Insurance, Banking and Community Reinvestment Campaign
(Also See: Auto Insurance Rates Campaign)
Foreclosures Soar in New Jersey
In 2008, between 13,500 and 16,500 New Jersey homeowners are likely to face foreclosure as a result of high-cost, subprime loans.
New Jersey's homeowners and neighborhoods are at risk. Camden, Newark and Edison were already among the 50 United States metropolitan areas with the highest foreclosure rates in 2006, and conditions are worsening throughout the state. There are 179,873 estimated outstanding subprime mortgages in New Jersey, and 35,117 subprime foreclosures are expected to occur here between the third quarter of 2007 and the end of 2009 – nearly 1 out of every 5 subprime loans. For full details, download the NJ Foreclosure Fact Sheet.
New Jersey has a compelling interest in protecting existing homeowners and their communities from the effects of the current subprime lending crisis to the extent feasible, and in ensuring that going forward, home owners and home buyers – particularly those of lower income – are not victimized by loan practices that place the affordability of their homes at risk.
"We've Got Issues" Cable News Show on Foreclosure Crisis – Panel Includes Phyllis Salowe-Kaye
The "We've Got Issues" Cable news show recently featured an hour-long panel discussion on the growing mortgage foreclosure crisis and the impacts on local communities. The program is televised statewide on cable systems and reaches out to all our residents and explains how foreclosures can impact them, even if they are not going through foreclosure.
The NJ Cable Telecommunications Association (NJCTA) have partnered with the NJ State League of Municipalities to produce this show in an effort to highlight the mortgage foreclosure crisis.
The panel, moderated by Laura Jones, includes Phyllis Salowe-Kaye, the Executive Director of NJCA; Adam Greenberg, Esq. of the Tax Collectors and Treasurers Assoc.; James Hughes, Dean of The Rutgers Bloustein Center for Planning and Public Policy; Robert Levy, Executive Director & Counsel for the Mortgage Bankers Association of NJ, and Steven M. Goldman, NJ Commissioner of Banking and Insurance.
In addition to Cablevision and Comcast channels, the Mortgage Foreclosure show is available on the Time Warner Cable and Service Electric Cable TV of NJ channels. The link below is updated with the complete schedule of when the show will be airing on your local channels:
http://www.cablenj.org/News/archive/108.asp
You can watch the program any time, any day for free on...
- Time Warner Cable
- Channel 1111 – New Jersey On Demand channel
- Go to the "News and Government" category
- Select the title "We've Got Issues"
Yuo can also watch the program during May on...
- Service Electric Cable TV of NJ
- Channel 10
- Available May 1 through May 31, 2008
- 2:00 p.m. and 5:00 p.m.
Don't miss this very special "We've Got Issues" investigation into the mortgage foreclosure crisis in New Jersey. You can also read about the program in "Show Puts Foreclosure In Spotlight" (Herald News – April 25, 2008).
Support the Foreclosure Prevention Act
Take Action! Sign on to support the Foreclosure Prevention Act and help protect NJ residents and communities. The proposed Foreclosure Prevention Act will allow NJ to take positive action as our friends and neighbors face the devastating impact of foreclosure. Rather than stay the course as the federal government continues to ignore the needs of the people; it is time for NJ to provide relief and a viable solution to those who are suffering now. Support the Foreclosure Prevention Act and help move NJ one step closer to solving the foreclosure crisis. Download the Support Statement, then please return the completed form by fax: 973-643-8100 or email: crystals@njcitizenaction.org.
NJCA Joins with Allies and NJ Lawmakers to Help Families Worrying About Home Foreclosure
On March 11, New Jersey Citizen Action, the Housing and Community Development Network and the New Jersey Institute for Social Justice, announced the introduction of legislation sponsored by State Senator Ronald Rice (D-28) and Assembly Majority Leader Bonnie Watson Coleman (D-15) to address New Jersey's growing foreclosure crisis. The bill, which is also sponsored by Assembly Housing and Local Government Chairman Jerry Green, (D-22), can be viewed here.
The legislation provides for a six-month moratorium on certain defaulted loans to allow the borrower time to work towards a more favorable solution. It also creates a fund to provide foreclosure prevention counseling and "catch-up" loans to help people stay in their homes. The fund would be built on a $2,000 impact fee charged to lenders who foreclose on subprime loans, and is projected to raise between $27 million and $33 million for the year. The bill allows former homeowners who lose their homes due to foreclosure to remain in the property as tenants until the property is acquired by someone who plans to occupy it. It also provides other protections against future lending abuses.
Principles
The following principles should guide New Jersey's efforts to address the subprime lending crisis:
- Maximize the number of at risk homeowners who can stay in their homes rather than face foreclosure.
- Ban abusive loan products and practices.
- Require lenders to underwrite all loans based on buyer's ability to repay, including fully indexed rate and amortized payments.
- Require all loans to show a net tangible benefit to the borrower.
- Hold lenders responsible for abusive lending practices regardless of whether the loan was originated by the lender or a mortgage broker.
- Require loan originators to provide the best loan product available based on a borrower's income and credit history.
- Establish industry funded Foreclosure Prevention Program that funds financial education, counseling, legal assistance and gap financing for at-risk homeowners.
- Reward lenders with state, county and municipal deposits if they participate in a Rescue Pool that will refinance borrowers using an "ability to repay" loan standard.
- Reward investment firms that participate in a workout fund that supports attorneys and workout specialists for nonprofit organizations engaged in foreclosure prevention, by prioritizing them for underwriting, bonding or financial services being provided to state, county and local government.
- Protect neighborhoods by reducing the number of foreclosures, making creditors responsible for maintaining properties they foreclose on, and helping community groups acquire foreclosed properties for rehabilitation and reuse.
- Require servicers to document their efforts to modify and reset loans to avoid foreclosures, and create a state rating system that will evaluate and publicize these efforts.
- Require mortgage lenders and servicers to permanently fix interest rates on adjustable rate mortgages that have not yet reset for owner occupied homes.
(You can also download these 12 Principles in PDF format.)
PNC Promises New Jersey $1 Billion
The Record (NorthJersey.com) reported on August 17, 2007:
"PNC Financial Services Group, the third-largest deposit holder in New Jersey, plans to invest at least $1 billion over the next three years in the state to help business owners and home buyers in low-income and moderate-income areas.
"PNC held a press conference Thursday in Newark with representatives of consumer watchdog group New Jersey Citizen Action and the Housing and Community Development Network of New Jersey to announce the pledge, which includes $550 million in business loans.
"The Pittsburgh-based bank, which has more than 300 branches in New Jersey, also said it promised to make $235 million available for home-equity, home-improvement and unsecured consumer loans at discounted rates.
"'PNC has been a leader in creative and innovative ways to provide loans, products and direct services to those who most desperately need assistance in our state,' Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, said in a statement.
"As part of the pledge, PNC will provide $60 million for below-market-rate mortgages and for grants to help home buyers with closing costs...." Here is the complete article.
Mortgage Misery
As reported in The Times of Trenton on September 2, 2007: "Mercer County has been swept up in the mortgage meltdown affecting the nation, as foreclosures increase and residents face the results of taking out subprime mort gages with higher interest payments. Foreclosure filings have risen from 728 through Aug. 20, 2006 to 928 for the same period this year, a 27.5-percent increase, according to the Mercer County Clerk's office. Some of those who can't make their mortgage payments should never have received approval for the loans, according to Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, which provides mortgage counseling.
"They target low- and moderate-income minorities in urban areas," Salowe-Kaye said of subprime lenders. She recalled one New Jersey resident with a $40,000 income who took out a $400,000 mortgage by claiming that renters would cover much of the mortgage cost. New Jersey Citizen Action has provided counseling to hundreds of residents at its loan counseling center in Trenton...." Read the complete article.
As reported in the Asbury Park Press, on August 19, 2007: "Homeowners facing foreclosure will get no help soon from a $30 million state rescue program because officials have suspended the effort before it even started. The decision comes as foreclosure lawsuits in New Jersey are on pace to rise to their highest level in at least 12 years....
"Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, a Newark-based nonprofit that provides credit counseling and also helps find financing for homeowners in trouble, said the state program's requirements were so tough that it would help only people who would be able to refinance in the open market.
"Homeowners... who have missed multiple mortgage payments, have already seen their credit ratings drop precipitously, Salowe-Kaye said. Most lenders won't touch them, she said.
"Yet even if the state's requirements were lowered, the $30 million program would provide refinancing for only about 160 homeowners, Salowe-Kaye added.
"'What are they going to do with the rest of the people in danger of losing their homes?' Salowe-Kaye asked. 'This should not be the only thing out there today to help people. This program doesn't deal with the most vulnerable.'"... Read the full article here.
NJCA Protests Abusive Tax Refund Loans
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| Phyllis Salowe-Kaye, Executive Director of NJ Citizen Action, with the facts on abusive tax refund loans, whose annual interest rates can range from 40% to 700%. |
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| More photos from the Jackson Hewitt action and press conference with NEDAP on January 16, 2007, covered by News 12 New Jersey (photos courtesy of NEDAP). |
Wal-Mart Drops Banking Plan
Wal-Mart, the world's largest retail corporation, at last admitted defeat on March 16, 2007 and dropped its controversial banking application. It had tried to become a bank – with very little federal regulation. A recently released internal Wal-Mart email exposed that the retailer had misled both elected leaders and the FDIC about its banking intentions.
Citizen Action, its members and affiliates, and its partner, The National Community Reinvestment Coalition (NCRC), strongly opposed creation of a Wal-Mart Bank. NJCA staff attended the NCRC national convention and joined the NCRC organized rally. We celebrate this victory for hard-working famiies all across America.
For your reference, below is our original entry:
Wal-Mart, the world's largest retail corporation, is trying to become a bank – with very little federal regulation. Citizen Action, its members and affiliates and its partner, The National Community Reinvestment Coalition (NCRC), strongly oppose creation of a Wal-Mart Bank. NJCA staff attended the NCRC national convention and joined the NCRC organized rally. The rally in Washington, DC opposed the application of Wal-Mart to become a limited form of bank not subject to the regulation and community reinvestment obligations. Three hearings were held around the country on this controversial application and Leila Amirhamzeh, NJCA's Financial Education Director, and Bonita Holmes, Loan Counseling Director, joined the protest on the day of the hearing in Washington.
Leila Amirhamzeh, Citizen Action Financial Education Director, stated, "Over the years, Wal-Mart, the largest retail company in the world, has become the poster child for unscrupulous corporate behavior. It has an abysmal record of low wages and little or no health insurance, as well as a history of civil rights and child labor violations. Now, by trying to become a bank, Wal-Mart may well add unsafe and unsound banking to its list of abuses."
Bonita Holmes, NJCA Director of Loan Counseling, argued, "Allowing Wal-Mart to become a bank would pose significant threats to low- and moderate-income communities, small businesses, community banks, American taxpayers and the U.S. banking system. We believe that this application would lead to an unhealthy and dangerous combination of banking and commerce, Citizen Action and affiliates strongly oppose Wal-Mart's becoming an industrial loan company (ILC)."
Wal-Mart claims to have limited banking interests as it is promising to only process credit cards, debit cards and electronic check transactions. Citizen action is more than suspicious of this claim as history has shown that the retail giant has a larger objective in mind. Wal-Mart has tried several times before to acquire or become a full-service bank – all of which have failed.
Wal-Mart is still trying to get its foot in the door by applying for this limited form of banking. Wal-Mart would process hundreds of million of transactions if approved, according to Wal-Mart officials. As such, the Wal-Mart bank would represent a revenue source that would generate billions of dollars.
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| NCRC Board Chairman, Irvin Henderson of North Carolina |
Wal-Mart's application would allow the same privileges of a regular bank without the rigorous regulatory oversight required of them. Unlike other banks, industrial loan companies fly under the radar of federal regulating agencies. What's more, Wal-Mart would be able to expand to full service banking without any further public hearing. Without these protections American taxpayers who fund the federal safety net for banks are put at serious risk. If Enron had been an ILC, the U.S. banking system and American taxpayers would be the ones to foot the bill. Now imagine the implications given the massive size of Wal-Mart, which does more business than Target, Sears, Kmart, JC Penney, Safeway and Kroger combined.
Mixing banking and commerce imperils safety and soundness because it eliminates the impartiality of the bank. A bank with a commercial affiliate will not base its lending decisions on sound underwriting criteria. Instead, the bank will favor its commercial affiliate and cut-off credit for its competitors, regardless of the risk of its activities. In fact, the Federal Reserve Board recently recommended that the ILC exemption be eliminated. Call on Congress to close this loophole permanently.
Dodging Its CRA Obligations
Passed by Congress in 1977, the Community Reinvestment Act (CRA) states that banks have "continuing and affirmative obligations to help meet the credit needs of the local communities in which they are chartered". Citizen Action is actively involved in reviewing and expanding this regulatory regime for monitoring the level of lending, investments, and services in low- and moderate-income neighborhoods that have been traditionally underserved by lending institutions. However, Wal-Mart first requested to be exempt, or rather opt out, of its CRA obligations. Now they say they will abide by CRA, only after response to widespread media coverage. Its grudging acceptance of CRA now suggests that Wal-Mart would try to engage in only minimum levels of compliance and reinvestment. This should be a red flag for regulators indicating that Wal-Mart does not take its obligations to communities seriously. This is not the type of corporation that should receive the privilege of a bank charter.
Wal-Mart's attempt to evade CRA responsibilities was particularly audacious since Merrill Lynch an ILC of comparable size complies with CRA and made nearly $247 million in community development loan commitments. Of this total, almost $59 million were nonrevolving loans including funding for a charter school in a low- and moderate-income neighborhood and loans in affordable housing construction. Merrill Lynch made over $202 million in qualified investments, which went to venture capital funds for small business investment companies, low-income housing tax credits, and loan pools that provide long-term financing for low- and moderate-income multi-family housing.
New Jersey Citizen Action maintains an active watch on banks operating in New Jersey to support and encourage them to go beyond their legal CRA obligations and provide below market loans to low and moderate income families without closing costs and low or no down payment requirements. NJCA also provides a full service loan counseling and financial education for such families to help them become successful homeowners.
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)
- Join NJ Citizen Action (free).
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.
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?
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.
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!
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.
For more information on CRA issues email Ev Liebman at ev@njcitizenaction.org.
Victory!
NJ Passes Anti-Predatory Lending Law
Victory achieved by NJCA and the Coalition for Fair Lending!
On February 27, 2003, the first NJ Anti-Predatory Lending Legislation (A.75 NJ Homeownership Security Act) was passed in the NJ State Senate and we are confident this bill will be soon signed into law by Governor McGreevey. This legislation will help protect many New Jersey families from unscrupulous predatory lenders. It will also provide recourse for families who do fall prey to these lenders.
NJCA has worked for over a year now with the Coalition for Fair Lending to introduce and strengthen the momentum on this legislation. Although the lending industry attempted to weaken the bill for consumers, the Coalition was successful in getting the strongest possible bill passed in the Senate. Thanks to everyone who had a part in this success!