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Woodstock Developments

A monthly update on new research, analysis, and advocacy from Woodstock Institute

August 19, 2010

 

From the President: Community leaders demand effective incentives for community investment at CRA hearing in Chicago

Dory RandCommunity leaders turned out in force at the Community Reinvestment Act hearing held at the Federal Reserve Bank of Chicago on August 12. The Chicago hearing was the third of four such hearings being held by federal banking regulators this summer to discuss whether and how to revise rules implementing the CRA’s requirement that federally insured depository banks meet the credit and financial services needs of the communities in which they operate, including low- and moderate-income communities, consistent with safe and sound practices. The CRA became law in 1977 and current CRA rules have not been updated since 1995.

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Related: Submit written comments on CRA modernization
Related: Woodstock co-sponsors South Side training for upcoming CRA modernization hearings

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Why we must modernize CRA

Assessment areas no longer reflect how banks do business

Currently, the CRA does not require banks to serve the financial needs of low-wealth people in all of the communities where they actually lend—only where they have bank branch locations. New types of financial institutions, such as online banks, have emerged. Others, such as insurance companies and credit card banks, have expanded to provide other products and services (insurance companies are not currently covered by CRA, but we recommend that CRA obligations be extended to them). In light of these new and changing delivery channels, the existing designation of these CRA assessment areas based on branch location is insufficient and does not capture the complete market presence of a financial institution for the purpose of determining that institution’s reinvestment activity.

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More and more financial activity is taking place at non-CRA-regulated institutions

The percentage of assets deposited in banks and thrifts, which have community reinvestment obligations under CRA, has declined dramatically. When the CRA was enacted in 1977, households held 25 percent of their financial assets at CRA-regulated institutions. By 2007, that share had declined to 15 percent. As financial assets migrate to other types of institutions such as mortgage companies, insurance companies, credit unions, and securities companies, it is critical that we expand the scope of CRA to these types of institutions to ensure that it remains relevant and effective at encouraging financial services providers to meet the needs of low-wealth people and communities.

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Dory Rand joins advocates, Gov. Quinn to usher in new consumer protections from debt settlement companies

At last, consumers who seek debt relief through debt settlement companies will be protected from deceptive and predatory practices that often leave consumers worse off than they were before. Gov. Pat Quinn signed the Debt Settlement Consumer Protection Act (HB 4781) on August 3, ending some of the worst debt settlement industry abuses in Illinois.

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IRS to stop aiding tax preparers who provide high-cost refund anticipation loans

Tax preparers who arrange refund anticipation loans (RALs)—high-cost loans secured by a taxpayer’s expected income tax refund—have long relied on the IRS to provide information on any outstanding debts, such as back taxes or child support, that will be withheld from the borrower’s tax refund. This information, called the “debt indicator,” allows tax preparers to underwrite RALs and facilitates an industry that strips $114 million from Illinois taxpayers. In a huge victory for consumers, the IRS announced that it would stop providing the debt indicator to tax preparers.

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Related: Wells Fargo improperly charged millions in overdraft fees, judge rules

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HAMP trends continue while Treasury rejects recommendation to make principal reduction mandatory for participating institutions: June


New data on the Home Affordable Modification Program (HAMP) show that loan modification activity is continuing along recent trends, with increasing permanent modifications and decreasing trial modifications and total HAMP activity (see our previous analyses). Permanent loan modifications rose by 15 percent from May to June, while trial modifications decreased by 23 percent and total active modifications fell by 7 percent (see charts A and B below). These changes are less dramatic than May’s increase in permanent modifications (17 percent), decrease in trial modifications (27 percent), and decrease in total modification activity (13 percent).

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Follow Dory Rand on Huffington Post



We're pleased to announce that Dory Rand and the Woodstock team are now blogging for Huffington Post on issues of economic security and community prosperity. You can follow all of Dory's posts by becoming a fan.

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Looking for information on the foreclosure crisis in the Chicago metro area?

Visit the Regional Home Ownership Preservation Initiative's website at www.regionalhopi.org. The RHOPI site is a one-stop shop for foreclosure information in the Chicago region, such as success stories of local efforts to forge solutions to the foreclosure problem, events, resources for homeowners and renters in trouble because of foreclosure, regional and national research, and data and indicators.

New at RHOPI: Lake County launches Preservation Initiative

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In this issue

Video: Rep. Luis Gutierrez calls for action on CRA
 

  Recent Work

File IconPaying More for the American Dream IV: The Decline of Prime Mortgage Lending in Communities of Color
May 2010 

File IconGovernment Interventions Have a Limited Impact on Chicago Area Foreclosure Activity in 2009
February 2010 

File IconDiverted Opportunity: Refund Anticipation Loans Drain Wealth from Low Wealth Tax Filers and Communities of Color
January 2010  

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