lending discrimination in her recent op/ed:
Subprime lending to minority borrowers has abated within the past few years; in its place is a lack of credit and, in turn, opportunity in African-American, Hispanic and low-income neighborhoods. During the housing boom these households were often targeted by unfair lending practices through the distribution of inferior mortgage loan products to qualified borrowers. The Center for Responsible Lending found that African-American and Latino borrowers with good credit were given high interest rate loans three times as often during the housing boom.
According to the US Census, by the end of this decade no single racial or ethnic group will constitute a majority of children under 18. And in about three decades, no single group will constitute a majority of the country as a whole. But as we are growing more diverse, we are also growing more unequal. Both wealth and racial inequality have increased, in some cases dramatically.
Virginia is getting more money from a national settlement stemming from the foreclosure crisis. The Virginia General Assembly will be getting $3.5 million from a settlement over “robo-signing” and “surrogate signing” of mortgage loan default servicing (aka foreclosures). This money is supposed to be used for housing, but the Virginia General Assembly now gets to decide where and how to spend this money.
Robo-signing was a significant problem in Virginia that raised serious questions about the sanctity of property rights in the Commonwealth. It was such a serious concern, that a community group in Northern Virginia organized citizen volunteers to investigate this problem in Prince William County.
Expanding refinances in Virginia could save $1.2 billion for more than 346,000 families.
Congress has a rare bipartisan opportunity to put more money in Americans’ pockets, strengthen the housing market and boost the entire economy. By making it easier to refinance into today’s low interest rates, Congress could expand the Home Affordable Refinance Program (HARP) so it helps up to 13 million Americans nationwide save $35 billion.* In Virginia, 346,507 families would qualify, saving them over $1.2 billion in lower mortgage payments.
KEY FACTS *
For families who are paying their mortgage on time, refinancing into a lower-cost mortgage is a low-risk, high-benefit proposition.
- The average rate for a 30-year mortgage is now about 3.8%.
- Among homeowners with 30-year fixed-rate mortgages guaranteed by Fannie Mae and Freddie Mac, nearly 70% have an interest rate of 5% or higher.
- By lifting unnecessary barriers and making refinances more accessible, families who get refinances in Virginia would save, on average, $3,653 per year.
- Today’s constraints on refinancing have a disproportionate impact on middle-class borrowers whose original mortgages were under $200,000.
- Refinance savings would mean more money in families’ pockets, fewer foreclosures and a stronger economy.
With foreclosure rates remaining high over the past few years, homeowners across the country are increasingly desperate to save their homes from bank repossession – and scammers are ready to come to the “rescue.” Some companies claim they can fight off foreclosure by negotiating new terms with lenders or servicers, but these various schemes ultimately end with homeowners being forced out of their homes and losing even more money.
Foreclosure rescue and mortgage modification scams are a growing problem. In April, nearly 1 in every 700 housing units in the country received a foreclosure filing, giving scammers over 1.3 million chances to strip homeowners of their last assets.
The federal government has launched a coordinated effort to target mortgage and foreclosure fraud, educate homeowners on how to protect themselves, and assist victims of fraud. The Federal Trade Commission issued the Mortgage Assistance Relief Services (MARS) Rule in 2010 to curb unfair and deceptive practices associated with these scams. Various “compliance highlights” for businesses in the mortgage industry include:
As you may have heard, Virginia recently received a lot of money from the National Mortgage Settlement agreement. Some of this money will go directly to home owners in need, some will come to directly to the State to offset the costs of the housing crisis. Below is a breakdown of all the funds coming to Virginia:
- Virginia’s home borrowers will receive an estimated total of $409,937,551.22 in benefits from loan term modifications and other relief.
- Virginia’s borrowers who lost their homes to foreclosure from January 1, 2008, through December 31, 2011, and suffered servicing abuse qualify for approximately $31,301,320.91 in cash payments.
- The value of refinanced loans to Virginia’s underwater borrowers will be an estimated $84,309,742.00.
- The Commonwealth will receive a direct payment of $69,657,121.00.
- The Bureau of Financial Institutions at the State Corporation Commission, as Virginia’s banking regulator, also joined the settlement and will receive an additional $1,000,000.
The $69 million direct payment to the Commonwealth is what Virginia could use to address the costs of the housing crisis such as the money Virginia had to spend for foreclosure prevention counseling. This $69 million was a great opportunity to invest in rebuilding home ownership in the Commonwealth. In his presentation to the Senate Finance Committee, Attorney-General Ken Cuccinelli noted this $69 million coming directly to the Commonwealth:
Preference that money be used for foreclosure prevention or counseling programs, or to enhance consumer protection efforts to prevent and prosecute financial fraud.
The Virginia House of Delegates and the State Senate released their respective versions of the State Budget this past Sunday Feb 19th and neither body used the $69 million settlement for housing. Neither body included any money in the budget for a Housing Trust Fund or any significant investments in addressing the housing crisis many Virginians are still stuck in. Both bodies used the $69 million from the national mortgage foreclosure settlement for aid to local governments and capitalizing a new Fund created to mitigate impact in Virginia of anticipated Federal Budget cuts.
This is a guest post by Amy Weiss. Amy is originally from Richmond, Virginia and is a third year law student at the University of Richmond. She graduated from the College of William and Mary in 2007 where she studied history and anthropology.
A mortgage company from Midlothian VA has recently settled with the U.S. Justice Department because of discriminatory mortgage practices:
C&F charged greater interest rate markups (overages) and gave lesser discounts (underages) on home mortgage loans made to African-American and Hispanic borrowers,
This is not an isolated incident. There is a long history of racial discrimination in the mortgage-lending industry. As laws began to address discrimination in the United States, mortgage discrimination evolved from denying minority homeowners loans to granting them mortgage loans at much higher rates than similarly situated white homeowners. This does not mean the mortgage industry is trying to be prejudiced, but it means that we must make sure that everyone has equal access to our free market economy.
This is a guest post by Bruce McClary. Bruce is a Financial Educator and the Media Relations Director at ClearPoint Credit Counseling Solutions. This post was originally published on ClearPoint’s blog.
It’s a good time to look back at the events that changed the world of consumer credit in 2010. After all, some would say that 2010 was a historic year for change in the credit industry.
- The CARD Act – Otherwise known as the Credit Card Accountability, Responsibility, and Disclosure Act, this legislation was implemented in February. Consumers now benefit from: clear disclosures of fees on their monthly statements, interest rates applied to multiple balances to aid progress toward payoff; term changes come with a 45-day advance notice; new rules govern the use of prepaid cards, and limited creditor access to consumers under the age of 21. More on the CARD Act.
- The Dodd-Frank Wall Street Reform Law – The new Consumer Financial Protection Bureau will be responsible for keeping an eye on how banks and consumer finance companies comply with existing regulations for fairness and disclosure. It will also maintain a toll-free hotline for consumers to report deceptive practices. While the agency did not begin operation in 2010, the legislation paved the way.
- FTC Debt Settlement Rules – Countless hearings, testimony from fraud victims, and scammers caught in the act by congressional investigators led to a significant crackdown on the for-profit debt relief industry. Included in the new rules are strict guidelines for fair disclosure in advertising, required compliance with existing telemarketing rules, and prohibition of advance fees.
ClearPoint encourages consumers to stay informed in order to make wise financial decisions. Resolve to learn more about personal financial management in the new year, and you will be sure to like the results.