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Community agreement with US Bank

After a year and a half of organizing, the Coalition for Community Banking has won a community benefits award with U.S. Bank which addresses banking and credit needs on the West Side and western suburbs.

Coalition leaders and bank officials will discuss the agreement tomorrow, Friday March 4, 10 a.m., at U.S. Bank’s office at 11 W. Madison in Oak Park.  Joining them will be U.S. Representative Danny Davis and Oak Park village president David Pope.

The coalition was formed in October 2009 after the FDIC closed the community-based Park National Bank and turned it over to U.S. Bank, the sixth largest bank in the nation. Community leaders had travelled to Washington D.C. to oppose the FDIC action.

The agreement will cover enhanced banking services and reinvestment in the area, along with a commitment to maintain PNB’s support for local schools and nonprofits.  .

The coalition pushed for public reporting on U.S. Bank’s lending to areas previously served by PNB, additional access to credit for small businesses, and increased efforts on financial education and foreclosure prevention.

The bank has committed to working with local housing agencies to prevent foreclosures and restore foreclosed properties, said Rev. Marshall Hatch, a coalition leader. Tomorrow’s event will include a tour of several foreclosed homes that will be renovated under the agreement.

“We’re proud of the way the coalition came together, people from the West Side and from Oak Park, River Forest and Maywood, blacks and whites, people from different income levels,” said Hatch. “It shows what can be accomplished when people work together on behalf of the community.

“That’s the legacy of Park National Bank,” he said.

Credit card rates up

Interest rates for new credit cards are at record levels due to new regulations which limit rate hikes for existing customers, a credit expert told the Chicago Tribune earlier this week.

That’s not the whole story, said Brian Imus of Illinois PIRG. “Banks are also trying to recover the revenue lost after they collapsed the economy and forced consumers to use their cards less,” he said.

“And just as banks protest that the rates are high in order to balance out risk, like addicts who can’t kick the habit, they’re ramping up lending to risky borrowers again,” writes Bryce Colbert at The Swipe, a new blog on credit card issues at New Deal 2.0.

“Their profits come from fees and interest paid by borrowers who can’t stay on top of their bills,” she writes. “They just can’t stay away from fleecing low-income customers.”

Consumers are much better off since passage of the CARD Act last year, Imus said.  “It’s much harder for issuers to impose back-end ‘gotcha’ penalty rates or fees,” and new disclosure requirements make it much easier for consumers to shop around for the best deal.

And the minimum payment warning – which spells out how much interest will cost over time if a cardholder pays only the minimum – has inspired more people to pay down their balances, he said.

The banks knew this would happen, Imus said.  “That’s why it took us over 20 years to enact that critical disclosure.”

In the newest post on The Swipe, Colbert discusses JPMorgan’s highly profitable line of business providing debit cards for food stamps.  It netted the bank over $5 billion last year.

Beware the Payday Loan Grinch

The Payday Loan Grinch will be downtown Monday – but don’t be afraid: payday loan reform advocates will be there too, singing carols warning shoppers of the dangers of payday installment loans.

A real-life grinch, along with members of the Monsignor John Egan Campaign for Payday Loan Reform, will be outside the PLS Loan Store, 337 S. Franklin, at 11 a.m. on Monday, December 13.

“Between a weak economy and the pressures of holiday shopping, the temptation to take out a payday loan can be particularly high,” said Dory Rand of the Woodstock Institute – but the loans can carry triple-digit interest rates, she warns.

“The payday Grinch’s high fees can sap working families’ assets and threaten their financial security,” said Lynda DeLaforgue of Citizen Action-Illinois.

Reforms won by the Egan Campaign in Springfield this year will cap interest rates and establish a range of consumer protections.  But they won’t go into effect until March of next year.

Payday loans are still a costly form of debt that targets those consumers who can least afford extra charges, the campaign warns.

DeLaforgue urges families under financial stress seek out a reputable consumer credit counselor and consider lower-cost options to payday loans, including small consumer loans with lower fees available from credit unions and community banks.

The myths of ShoreBank’s failure

Was ShoreBank a victim of its mission — to provide financial services and build wealth in low-income communities of color?  Tim Fernholz looks at the myths surrounding the bank’s takeover this year in the latest issue of American Prospect.

In a sense the bank may have been a victim of its success.  From its perilous founding, it found a niche helping small landlords rehab affordable housing, and its highly personal approach, knowledge of its neighborhood and attention to detail paid off.  Along the way it served as a model for scores of community development banks — and showed big banks that serving minority communities could be profitable.

Founded with a $2.4 million loan in 1973, Shorebank had $2.6 billion in assets in 2008.  But with success – and as the founders moved out of direct management – the bank moved beyond its “old-fashioned” view of a bank rooted in a community, expanding to Cleveland, Detroit, and the Pacific Northwest, even backing overseas development loans.  And although Shorebank eschewed subprime lending, its borrowers were not safe from the housing crash, and losses began piling up.

The conservative contention that ShoreBank was politically favored, with connections to Presidents Clinton and Obama among others, might have been rendered moot when the FDIC closed the bank in August.  But Fernholz notes “a new conservative conspiracy theory” – “regulators were letting the FDIC’s insurance fund absorb losses so that the social experiment could start anew.”

In fact the consoritum of investors who formed Urban Partnership Bank was tagged to purchase the bank’s assets only after hundreds of banks passed on the same opportunity.  And the new operation will share ShoreBank’s losses with the FDIC, which would have been on the hook for the entire bill otherwise.

Now “ShoreBank’s experience is being taken as a call to end government support for community lenders, as though encouraging credit access in underserved communities is the moral equivalent of bailing out Wall Street’s megabanks,” says Fernholz.  (This echoes the contention that the Community Reinvestment Act caused the crash by requiring investment in low-income communities; but the bulk of subprime loans came from unregulated mortgage companies and investment banks, and their securitization was a project of the higest rollers.)

Fernholz argues instead that ShoreBank’s experience is emblematic of the challenges facing small banks.  And he cites bankers who say “ShoreBank’s failure was less because of its mission and more because of its business practices” – it “tried to accomplish too much, too fast.”

“The politicization of ShoreBank’s failure detracts from the urgent need to reinvest in these areas with sustainable, local loans,” writes Fernholz.  The lesson is not that poor areas don’t deserve investment – indeed ShoreBank showed it can be done successfully.  Perhaps it’s what founder Ron Gryzwinski wrote in 1991: “To serve almost any geographical or social community we might name, banks must either be small or at the very least maintain a local focus.”

And while big banks have gotten bigger on bailouts predicated on their risk to the financial system, it’s time to recognize the importance of small banks to communities and families, with “policies that encourage community banks to do what they do best.”

Shel Trapp

It was always hard to conceive that Shel Trapp had been a Methodist minister.  He smoked like a chimney and swore like a sailor.

The co-founder of National People’s Action, who died October 18 at the age of 75, Trapp was strategist for the extended organizing campaign –growing out of grassroots drives against redlining and blockbusting on Chicago’s West Side – that won the Community Reinvestment Act in 1977.

“I don’t know many organizers who can claim an impact of $1 trillion,” sociologist Randy Stoecker tells the Sun-Times.  He says the campaign for CRA was “arguably the best piece of community organizing,” after the civil rights movement, in the nation’s history.

“The success of CRA is not debatable,” Stoecker said.  “It has brought so much money into communities that would otherwise have been excluded from that money.  Cities would be different.  It’s scary to think of what they would be.”

Beyond CRA, Trapp’s legacy is comprised of thousands of scrappy organizers he trained, passing on his tenacity and commitment.

“Among his proudest achievements was his work to help create ADAPT,” NPA reports.  Trapp worked with the group from the beginning, on campaigns to free people from nursing homes, to win accessible public transportation, and ultimately to pass (and enforce) the Americans with Disabilities Act.

Foreclosure fraud: ‘tip of the iceberg’

The problem with Cook County Sheriff Tom Dart’s foreclosure moratorium isn’t that it “delays the inevitable.” It’s that it may not have much impact at all.

Two weeks after Action Now called on Dart to declare a moratorium on all foreclosure evictions, and five days after the Chicago Anti-Eviction Campaign served him with a “five-day notice” with the same demand, the sheriff announced he would suspend evictions on foreclosures by three lenders “until they can provide complete assurance that the foreclosure was done properly and legally.”

Dart targeted lenders that have admitted that foreclosure documents were attested to by “robo-signers.”  But all of the lenders have instituted their own moratoriums; at JPMorgan/Chase foreclosures are still on hold.

The other two, Bank of America and GMAC/Ally, say they’ve completed reviews of foreclosure documents; it’s quite likely they’ll have no problem providing Dart with the requested assurances.

“We are happy to respond to any questions from Sheriff Dart on this matter,” an Ally spokesperson told Bloomberg.

All indications are the robo-signing scandal is much broader.  Dart’s office may have missed the Financial Times report of a deposition by a vice president for loan documentation at Wells Fargo, who said she signed as many as 500 foreclosure-related papers a day.

The only information she actually verified was whether her name and title apeared correctly, according to FT. Wells Fargo has refused to consider a moratorium.

For the three affected lenders, Dart is only requiring that they self-certify.  Is that enough?  “It’s not clear how he’s going to evaluate their documentation, other than taking their word for it,” said Bob Palmer of Housing Action Illinois.

Action Now called Dart’s announcement “a huge victory.”

The Chicago Anti-Eviction Campaign said it’s “not enough.” “The moratorium may help a significant number of families to keep their homes” but it “ignores families who have mortgages with other banks – even those banks that were bailed out by the federal government – as well as tenants in low-income or subsidized public housing,” the group said in a release.

The anti-eviction group is holding a meeting for families facing eviction along with activists and volunteer attorneys on Saturday, October 23, 11 a.m., at 7463 N Ridge.

Beyond sloppy paperwork

The robo-signing scandal broke last month with revelations that a GMAC/Ally employee admitted to falsely certifying that he’d verified thousands of foreclosure documents a month.

But with “foreclosure mills” processing massive amounts of documents for mortgage servicers – as lenders rushed foreclosures without due diligence on thousands of loans (which they earlier rushed to sell without due diligence) – observers say it’s clear the problem extends through the entire industry.

“Everybody doing this work has seen this for years,” said Dan Lindsey of the Home Ownership Preservation Project at the Legal Assistance Foundation.

He points out that GMAC was actually sanctioned for robo-signing in 2006, and promised to institute procedures to guard against it.

“It’s not a problem of isolated banks and servicers,” said Liz Ryan Murray of National People’s Action.  “We’ve been hearing about these problems for years.”

And it goes far beyond what banks depict as a “technical problem” of mishandled paperwork.  The foreclosure documents to which the robo-signers attested are themselves full of problems.

Most basic could be the question of who owns the home loan, and whether foreclosers can prove that they are entitled to foreclose.  The question is at the center of “a potentially seismic legal clash,” the New York Times reports today.

With a number of national allies, NPA has launched Where’s the Note, a website to help homeowners contact their lenders to demand to see the original note on their mortgages.

Another set of problems covered up by robo-signers could unfairly push homeowners into default and foreclosure.  According to Lindsey, foreclosure documents too often reveal inaccurate accounting of what homeowners owe.

There is fee padding – late fees, attorney’s fees, broker fees, inspection fees.  Murray says she’s seen lots and lots of “crazy fees” – for document processing and recording, copying and even faxing.  “In some cases borrowers may owe something but less than what is being claimed, and it may make a difference as to whether they can come up with that amount or not,” Lindsey says.

There are also many cases of misapplying fees for principal and interest so the loan is improperly considered to be in default.  The same can happen with highly inflated assessments for homeowner insurance, which are credited before payments on the mortgage are applied.  This can precipitate foreclosure on otherwise up-to-date loans.

“It’s a completely broken system,” said Murray.

The idea that Bank of America can take two weeks off to review its foreclosure filings and then resume home seizures is “just a joke,” said Lindsey.  “It’s spin control.”

Beyond a moratorium

Dart’s announcement puts pressure on banks but “it’s just a beginning, and there’s no plan for any change in the approach of the banks” to the foreclosure crisis, said Palmer.

The foreclosure fraud crisis is “an opportunity for the Obama administration and Congress to start doing something real about foreclosures,” Murray said.  “The solution is to get real about principal reductions and longterm forebearance for unemployed homeowners.”

Sloppy paperwork is certainly one aspect of banks’ inability to move quickly on modifying mortgages.  A constant refrain from housing advocates concerns lenders repeatedly losing and demanding resubmission of applications and documentation for loan modifications.

This can lead to illegal foreclosures.  “There have been cases where homes are going to sale while homeowners have HAMP applications pending,” Lindsey said.  That’s a violation of Treasury Department guidlines for banks under the federal Home Affordable Modification Program.

“There are countless cases of homeowners [participating in HAMP trial modifications] having their [mortgage] checks returned and told a foreclosure sale is scheduled,” Murray said.  She said homeowners are often hit with improper late fees and interest charges on trial modifications they’ve been paying faithfully when the bank cancels the trial.

Eight class action lawsuits against Bank of America are being consolidated, charging (as one complaint puts it) that BoA “serially strung out, delayed and otherwise hindered the modification processes that it contractually undertook to facilitate when it accepted billions of dollars from the United States.”  A similar case against JPMorgan/Chase is set to move forward next month.

Citing the Woodstock Institute and Neighborhood Housing Services, last month Medill reported that “dishonest practices by mortgage servicers” were undermining HAMP’s effectiveness in the Chicago area.

NPA and allies have launched a campaign to press BoA to do more modifications.  Last week they protested at an American Bankers Association convention in Boston, demanding “that the banking industry immediately freeze all foreclosures until all homeowners have had a full opportunity to modify their mortgage.”

Who will pay for the housing bubble?

With as many as a third of American homeowners owing more on their homes than they are worth, what’s needed is large-scale principal reduction, advocates say.  Lenders “need to immediately institute principal reduction programs to bring mortgages down to their real market value,” says George Goehl of NPA at Huffington Post.

“Given the discouraging track record of voluntary programs like HAMP,” a mandatory principal reduction program seems to be what’s needed, writes Katie Buitrago at Woodstock.  (Woodstock is more cautious about a foreclosure moratorium.)

“The mortgage market needs to reflect economic reality, not inflated banker dreams,” says Zach Carter of the Campaign for America’s Future.

“Banks convinced people their homes were worth an inflated amount and persuaded them to borrow against that amount,” says R.J. Eskow at Huffington Post.  “Requir[ing] homeowners to pay the full amount of that inflated loan, with no penalty to the bank for its role in that transaction,” amounts to a second, “invisible bailout” of banks by homeowners, he maintains.

“If banks admit that they can’t prove ownership, then they have to write down a lot of assets” – and “negotiate with homeowners…for the actual, current value of the home,” says Eskow. “That’s exactly what they don’t want to do.”

Shorebank on the ropes

While Shorebank struggles to survive – with regulators hesitating to back recapitalization efforts, according to reports – community investment advocates say “Shorebank is worth saving” and suggest that policies that favor big banks don’t take community needs into account.

Meanwhile community groups will demand action on banking issues on two fronts tomorrow – picketing US Bank and Bank of America on LaSalle Street, and testifying at a Federal Reserve hearing on modernization of the Community Reinvestment Act.

Something is wrong with policies that bail out big banks after they’ve torpedoed the economy with high-risk investments in toxic subprime loans, while “community banks which have been meeting the needs of low-income neighborhoods for decades” are allowed to fail, said Karen Harris of the Shriver National Center on Poverty Law. (See her post at the Shriver Brief.)

“Shorebank didn’t do subprime loans,” she said.  “Shorebank should be the bank being saved.”

Founded in 1973, Shorebank is the nation’s oldest and largest community development bank, serving as the model for scores of smaller institutions.

Harris points out that the unmet credit needs which Shorebank was founded to address continue to exist.  Bailout funds that were supposed to provide credit in communities are being hoarded by big banks – and paid out in huge bonuses to executives.

“They’re still not lending,” she said.  “The credit needs are still out there.”

Jacqueline Leavy, who works with the Coalition to Save Community Banking, sees “hypocrisy” when regulators call on banks to invest in low-income communities and then crack down on those that do.  Regulators are “trying to look tough” in the aftermath of the 2007 bailout, “but they’re not taking into account the real-life consequences on the ground in communities.”

She wonders why a small portion of the bailout funds that were to be dedicated to community banks aren’t being deployed more rapidly.

The tough-cop approach is probably not helping economic recovery.  Now “community banks that we talk with are so scared, they’re looking over their shoulder, afraid the FDIC will come after them, that they don’t want to make loans either,” said Bob Vondrasek of the South Austin Coalition, also part of CSCB.

(While we spoke Monday, a housing counselor at SAC learned that Shorebank had approved a mortgage modification, with monthly payments for an Austin homeowner reduced from $1,140 to $790.  Shorebank is “a lot better at doing modifcations” than bigger banks, Vondrasek said.)

CSCB was formed last year when the FDIC seized community-based Park National Bank and handed it over to US Bank, the nation’s fifth largest bank.  Since then, negotiations to encourage US Bank to continue PNB’s community service have dragged on, and action on even minor commitments has been slow, Leavy said.

SAC and other CSCB members will picket U.S. Bank’s downtown office, LaSalle and Adams, tomorrow (Thursday, August 12, 12 noon), demanding a community benefits agreement including a “community restoration fund” to modify mortgages and restore abandoned homes.  They’ll also picket Bank of America, recently identified as “Chicago’s biggest forecloser.”

Also Thursday, community groups from across the city and state will be testifying at a Federal Reserve hearing on modernizing the Community Reinvestment Act, which like Shorebank is the product of anti-redlining campaigns in Chicago in the 1970s.  CRA is considered a “remarkable success” in leading banks to begin serving communities they had previously written off.

The Woodstock Institute is calling for expanding the act to cover mortgage brokers, insurance companies and credit unions and to do a better job tracking new activities like online banks and credit card banks.

National People’s Action points out that large banks whose practices have put millions of families in foreclosure have gotten “outstanding” community investment ratings under the current system.  The group calls for counting predatory lending against banks’ ratings – and for giving automatic failing grades to banks that offer less credit or inadequate services in minority communities.

Woodstock, which recently identified a trend of  “re-redlining” in minority communities, held a series of workshops on the issue for local community groups and reports that “disinvestment and safe and sustainable credit are still pressing needs.”  At workshops, community activists “shared stories of how disinvestment was hurting their communities and lamented the dwindling number of community banks that invested in their neighborhoods in the past.”

The hearing takes place Thursday, August 12 from 9 a.m. to 4:30 p.m. at the Federal Reserve Bank of Chicago, 230 S. LaSalle.

West Siders to meet with U.S. Bank

A town hall meeting on community banking with representatives of U.S. Bank has been called tonight by an activist group that is monitoring the bank’s takeover last year of Oak Park-based Park National Bank.

The Coalition to Save Community Banking is sponsoring the town hall at 6:30 p.m. tonight (Tuesday, June 8 ) at Hope Community Church, 5900 W. Iowa.

The coalition is looking for answers to its call for stepped-up foreclosure prevention and community investment efforts by U.S. bank, said Jackie Leavy.

As Newstips reported in May, the coalition has raised concerns about elimination of community development staff on the West Side and western suburbs since the PNB takeover, and has been pressing for funding for foreclosure counseling and a community stabilization fund.

With nearly 2,000 foreclosure filings in Chicago last year, U.S. Bank ranked third among financial institutions for filings in the area; in the first four months of this year, the bank filed or completed 1,000 foreclosures.

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