Insurance, Banking & Community Reinvestment
(Also See: Americans for Financial Reform, Auto Insurance Rates Campaign and Foreclosure Prevention)
The Community Reinvestment Act
About the Community Reinvestment Act (CRA)
The Community Reinvestment Act (CRA) is a federal law that requires banks to invest money into all areas where they take deposits. This law was designed to eliminate "redlining," the practice of not lending or investing in an area because of its income level or minority population.
NJCA and the NJCA Education Fund (NJCA's research and education arm) have mobilized community groups and local activists to negotiate Community Reinvestment Act Agreements with almost all of the largest and some of the smallest banks in New Jersey. We have CRA Agreements totaling over $8 billion in commitments for below market rate mortgages, discounted home improvement loans, construction and permanent financing for non-profit affordable housing developers, and small business loans for women and minority owned businesses.
NJCA’s CRA Agreements provide:
- Below market rate mortgages and grants for down payment and closing costs assistance to low and moderate income first time homebuyers
- Discounted home improvement loans to tenants and homeowners
- Construction and permanent financing to non-profit affordable housing developers
- Small business loans to women and minority owned businesses
- Grants to community and economic development organizations
Ongoing analysis by NJCA shows that many banks still do not lend to low and moderate income or minority applicants at the same level as high income, non-minority applicants. Some banks still do not offer competitive and affordable loans. Some members of Congress have tried to weaken the Community Reinvestment Act.
As a result, NJCA needs your help! Support our CRA Campaign:
- Write a letter to a bank that does not have an Agreement with NJCA
- Participate in informational picketing of a bank that does not have a CRA Agreement
- Write a letter to your Representative or Senator, asking him or her to vote in support of CRA
- Monitor banks in your area (we can send you special information about this)
How NJCA Uses CRA to Help Working Families
Our free, one-on-one Mortgage and Credit Counseling Service helps low and moderate income first time homebuyers deal with budgeting and credit repair in order to qualify for one of the special mortgages offered by banks who have Agreements with NJCA.
We also provide a Home Improvement Loan Counseling Service to help homeowners review contracts, research contractors and obtain affordable financing for home improvement projects.
NJCA holds Women’s Housing Initiatives statewide to encourage women to use loan counseling to achieve the dream of homeownership. We provide marketing and outreach services to increase the communities’ awareness of the loans in the CRA Agreements.
CRA Is Not the Problem! Predatory Lending Is!
Repeatedly over the last several weeks — in print, on the airwaves and online — the federal Community Reinvestment Act has become a target of blame both nationally and here in New Jersey. New Jersey Citizen Action and The Housing and Community Development Network of NJ, who have negotiated approximately $18 billion in CRA investments in New Jersey over the next three years will not remain silent while a good law responsible for a great deal of positive development in lower income communities is outrageously vilified.
"The CRA is not only responsible for good mortgages," said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action. "Under the law, banks have offered discounted home improvement loans, construction and permanent financing, small business loans targeting women and minorities, and other investments in community and economic development. Many of these investments would not have happened otherwise."
"Certain people are trying to blame CRA for the current financial crisis," said Paige Carlson Heim, the Network's managing director. "That is patently false. Mortgages originating from banks under CRA are among the soundest in the nation."
CRA is a federal law that imposes an affirmative obligation on banks to serve the credit needs of low- and moderate-income communities and to take steps to provide equal access to responsible financial products and services to traditionally underserved populations. The law was created in 1977 to counteract lending discrimination that restricted credit for low-income, minority and urban communities. Often cited as a positive agent for change, the CRA has lately come under attack. Legislators and others are claiming that the federal government — through the CRA — has forced banks to make subprime loans to people who were bad risks. Therefore, they say, CRA is responsible for all the toxic paper that is now poisoning the entire global financial system.
This is simply not true. Unregulated, unchecked predatory lending is the problem, not CRA. According to extensive documentation, including reports by governmental agencies, non-profits and research organizations, the vast majority of high-cost, subprime loans were originated by independent mortgage and finance companies — lenders not covered by the CRA. Banks that make below-market mortgage loans under CRA agreements, negotiated with groups like NJCA and the Network, provide these loans only to appropriately qualified homebuyers who have successfully completed home ownership and credit counseling classes and whose incomes have been verified. These are some of the safest loans for banks because of the CRA requirements and because advocacy groups like NJCA and the Network monitor their lending performance.
"Over the last 13 years, 12,000 NJCA clients have closed on 30-year fixed, below market-rate mortgages, with no points or PMI, using CRA mortgages negotiated with participating banks," Salowe-Kaye said. "All clients receive one-on-one counseling, pre- and post-mortgage, at one of our nine HUD-certified offices throughout the state. According to the banks with whom we partner, our default record is almost nonexistent."
As stated by CFED, the national nonprofit dedicated to expanding economic opportunity to all Americans, the CRA has an impressive track record of providing affordable, sustainable and profitable loans in underserved communities, and that those loans have a consistently low default rate.
"Banks under CRA must follow strict underwriting standards that ensure that the borrower understands and can afford the loan, and that disallow and penalize the unfair lending practices that caused the current mess," Carlson Heim said.
NJCA and The Network agree with CFED's analyses that the subprime crisis is a result of risky and complex lending and poor or absent regulation. Lenders approved risky adjustable-rate mortgages, often without considering whether borrowers could afford them; investors bought them in securitized form perhaps without understanding the risk; and regulators did not step in. The worst offenders, the independent mortgage companies, were never subject to CRA or any federal regulator for that matter. In short, CRA didn't make them lend; profit motive did.
NJCA and our allies will continue to defend the CRA, and to push for assistance to those families and communities threatened by the subprime foreclosure crisis. On October 6, 2008, the Assembly Budget Committee approved the New Jersey Home Ownership Preservation Act (A-2517/ S.1599), clearing the way for a vote on the measure before the full chamber. Thanks and congratulations to all of the members and friends who communicated their support to Assembly committee representatives! We will need to keep the pressure on our lawmakers and Governor Corzine to enact the relief the state needs. New Jersey's families deserve quick and decisive action to stem the threat to homes, neighborhoods and the state's economy. For more information about getting involved in our effort to pass this bill, see the articles on this page, or email Phyllis Salowe-Kaye, Executive Director of NJ Citizen Action, at phyllis@njcitizenaction.org.
What's New?
Financial Reform Summit
Thank you for attending the Financial Reform Summit on November 30, 2011 and making it such a great success! Special thanks to the panelists and everyone who participated in the conference, including consumer advocates, community leaders, elected officials, bankers, regulators, labor leaders, seniors, academics, students and members of the public.
Speakers discussed the developments financial reform in New Jersey since the enactment of Dodd-Frank Wall Street Reform and Consumer Protection Act, its impact on consumers, investors and small business owners. State and national reform experts also discussed the foreclosure crisis, the efficacy of state and national programs meant sole it, as well as alternative approaches that seem to be having a positive impact and how they can help homeowners in New Jersey.
NEW FOR 2012! Attend the 2012 Financial Reform Summit on September 21, 2012 (details here).
For Homebuyers
Important Do's and Don'ts for Homebuyers
DON'T:
- Don't deal with door-to-door or telephone solicitors for home mortgage loans or home improvement contracts.
- Don't use a lender or contractor who will not provide a written contract specifying all costs.
- Don't deal with any unlicensed lenders or contractors.
- Don't sign any forms or papers with blank lines or spaces.
- Don't allow yourself to be pressured into signing anything.
- Don't believe anyone who says you have no other options.
- Don't accept a promise that isn't in writing.
DO:
- Do make sure that the lender or contractor is licensed and check with the New Jersey Department of Banking (609-984-2777) or the Division of Consumer Affairs (1-800-242-5846) to see if any complaints have been filed against the lender or contractor.
- Do ask the contractor for references.
- Do shop around for the best offer.
- Do keep careful records and get copies of everything, making sure the lender signs and dates all papers.
- Do read all documents carefully and pay special attention to interest rates, fees, points, and terms and conditions of the loan. If you do not understand something, ask for an explanation--you are paying for these services.
- Do ask the lender to provide you with a "Notice of Recission," also known as a "Notice of Right to Cancel" (within 3 days)
- Do ask if you qualify for a less expensive loan before accepting a subprime mortgage product.
- Do beware of offers of debt consolidation—if lenders offer to pay off your credit card or medical bills with a home equity loan, you could lose your home if you don't make the payments.
- Do make sure that you can afford to repay your loan. Even if the lender says you qualify for the loan, it does not mean that you can afford the monthly payments.
- Do make sure that your contractor gives you a start date and an expected completion date in writing.
- Do get pre-loan counseling from a reputable loan counseling office.
Contact NJCA if you have any questions. Always remember, if the deal sounds too good to be true, it probably is!
Know Your Rights!
Prohibit Employment Discrimination from Credit History or Financial Status
We urge State policymakers to pass legislation, S-1791 and S-1922, prohibiting employment discrimination on the basis of credit history or financial status, and to further prohibit the practice of requiring credit check as a condition of employment. It is unfair to deny jobs on factors that have nothing to do with potential work performance, especially when those factors could be mistaken.
The practice of checking credit history and/or requiring a credit check as a condition of employment, through S-1791 and S-1922, lifts an unnecessary roadblock to getting people back to work during this economic recession. With the workers in NJ unemployed for longer periods, many households have fallen behind on their bills and this may affect their credit report. A credit check as a condition of employment complicates landing that new job and has become yet another barrier for many of the estimated 436,100 (April 2010) out-of-work residents living in New Jersey.
Trans-Union, one of the "big 3" credit agencies, recently testified that there is no study that shows a statistical correlation between what appears on someone's credit report and their job performance or their likelihood of committing fraud. Additionally, credit reports are often incorrect and can unfairly cost an applicant a job.
Resources
- Statement of Leslie Schlesinger, Community Reinvestment Act Organizer, NJ Citizen Action In Support of S-1791 and S-1922.
- News Coverage: "Bill That Would Limit N.J. Employers' Ability To Do Credit Checks Stalls In Senate Committee" (Star-Ledger – May 30, 2010)
Tenants Rights During Foreclosure
Through our loan counseling services and community financial education outreach, New Jersey Citizen Action became aware of tenants being illegally forced out of their homes when living in properties facing foreclosure. Along with Legal Services of New Jersey and the New Jersey Tenants Rights Organization, NJCA brought tenant eviction issues to the attention of New Jersey Public Advocate and the New Jersey Department of Banking and Insurance.
The New Jersey Anti-Eviction Act protects tenants even when the property where they live is in foreclosure or has been foreclosed. The law protects tenants against eviction as long as they pay the rent, respect the peace and quiet of their neighbors, and avoid willful or grossly negligent damage to the property. The Act does not apply to tenants of owner-occupied homes with two or fewer rental units.
In some cases, tenants are offered "cash for keys" agreements, where they are given money to turn in their keys and move out, but the offer does not mention that they are also free to stay. In other cases, they are just told they have to get out.
The Public Advocate wants to hear from any tenants who have received notification that they must vacate their apartments due to a foreclosure. Call 609-826-5070 to learn about your rights and get appropriate referrals. Eligible low-income tenants threatened with illegal evictions can call the LSNJ hotline directly at 888-576-5529.
"As Citizen Action continues to be inundated with homeowners who are facing foreclosure, we are discovering that renters who occupy some of these homes are unaware of their rights as tenants and are being pressured to move out. Public education and strict enforcement of the law is essential to preventing more people from losing their homes," said Phyllis Salowe-Kaye, Executive Director of NJ Citizen Action.
For more information, see the Media Release from the New Jersey Public Advocate, Commissioner of Banking and Insurance: "Tenants In Foreclosed Properties Have Rights — Cannot Be Evicted Due To Foreclosure Under NJ Law."
What you need to know about Predatory Lending, Redlining and Scams!
Protect Yourself from Predatory Lending
Beware Before You Borrow: Protecting Your American Dream
For many people, homeownership is a major part of the American dream. In fact, your house is likely to be your single greatest asset. Unfortunately for homeowners, predatory lenders are on the prowl, targeting unsuspecting New Jersey consumers and often forcing them into high cost loans that could lead to foreclosure. In order to protect your dream, there are some important things you need to know, whether you are buying a house for the first time, refinancing your mortgage, or simply making improvements or repairs on your home.
What is the difference between subprime and predatory lenders?
Subprime lenders make loans to borrowers who have a less than perfect credit history. As a result, they charge higher rates and fees than banks (conventional lenders) to offset borrowers' credit problems. Predatory lenders, however, systematically target individuals who are least able to pay back loans and who are most vulnerable to the abusive lending tactics listed below.
What are some common predatory lending practices?
- Charging borrowers high loan fees, points, or other charges upfront (padding)
- Selling borrowers costly and unnecessary insurance policies upfront ("packing") – for example, single premium credit life insurance,disability insurance,or unemployment insurance
- Charging borrowers outrageous prepayment penalties
- Forcing borrowers to make a large payment midway or at the end of the loan ("balloon" payments)
- Charging high interest rates
- Repeatedly refinancing loans ("flipping"), with no benefit to the borrower
- Using home improvement scams to lure borrowers into bad loans (steering)
Who do predatory lenders target?
Although anyone can be a victim of abusive lending practices, research throughout the country has shown that minorities, seniors and other low income groups are typically targeted by lending predators.
What are home improvement scams?
Although the majority of home improvement contractors are honest people who provide homeowners with important services at fair prices, there are some contractors who are deceitful. In most home improvement scams, these contractors will overcharge consumers for work, urge them to have unnecessary repairs done, perform work that is shabby and below standard, and in some cases, will steer unsuspecting homeowners to a high-priced and often predatory lender to finance the improvements.
Insurance Redlining
Is it Happening in Your Neighborhood?
NJCA studied the rates and accessibility of homeowners insurance for low and moderate-income homebuyers and urban residents.
See who is paying more – and in which cities you are less likely to find an insurance agent – by taking a look at our study, Insurance Redlining: Is it Happening in Your Neighborhood?
Are You the Victim of a Loan Scam?
We hold informational meetings for individuals who feel that they may be victims of predatory lending. At NJCA's informational meetings about predatory lending, you will receive information on the following:
- Individual loan counseling to repair your credit and help you prepare for refinancing in order to lower your monthly mortgage payment;
- Information on NJCA's current negotiations with major New Jersey banks, Fannie Mae, the State of New Jersey, and various municipalities in the hopes of possibly creating a grant pool of funds that would be available to homeowners to make the necessary repairs on their homes;
- Information on how to contact state agencies that are looking into the dealings of lenders who engage in abusive lending practices;
- Information on proposed legislation that would prohibit specific predatory lending practices, and what you can do to help stop predatory lending;
- Potential legal strategies available for victims of predatory lending (although victims should be mindful that there may be a statute of limitations preventing them from pursuing legal action).
If you are facing immediate foreclosure, contact NJCA's free loan counseling service for crisis counseling.
News Events Archive
Renewal of PNC's Three-Year Community Reinvestment Commitment to New Jersey
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| L to R: Diane Sterner, executive director of the Housing and Community Development Network of New Jersey; Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action; William Best, senior vice president for PNC. |
On August 31, 2010, New Jersey Citizen Action, the Housing and Community Development Network of New Jersey, and PNC formally signed PNC's three-year Community Reinvestment Agreement for almost $1 billion.
In renewing their commitment to the people of New Jersey by signing this three-year agreement, PNC is extending its pledge to lend and invest in low- and moderate-income communities, to individuals, and to small businesses owned by women and minorities. PNC will offer below market rate mortgages with low down payment requirements, no points and no PMI for low- and moderate-income borrowers, grants for closing costs, and grants and loans for residents with disabilities.
This agreement will also provide refinance loans, consumer loans, and capital for low-income and moderate- income business owners. PNC has also made a major commitment to New Jersey's community development nonprofits. PNC has agreed to provide products including loans for site acquisition and construction financing, lines of credit for rehab and resale, and permanent financing for affordable housing development. Non-residential real estate loans for construction and permanent financing will also be available to non-profit organizations.
In addition, PNC will continue to support local small business lending and is making a commitment to lend to businesses located in low- and moderate-income communities and to smaller businesses borrowing $100,000 or less.
- News Coverage: "PNC Pledges More Than $900 Million In Community Reinvestment" (The Record / NorthJersey.com — September 1, 2010), "PNC Bank Renews Mortgage-Lending Commitment To Low And Moderate Income" (NJBIZ — August 31, 2010).
NJCA Celebrates Main Street's Victory Against Wall Street!
On July 15, 2010 NJ Citizen Action, having spent the past year fighting for Financial Reform legislation, celebrated the Senate passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, one of the last hurdles before President Obama signs it into law. The legislation will take unprecedented steps to clean up Wall Street:
- It will protect consumers buying homes.
- It will create new rules of the road for credit to protect families and small businesses.
- It will rein in the casino economy and stop speculators from operating in secret.
- It will provide the tools to stop future bailouts.
- It will make our economy more secure and more stable.
Learn more:
- Press Release.
- News Coverage: "Holt Advocates Wall Street Reform Bill In South River" (Sentinel – July 22, 2010), "Financial Reforms In Eye Of Beholder" (Asbury Park Press – July 22, 2010), "Congress Passes Overhaul To Prevent Future Bailouts" (Asbury Park Press – July 15, 2010), "State And Local Bankers Criticize Landmark Reform Bill" (Press of Atlantic City – July 13, 2010)
No More Taxpayer Bailouts of Wall Street!
Senator Menendez, NJ Citizen Action and Consumer Groups Want a Bailout Prevention Fund
Senator Robert Menendez (D-NJ) held a press conference on April 12, 2010 in Hoboken to urge support of an increase in a proposed fund to avoid future big bank bailouts paid for with taxpayer money. Senator Menendez was joined by representatives from NJ Citizen Action and Consumers Union, as well as New Jersey resident Edward Heaton, who as a taxpayer has contributed to the big bank bailout but is still waiting for permanent loan modification to save his home currently in foreclosure.
"Simply put: we can't have a system where big Wall Street banks take huge gambles, knowing that they can keep the gains if they win, but that we will pay the costs if they lose," said Senator Menendez. "We need to require the big banks to pay up-front to insure against any future failures, and shore up our financial system so that American families' lives are not devastated by another foreclosure crisis, and on top of that are left footing the bailout bill. This fund will not be used for bailouts; it will only be used to dissolve failing institutions. If Wall Street banks behave recklessly they should gamble with their own money, not the hard earned cash of the American taxpayer."
NJCA organizer Leslie Schlesinger, present at the event, noted that "This will be a powerful deterrent to the high-profit, high-risk environment that Wall Street has become today."
- Senator Menendez's Press Release.
- News Coverage: "U.S. Sen. Menendez Pushes For Passage Of Bailout Prevention Fund" (The Jersey Journal — April 12, 2010).