This section features a few of the many ways to curtail predatory lending and help low-income families pursue economic self-sufficiency.   Some of the outcomes are captured in the table on the effectiveness of predatory lending interventions, which begins page 11.

Center(s) for Working Families (CWF)

Mary Rigg Neighborhood Center

Indianapolis, IN

http://www.aecf.org/initiatives/fes/center/

http://www.maryrigg.org

Centers for Working Families (CWF) are a new approach to strengthening families. Conveniently located in low-income neighborhoods, each CWF offers a supportive and resource-rich environment where families can access financial services and assistance, income and work supports, community referrals and more. Human service agencies and financial institutions “staff” the centers and bundle their services to deepen impact while expanding their client base.  With seed funding from the Annie E. Casey Foundation, four CWFs are developing three integrated core services.

• Workforce services help families achieve stable jobs and career advancement opportunities.
• Income supports enable families to access the wide array of cash and non-cash benefit programs offered by all levels of government.
• Financial services and asset-building bring more families into the financial mainstream through fair, appropriate financial services and financial education and counseling (AECF 2005).

One of these CWFs is at George Washington Community School, a nationally recognized “center of community” in west Indianapolis.  The CWF receives support from Casey, BankOne/Chase, Indiana University-Purdue University Indianapolis Office of Neighborhood Partnerships, the Purdue Extension Service, the Mary Rigg Neighborhood Center, Christamore House and Hawthorne Community Center.  Through the center, local families – many of whom earn less than $19,000 per year – are able to access existing community resources they need to build a strong financial foundation, including:

• Financial literacy: A five-week program teaches participants how to budget, save, build a strong credit history and break habits that keep them from getting ahead.  As an incentive, participants receive grocery coupons, gift certificates and $100 to start a checking or savings account. 
• Financial counseling: The center offers one-on-one financial resource counseling by trained professionals.
• Family resource referrals: The center helps families connect with the services they need in their neighborhood, such as food pantries and individual development accounts.  Before coming to the center, many clients were unaware of resources that could help them make ends meet and get ahead.

CWF participants have purchased homes, cleaned up credit, completed job training, secured employment, advanced careers and enrolled in GED programs and college.  This fall, the center is partnering with the Central Indiana Community Foundation to provide intensive support to 30 families with the goal of significantly enhancing their economic foundation. Over the next three years, participating families will receive in-depth financial counseling, goal-setting and job-advancement assistance and open individual development account-style savings plans.

Homeownership Preservation Initiative (HOPI)

Chicago, IL

http://www.nhschicago.org

To help distressed borrowers keep their homes whenever possible, Neighborhood Housing Services (NHS) of Chicago joined with the City of Chicago and responsible lenders to create the Homeownership Preservation Initiative (HOPI).  The public/private partnership’s goals are twofold.

• Foreclosure avoidance: Each year the partnership aims to help 500 homeowners at-risk of foreclosure through a multi-faceted set of strategies.
  • Community outreach through mailings and neighborhood institutions educates homeowners about getting help at the first sign of trouble.
  • 3-1-1 campaign encourages at-risk homeowners to call Chicago’s non-emergency 3-1-1 assistance line for referrals to qualified credit counselors.  Through a free one-hour session, counselors help homeowners assess their financial situations and develop action plans.  Counseling agencies also help clients communicate with lenders.
  • Financial education by NHS in foreclosure “hot spots” proactively helps homeowners learn about refinancing, paying for home repairs and avoiding foreclosure.  The Chicago Department of Housing also offers a post-purchase education course.
  • Intensive counseling and assistance by NHS helps homeowners develop repayment plans, work with lenders, obtain loan modifications and refinance. Small loans and grants are used to become current on payments.  NHS also refers clients to local resources (such as job training, tax assistance).
• Reclaiming foreclosed properties for affordable housing: Each year NHS, with assistance from the city and lending partners, seeks to acquire 100 foreclosed, vacant single-family homes.  After making the houses safe and habitable, NHS sells them to low- and moderate-income families.  HUD and mainstream lenders donate properties or sell them at a deep discount to NHS, which also receives subsidies from the city housing department for housing rehabilitation.  On a parallel track, the municipal Troubled Building Initiative is accelerating the foreclosure process to minimize vacancies.

The initiative has kept half of distressed-borrowers’ homes from becoming vacant and/or abandoned property (Neighborhood Housing Services of Chicago 2004; Apgar et al. 2005).

North Carolina’s Anti-Predatory Lending Law

Banks, mortgage bankers and brokers, nonprofit groups and others coalesced to support the North Carolina Anti-Predatory Lending Law, which was adopted in 1999.  The law prohibited certain lending practices and limited high-cost loan terms.  In 2001, policy makers enacted the Mortgage Lending Act to supplement the original Anti-Predatory Lending Law.  As a result, the state now requires mortgage professionals (lenders, brokers and loan officers) to be licensed.  The second law gave the banking commissioner enhanced powers and placed additional prohibitions on mortgage lending practices. 

The state banking commissioner has reported denying many mortgage-professional licenses when applicants failed to meet basic requirements, including background checks.  Due to data limitations, GAO concluded that additional experience and data are needed to assess impact (GAO 2004).  One independent group, the Center for Responsible Lending, estimated the law saved consumers at least $100 million without reducing low-income borrowers’ access to subprime credit (CRL 2002).

Opportunities Credit Union (formerly Vermont Development Credit Union)

Burlington, VT

http://www.vdcu.org

In 2005, the National Credit Union Foundation awarded Opportunities Credit Union (OCU) its highest honor for developing the financial health of disadvantaged communities.  OCU currently brings capital and financial services to 14,000 Vermonters in 210 towns and seeks to become the first full-service, statewide community development bank in the nation.

In 1989 the nonprofit, member-owned, federally-insured credit union was founded to help low-income Vermonters become homeowners, build small businesses and obtain affordable financial services.  One measure of success is OCU’s astounding growth rate, which in some years topped 40%.  Credit union officials attribute this feat to strong counseling-based lending (characterized as “we don’t say no; we say when”) and sound financial management.

Today, OCU offers a wide range of affordable services: low-minimum bank accounts, check cashing, financial education and counseling.  Loans from $50 to $100,000+ come in traditional (mortgage, home improvement, small business) and innovative forms (“working wheels,” computers, individual development and more).  OCU’s members can access special incentives when they deposit their tax refunds or credits into super-saver accounts, and tracker loans help them build a strong credit history.  Because some services most needed by underserved communities may not pay for themselves, OCU, like many CDFIs, depends on external support to finance growth (Stewart et al. 2005).  Some of its current partners include non-member investors, Fannie Mae, Banknorth Vermont and the Ford Foundation.

Predatory Lending Solutions Project

Montgomery County (Dayton), OH

http://www.mvfairhousing.com

Recognizing a growing crisis in predatory lending and foreclosures, Montgomery County Commissioners created the Predatory Lending Solutions (PLS) project to offer prevention and intervention services to county families.  PLS partners include the Miami Valley Fair Housing Center (lead agency); Consumer Credit Counseling Service (a division of Lutheran Social Services of Mid-America); and the Legal Aid Society of Dayton.  To help families avoid or escape predatory lending, PLS uses an interrelated group of strategies.

• Community education and outreach raise awareness of predatory lending practices. 
• Hotline responders vet initial inquiries/complaints about potential abuses and then help potential victims get assistance.
• Integrated intervention and rescue services are provided by a three-agency team created for each case.  Teams investigate complaints that have merit and assist clients or refer them to appropriate local resources.
• Research has informed both service planning and advocacy.  The University of Dayton’s, Center for Business and Economic Research conducted an independent study to identify the occurrence of predatory mortgages by neighborhood.  The study found rapid growth in foreclosures, with a disproportionate share from subprime lenders who were targeting low-income and minority residents.
• Advocacy has been essential in turning the tide.  Community groups used the study to help convince city and state policy makers to enact anti-predatory lending laws.

In just one year, PLS helped to cancel more than $94,000 is unjustifiable credit insurance and had face-to-face contact with 9,000+ county residents.  PLS receives support from the county’s general fund and Community Development Block Grant.  Montgomery County has received multiple national awards for PLS.