Full text of Bridges (Federal Reserve Bank of St. Louis) : Bridges, Fall 2007

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Linking

Lenders

And

Communities

Autumn 2007

P U B L I S H E D Q UA RT E R LY
BY T H E C O M MU N I T Y

Bridges

A F FA I RS D E PA RTM E N T OF
T H E F E D E R A L R E S E RV E
B A N K O F S T. L O U I S

I N DE X

4

University Boosts
Community’s Ef for ts

7

Foreclosures :
One Solution

Spanning the Region

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U p s , D ow n s o f
Infill Housing

The Health Care/Community Development Connection

Hospitals Move Beyond Traditional Roles
By Amy Simpkins
Community Affairs Specialist
Federal Reserve Bank of St. Louis

T

he importance of the
health sector frequently
surfaces in discussions surrounding community
development. In many ways,
hospitals and health-care organizations contribute to the stability
and growth of the local economy.
Most obviously, there are
jobs created by such organizations. The impact on quality
of life is another benefit healthcare organizations can bring
to the local economy. The
presence of a health-care organization might make a community more attractive to citizens
and businesses alike. The
U.S. Small Business Administration and the Ewing Marion
Kauffman Foundation both
point to a link between access

An affordable housing development by Avenue CDC in Houston nears completion. Funding
came from Community Direct Investment, a program of Christus Health.

to affordable health care and
entrepreneurship and small
business development.
Health-care organizations can
also play a part in community
development activities beyond
their traditional role of providing health services. Supporting
asset-building programs, small

business finance opportunities
and affordable housing initiatives are areas where healthcare organizations are involved
in direct community development activities. Two examples
of this type of health-care
system are Healthy Connections
and CHRISTUS Health.

Asset Development: IDAs
When Healthy Connections
formed in Mena, a rural community in western Arkansas, it
was a small nonprofit with five
employees offering health-education programs on a $200,000
annual budget. Since then, it
has grown to become a comprehensive community health
umbrella organization operating six distinct programs and
employing 31 people with an
annual budget of more than
$2 million. Healthy Connections now offers programs
and services to a seven-county
region and is one of the top 25
employers in Polk County.
What started as a small local
agency has grown into a fullservice regional center, with its
flagship Western Arkansas Total
Community Health Center
(WATCH) at the heart of it all.
continued on Page 2

Hospitals
continued from Page 1

WATCH is a federally qualified
community health center providing a full range of medical,
dental, mental health and casemanagement services to the
entire community on a sliding
fee scale. WATCH is governed
by an advisory board comprised
of local citizens representative
of the demographic mix in the
community.
Like many organizations in
rural communities that perform
multiple services for residents,
Healthy Connections offers
more than direct medical care.
It also operates a program for
abused children, a smoking prevention and education program,
a state technical assistance program in cooperation with the
Arkansas Children’s Trust Fund,
and a support services program
for pregnant adolescent parents.
It is through the services
targeting teen parents that the
individual development account
(IDA) program was born. After
conducting countless home
visits to pregnant and parenting teens, a common theme
emerged: There is a pervasive lack of personal financial
literacy, making saving for any
type of asset a distant dream.
With a broad mission to
serve the needs of children and
families in the communities in
western Arkansas, it made sense
for Healthy Connections to
address what they saw as a fundamental necessity in their community. The hope is to provide
their clients a continuum of care,
from prenatal to end-of-life, that

addresses the full range of needs
in the community.
Healthy Connections Executive Director Bob Young recognized a seamless connection
from the programs and services
they were already offering to the
IDA concept. “We were seeing
young parents with no budgeting skills, no way of running a

The state of Arkansas is the
primary source of matching dollars for the Healthy Connections
IDA program.
The first major hurdle for the
program was a lack of internal
knowledge. Young said they
started an education campaign
for their employees on the
range of programs and services

Development by the Numbers
Healthy Connections IDA Program
Number of IDA accounts (current)

52

Total savings by participants

$64,312

Number of homes purchased

10

Number of homes renovated

64

Number of students in higher education

8

Total impact on the community in dollars
(participants’ savings and match)

$257,249

Community Direct Investment
1,265+ affordable housing units created or preserved
200+ full-time jobs created
$21 million+ in loans to support nonprofits
$158 million+ in leveraged funds from other sources

house or saving for anything.
Now they think it is too good to
be true,” Young said.
Individual development
accounts provide participants an
opportunity to open a savings
account in a local bank and,
after completing a financial literacy course, to begin a savings
plan. Matching funds are added
to the accounts. Money can be
used to buy a home, rehab an
existing home, develop a small
business or save for college.

LINKING

LENDERS

offered by Healthy Connections, including the IDA program. The goal was twofold:
to increase awareness and the
number of participants in
the program.
Word of mouth tends to be
the best marketing tool for the
IDA program. As more and
more participants complete
their savings plans and obtain
their asset, community interest continues to grow. Even
Healthy Connections’ employ-

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COMMUNITIES

ees are getting in on the act and
starting their own accounts.
It would be hard to deny there
has been an increased level of
financial literacy resulting from
the program, as a former IDA
participant is now teaching the
very financial literacy classes
she once attended.
External partners are critical to the success of Healthy
Connection’s community development activities. Partnerships
with schools, the community
college, banks, local government
and professionals working in the
area are key to securing funding
and recruiting participants.
Of particular importance is
the statewide Arkansas Assets
Coalition, made up of all IDA
providers in the state. Healthy
Connections actively participates in the coalition with the
goals of ensuring program
sustainability, seeking increases
in funding and expanding the
program to the entire state.
One unique idea the asset coalition is exploring is a franchise
model for IDA programs. The
model would make it easier for
the programs to reach every
county by consolidating expensive back-office functions while
relying on local organizations to
be the face of the program.
For more information about
Healthy Connections and its
IDA program, contact Young
at bob_young@healthyconnections.org or visit
www.healthy-connections.org.
Investing in Communities
With a mission to serve all
people regardless of income or

economic status, CHRISTUS
Health System is keenly aware
of the complex problems facing
low-income communities.
The CHRISTUS Health
system includes more than 40
hospitals and facilities in seven
states—Texas, Arkansas, Missouri, Louisiana, Oklahoma,
Utah, Georgia—and Mexico.
With assets of more than
$3.4 billion, CHRISTUS has
been ranked among the top 10
Catholic health systems in the
United States.
But do not let its size fool you.
CHRISTUS Health prides itself
on its community focus. In an
effort to address local priorities,
CHRISTUS formed the Community Direct Investment (CDI)
program. CDI provides access
to capital for nonprofit housing
developers, microlenders and
service providers to low-income
communities. Through direct
loans, participation loans and
economically linked deposits,
CDI ensures that local nonprofits have the resources to carry
out their activities.
CDI puts into action
CHRISTUS Health’s commitment to promoting the total
health of the community. “Our
mission has always been to
serve the most-needy in our
communities, and the hospital
provides us a system and programs to achieve that mission,”
says Joseph Gonzales, CDI
program administrator with
CHRISTUS Health. “CDI is one
way we do that.”
For example, CDI made a
$2.5 million investment in
Nueces County Community

Action Agency. This investment reduces the interest costs
for the agency on a loan used
to purchase a building serving as its headquarters. Services offered include housing,
weatherization, comprehensive
energy assistance, rural rental
assistance, emergency food and
shelter, and the administration
of a Head Start program.
Key to CDI’s success are
the partnerships that generate
investment opportunities and
deliver services to the end user.
Some of its investments include
ACCION Texas, Local Initiatives
Support Corp., Greater Houston
Redevelopment and Southern
Financial Partners. These partners allow a large health-care
system like CHRISTUS to maintain a community perspective,
with local nonprofits serving as
a touchstone for its community
development efforts.
CDI does not limit its investments to opportunities where
CHRISTUS Health facilities are
located, but extends to areas
with a demonstrated need. This
includes investments with organizations serving the Arkansas/
Mississippi Delta.
Recently, CHRISTUS Health
joined Mercy Housing’s Strategic Healthcare Partnership, a
collaboration to increase access
to health care and affordable
housing in the United States.
This partnership will provide
special focus on housing for
residents in areas affected by
hurricanes Katrina and Rita. It
will also allow Mercy Housing
to hire a staff member dedicated
to helping hospitals and other

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developers build affordable
housing for senior citizens.
In addition to the CDI
program, the CHRISTUS Fund
provides grants to communitybased, nonprofit organizations.
Organizations that are funded
work to improve access to (1)
quality health-care services for
the uninsured and (2) services
such as affordable housing
and IDAs. The CHRISTUS

Fund responds to a variety of
requests, with an emphasis on
programs that offer a proactive
approach to helping lowincome communities.
To learn more about CDI and
CHRISTUS Health’s community
development initiatives, contact
Gonzales at joseph.gonzalez1@
CHRISTUShealth.org or visit
www.CHRISTUShealth.org.

How Financial Institutions Can
Work with Health Care Systems
Banks and other financial institutions can play a vital role in
community development activities spearheaded by health-care
organizations, making those activities sustainable and successful at the local level.
Representatives from financial institutions often serve on
advisory boards for health-care organizations to ensure
broad community support and to offer expert advice on fiscal
accountability structures.
Further, financial institutions play a critical role for IDA programs by housing participant accounts. This is often seen as
a way to reach new customers.
Financing health-care organizations that serve low- to
moderate-income communities and underserved areas is
another way to support community development activities.
Interagency Questions and Answers Regarding Community
Reinvestment, published by the Federal Financial Institutions Examination Council, offers guidance on the Community
Reinvestment Act (CRA). It states that community development
loans and services and qualified investments may be made to
health services targeted to low- or moderate-income people
and activities that revitalize or stabilize low- or moderateincome areas.
For a complete discussion of CRA-qualified loans, services and
investments, visit www.ffiec.gov/cra.

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Making Strides

With University’s Help, Community Moves Toward Stabilization

By Eileen Wolfington
Community Affairs Specialist
Federal Reserve Bank of St. Louis

Outreach Partnership Centers
program.
To select a community,
the university had a series of
conversations with St. Louis
County and other elected
officials. It was determined that
the Affton area was appropriate
for a number of reasons.
The largely middle-class community is unincorporated, so it
does not have a local government

25 percent of the Affton School
District and 30 percent of the
Bayless School District, which is
also located in Affton.
Community leaders were
eager to participate. University
individuals involved came from
departments such as Social
Services, Gerontology, Public
Policy and Administration, and
Psychology. Although it is not
uncommon for UMSL to pro-

hen you combine
the resources of a
university, community
partners and residents, positive
outcomes can occur. A good
example is the Affton Community Partnership, which began in
January of 2006, with help from
the University of Missouri—
St. Louis (UMSL). How did
Affton, an inner ring community
in south St. Louis County, and
the university, in north St. Louis
County, get connected?
It started with the U.S.
Department of Housing and
Urban Development’s Office
of University Partnerships
(OUP), which encourages
universities to work in communities, using faculty, master
students and advanced undergraduates. The partnership
with Affton was the result of a
two-year, $200,000 New Directions grant awarded to UMSL
under OUP’s Community

that can make binding decisions.
It does, however, have a strong
sense of community. One of
the distinguishing features of
Affton is that it has the largest
percentage of older residents
in Missouri. It also has a large
population of Bosnian immigrants who have moved to the
area in recent years. This ethnic
group represents approximately

vide assistance on community
projects, the scale of the Affton
project was uncommon.
Other partners included the
local chamber; school districts;
police neighborhood captains;
FOCUS St. Louis, an organization that promotes community
connections; the International
Institute of St. Louis; St. Louis
County Planning; the St. Louis

“Partnerships and bringing people
together to focus their resources
on a specific community can bring
the greatest successes.”
Kay Gasen, Director, Community
Partnership Project, University of
Missouri—St. Louis

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LENDERS

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County Economic Council; and
the Affton Community Betterment Association (ACBA).
Three focus areas were
identified: (1) welcoming new
Americans to the Affton community, (2) supporting Affton’s
older residents and (3) building
capacity to bring about change.
Welcoming New Americans
The ACBA, UMSL and the
International Institute collaborated to form the Affton New
Americans Task Force. With
assistance from the International Institute, the task force
initiated the Affton Community Links program to bring
longtime residents and new
Americans together to support
one another. Three groups
were formed that focused on
supporting a multicultural business corridor, neighborhood
networks, and school and community relations. Two success
stories followed.
The nearby St. Louis Enterprise Center now houses a
satellite office for the Business
Links Department of the International Institute. It provides
technical assistance in English
or Bosnian to clients who want
to start or expand a small business. Business Links consultant
Elvir Kolenovic said he is glad
to be in a building that has
many resources in one place

for people who want to stay
or move to the area. “Helping people to open a business
is more difficult than where I
came from,” he said.
Another successful program
that came out of the task force
was the development of a Bosnian language and culture class
that was held during three,
2-hour sessions. The expectation was that about 15 people
would enroll. To the task
force’s surprise, 60 people
enrolled, resulting in two class
offerings with a third class
beginning in the fall.
One of the challenges the
New Americans Task Force
faced was getting people
involved when they were already
busy working two jobs or tending to their children. Another
challenge was that some people
were content with how things
were going. The conditions in
Affton are not severe, so there
isn’t a sense of urgency. The
biggest complaint was about the
appearance of Gravois Road, the
community’s main thoroughfare,
where small businesses occupy
aging, nondescript buildings.
Supporting Affton’s Older Residents
“The university involvement is to
facilitate and provide an extra catalyst—energy for people already
embedded in the community.”
Ann M. Steffen, Director of Clinical
Training and Associate Professor,
Department of Psychology—UMSL
The Affton community has
a large older adult population
and an aging housing stock

dating back to the 1950s. The
Affton Community Partnership
conducted telephone interviews
and face-to-face surveys of older
adults and found differences
between two age groups. Those
80 years old and above were
more vulnerable than those ages
65 to 79 who said they were
doing just fine and planned to
remain in their homes. However, for the most part, their
homes have not been modified
to be older-adult-friendly.
Rose Terranova, director of
family and community services
for St. Louis County, said Affton’s older residents comprise a
very independent population,
most of whom do not think
they need help.
Terranova’s office recognized that, eventually, these
residents will need some type
of community service. The
partners decided not to create
new services, but to package information on existing
services with a focus on local
contacts in Affton. A brochure
was created that combined
information from the County
Older Resident Programs and
the Mid-East Area Agency on
Aging. These programs historically market their programs and
services independently.
Two additional successes
resulted from this initiative.
The first identified the
process St. Louis County uses
to distribute citations for code
violations. An agreement was
made that the county would
distribute home care and repair
flyers with citations so homeowners would know about

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Affton resident Kathy Jadlot is active in a community revitalization program involving
Affton residents and the University of Missouri—St. Louis.

options available to help them
make needed repairs.
The second success was the
creation of a risk-identification
sheet. University students
accompanied drivers who deliver
meals to homebound residents.
Drivers know the residents well
and can identify clients who
are beginning to deteriorate. A
risk-identification sheet is a tool
that can inform service providers
about the condition of their client so that appropriate referrals
can be made.
Because of these successes
and others, St. Louis County
introduced a housing initiative in Affton designed to
prevent older residents from
losing their homes. Terranova
said the project, called Home
Sweet Home, has two critical
elements: an assessment of a
house’s condition and an assessment of services the homeowner needs.
The partnership’s Aging Successfully Committee developed

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strategies for three focus areas.
These include raising awareness
about aging in place (staying
in your home as you age), raising awareness about available
community services, and building a volunteer base to serve
Affton seniors.
Building Capacity
to Bring About Change
“UMSL was the blessing we hoped
for. Our timing was pure luck.”
Kathy Jadlot, Affton Community
Betterment Association Member
Kathy Jadlot, an Affton
resident of 28 years, is on the
economic development committee of the Affton Chamber of
Commerce. She is also a member and former chairperson of
the ACBA. The ACBA realized
this community partnership
project needed to be bigger and
better than what had been tried
in the past.
continued on Page 6

Have you

Heard
Fed Report Studies Effects
of Credit Scoring
Since the mid 1980s, when credit
scores based solely on the credit
records of individual consumers
were introduced, credit scoring has
become an integral part of consumer lending markets. However,
the practice has raised concerns
about whether it adversely affects
minorities or those who rely largely
on nontraditional sources of credit.
Under directions from Congress,
the Federal Reserve Board studied
the effects of credit scoring on credit

markets and recently presented the
Report to the Congress on Credit
Scoring and Its Effects on the Availability and Affordability of Credit.
The report concludes, among
other findings, that “there is no compelling evidence that any particular
demographic group has experienced
greater changes in credit availability
or affordability than other groups
due to scoring.”
Credit scores are only one factor
considered in lending decisions.
The study does not address how
credit scores are weighed relative to
other factors considered in lending
decisions and whether this weighting
differs across demographic groups.
To read the report, visit:
www.federalreserve.gov/pubs/
reports_other.htm.

Resources
Mortgage Payments Sending You
Reeling? Here’s What To Do—
A Federal Trade Commission publication that could help homeowners
save their homes and recognize
and avoid foreclosure scams. The
publication explains different
kinds of mortgages, what to do if
homeowners fall behind on their
mortgage payments, how to avoid
default and foreclosure, and how to
avoid predatory scams. To read the
publication online, go to www.ftc.
gov/opa/2007/06/mortpub.shtm.
Preventing Foreclosures: Improving
Contact with Borrowers—A new
best practices report from the Office
of the Comptroller of the Currency.
The rapid growth in the subprime
and nontraditional mortgage market,
combined with a slowdown in the
appreciation of home values, may
lead to increased foreclosures

over the next few years. The report
reviews strategies that banks are
using to prevent foreclosures and
mitigate credit losses. It is available
at www.occ.treas.gov/cdd/
Foreclosure_Prevention_Insights.pdf.
The Community Investment Network—
A new, online resource for those
interested in community development
and investment both in the United
States and in other countries. The
web site offers news, information,
perspective and opinion, research
reports and links to government, notfor-profit and corporate organizations,
and other information sources. The
network is available at no cost to
community development leadership,
civic leaders, public officials, journalists, researchers, public policymakers,
funders and others. Visit www.
communityinvestmentnetwork.org.

LINKING

LENDERS

Partnerships
continued from Page 5

“At the beginning, we were
just four people,” she said.
“We were just too scattered.
With UMSL’s help, we have a
focus. The idea is for us to be a
resource, not the worker bee.”
So they created the ACBA
Strategic Plan. Introduced in
October of 2006, the plan had
three specific goals: maintaining and improving the quality
of and demand for Affton’s
housing stock, improving support for the Affton and Bayless
school districts, and strengthening the ABCA.
With the university’s help,
the housing committee compiled a list of St. Louis County
home improvement and loanassistance programs into one
booklet, making it easier for
residents to identify available
help. Other housing action
items included home improvement assistance, promotion of
first-time home buyer programs, monitoring the St. Louis
County occupancy permit
program and improving the
appearance of key corridors,
particularly Gravois Road.
In the area of public education, action plans included
raising awareness of the financial
needs and community contributions of the Bayless School
District and involving more volunteers, including older adults,
in public school activities.
To strengthen the ACBA, the
organization will work toward
completing three structural
action plans. They include
hosting quarterly public forums,

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revising the ACBA bylaws and
articles of incorporation, and
establishing a budget to support
implementing the strategic plans.
What Happens Now?
The university’s reputation
and neutrality created connections that traditionally might
not have been made. At the
recipient level, the university’s
involvement is seamless.
Although the partnership is
officially drawing to a close,
university representatives say
they will maintain a connection
with Affton. While the grant
enabled funds for some things,
the university has made a commitment to help Affton explore
alternate funding resources.
For more information, visit:
Community Partnership Project
www.umsl.edu/cpp
A Community Tool Kit for community
organizations will be available on this
site by fall 2007.
Community Outreach Partnership
Centers Program (COPC)
www.hud.gov/progdesc/copc.cfm
COPC was not funded in FY07.
Office of University Partnerships
www.oup.org/
University-Community Partnerships:
Current Practices Volume III
www.huduser.org/publications/
commdevl/partner.html
Neighborhood Leadership Academy
www.umsl.edu/divisions/
graduate/ppa/npml/nla.html

Foreclosures—Let’s Talk about the Solution
Counseling at All Levels Works
By Colleen Hernandez and
Chris Krehmeyer

F

oreclosures are big news.
Data seemingly comes
out daily quantifying
the problem nationally, regionally and locally, but rarely do
we discuss solutions to this
industry, community and family issue.
While the financial industry
may differ on the effects of the
current wave of foreclosures, the
fact remains that foreclosures are
costly to the mortgage industry—as well as to city governments, neighborhoods and
families facing foreclosure.
One significant solution is
offering counseling, both by
phone and face-to-face, to
customers. The Homeownership Preservation Foundation
(HPF), a Minneapolis-based
national nonprofit dedicated to
preserving home ownership and
preventing home foreclosures,
has joined forces with NeighborWorks America to expand
their efforts in reaching homeowners as early as possible to
prevent them from reaching the
point of foreclosure.
The partnership links HPF’s
1-888-995-HOPE toll-free hotline, which offers free foreclosure prevention counseling and
advice, with NeighborWorks’
national network of organizations that provide face-to-face

home ownership education and
counseling services.
The Telephone
Counseling Experiment
HPF opened its doors in
2004 with a $20 million seed
grant from GMAC-RFC (now
part of Residential Capital
Corp.). The nonprofit was
established to help reduce
foreclosures and preserve home

In 2006, more than 25,000
homeowners in distress from
all 50 states called the HOPE
hotline—a 600 percent increase
from 2005. Three of four calls
to the hotline in 2006 were from
people with an average income
less than $50,000. By the fourth
quarter of 2006, nearly 50
percent of all callers completed a
full counseling session ending in
a solution or referral.

ownership for families in crisis.
The hotline is staffed by trained
foreclosure counselors working
for one of four HUD-approved
regional counseling agencies.
The call and the counseling,
which begins immediately any
time, day or night, are offered
free of charge to any homeowner in the United States.

The first call can take anywhere from 30 to 60 minutes.
The counselor and the caller
discuss the homeowner’s
budget, financial situation and
mortgage status in depth. The
counselor works on a solution
between the homeowner and
the servicer that often keeps
the homeowner in their home,

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helps them avoid foreclosure
and allows the servicer to move
the loan to performing status.
Many of the nation’s largest
servicers, such as Countrywide,
Chase and Citigroup, have given
the foundation’s counselors
direct telephone access to one
or more loss mitigation specialists. Together, the servicer, the
counselor and the homeowner
can usually draw up a plan to
bring the mortgage up to date,
while keeping the homeowner
in their home. If staying in the
home is not possible, the counselor can offer options such as
auctioning or selling the home.
In the event that this comprehensive counseling session
cannot resolve the issues, the
HPF counselor then transfers
the client to the local NeighborWorks organization, such as
Beyond Housing in St. Louis.
The counseling staff at Beyond
Housing receives detailed case
notes regarding the individual
situation. A face-to-face meeting is scheduled quickly to
clearly understand the issues
facing the family.
After loan documents and
income/expense information are gathered, it is determined whether the underlying
problem has been or can be
rectified. Often a three-way
conversation with the homeowner, counselor and servicer
continued on Page 9

the Region

Spanning
New UCA Institute Provides
Consulting Services Nationwide
The University of Central
Arkansas (UCA) now offers
community development
consulting to cities nationwide through its new Strategic
Growth Institute (SGI).
The institute will work with
communities in Arkansas and
other states to produce strategic plans for development. A
few of the services SGI offers
are: customized community
and economic development
plans, analysis of a community’s
strengths and weaknesses, community marketing plans, and
target industry studies.
SGI is an outgrowth of the
university’s Community Development Institute and Master of
Science program in Community
and Economic Development.
More than 2,500 participants
from 35 states have taken courses
at UCA’s Community Development Institute, which prepares
practitioners for certification as
a community developer.
For more information about
SGI, contact Jennifer Tanner,
managing director, at jennifer.
tanner@gosgi.org.
2005 Payday Lending Law
Saves Illinoisans Millions
Less than two years after the
Payday Loan Reform Act was
signed into law, a new report
says the law has saved Illinois
consumers millions of dollars in
interest and fees.

The region served by the Federal Reserve Bank of

Enacted on
St. Louis encompasses all of Arkansas and parts of Illinois,
Dec. 6, 2005,
Indiana, Kentucky, Mississippi, Missouri and Tennessee.
the law limits interest
on payday loans and
Institution report focuses
who are at risk of default or
on the amount consumspecifically on the high cost of
foreclosure.
ers can borrow. A report by the
being poor in Kentucky.
The HomeProtect Program
Illinois Department of Financial
According to The High Price
will provide up to $250 million
and Professional Regulation
of Being Poor in Kentucky: How
to its lenders to refinance first
found that, under the law, conTo Put The Market To Work For
mortgages for primary resisumers were charged $15.35 per Kentucky’s Lower-Income Famidences in Tennessee, Kentucky
$100 dollars borrowed or a 350
lies, not only are lower incomes
and Ohio and other states served
percent APR (annual percentage
a constraint, but people with
by member banks. Cities in the
rate) for a 16-day loan. A 2002
lower incomes face higher
FHLBCin territory reporting
survey found that the average
prices for services they buy.
higher foreclosure rates in recent
cost of a short-term loan was
Among the added expenses
years—such as Memphis, Tenn.,
525 percent APR.
faced by Kentucky residents
and Louisville, Ky.—could see
Previously, borrowers who
making $20,000 or less a year,
lower rates using the program.
rolled over a loan had to pay
car insurance, on average, costs
To be eligible, borrowers must
additional interest and penal$384 more and cars of compabe at or less than 115 percent of
ties. Under the new law, conrable quality $500 more than
area median income. Loans are
sumers caught in the pattern of
higher-income residents pay.
subject to Freddie Mac concontinually rolling over loans
Low-income Kentuckians pay
forming loan limits; reasonable
have an option of a no-interest
an average of $363 a year more
points and fees will apply.
payment plan that allows them
in home insurance. They also
Under the HomeProtect
to catch up without adding
receive less favorable rates for
Program, borrowers will be able
additional fees and interest.
financial services and loans.
to pay off a mortgage balance
The study also shows that
To reduce these cost burdens,
and all delinquent payments and
Illinois consumers take out
the study recommends develop- fees, but must complete a homebetween 45,000 and 65,000
ing financial services targeted
buyer counseling program.
payday loans each month, with
for low-income residents and
Borrowers will not be able to
the average loan amount being
creating insurance pools that
borrow cash for other needs.
$350 with finance charges of
can help balance the scales.
The funds can be used with
$54. Using those figures, the
To read the report, visit
other mortgage programs or
state estimates that Illinois conwww3.brookings.edu/metro/
related grants if those programs
sumers have saved more than
pubs/20070618_kentucky.pdf.
permit it within their guidelines.
$20.5 million in finance charges
Member institutions applysince the bill was implemented.
FHLBCin Program Protects
ing for funds should contact
Homeowners from Foreclosure
FHLBCin at 513-852-7615 or
Brookings Study Highlights
The Federal Home Loan
e-mail Carol Peterson, senior
Cost of Being Poor in Kentucky
Bank of Cincinnati (FHLBCin)
vice president, at petersoncm@
Following up on a national
has developed a new program
fhlbcin.com or W. Jeff Reynolds,
report last year on a similar
to help member banks offer
vice president, at reynoldswf@
theme, a new Brookings
refinancing to homeowners
fhlbcin.com.

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Foreclosures
continued from Page 7

occurs to find a solution to the
problem. Funds may be available to help the family bring
their loan payments current as
a condition of the solution.
Getting the Phone To Ring
Homeowners facing foreclosure are embarrassed about
their situation, with 50 percent
too embarrassed or unwilling
to contact their servicer about
their problem. Therefore, the
experiment required a diversified marketing program to
speak to troubled borrowers
and ensure they knew the hotline was available.
Referrals come through nonprofit partners, which include
NeighborWorks America, the
National Urban League and
USA Cares. In addition, several
cities and states refer residents
facing foreclosure to the hotline,
either directly or through their
311 nonemergency call centers.
At the local level, the hotline
is promoted through grassroots
meetings, radio and television
interviews, paid advertisements, and local-access cable
programs. An initial review
of call volume reflects a direct
correlation between local promotion and number of calls to
the HOPE hotline. A foreclosure prevention advertising campaign is an exciting
new effort by NeighborWorks
in partnership with the Ad
Council to reach struggling
homeowners. The campaign
directs struggling borrowers to
call 1-888-995-HOPE.

But Does it Work?
The 1-888-995-HOPE
number receives 3,000 calls a
month. Moreover, call volume
is increasing by 20 percent to
25 percent every month, which
in turn means an increase in call
volume at the local level. HPF
has found that more than 75
percent of those who engage in
counseling ultimately avoid a
foreclosure sale—some through
loan modifications and others
through mechanisms like deed
in lieu of foreclosure. But this
is still only a small fraction of
those in need.
Servicers also find they can
only reach a limited number
of their customers who face
losing their homes. Numerous
reports suggest that more than
half of homeowners are afraid
to contact their servicer for fear
of losing their home sooner,
and direct mail has limited
success rates. Clearly, alternatives for making contact must
be explored. The HPF/NeighborWorks experiment begs the
questions: Does counseling
really save a homeowner from
foreclosure? And if so, what is
the most effective type of counseling—telephone or in person?
J. Michael Collins of PolicyLab Consulting Group, LLC,
has researched these questions
and made some interesting discoveries. “The question of faceto-face vs. telephone counseling
is moot,” Collins said. “Both
have a place.”
In-person counseling does
tend to keep homeowners
more engaged—they are truly
a captive audience, without

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the distractions that can plague
telephone callers. Nevertheless,
focus groups with homeowners
suggest some borrowers favor
telephone counseling.
“Telephone counseling offers
more flexibility for working
families,” Collins said. “Some
find it impossible to attend a
face-to-face session. Phone
counseling fits easily within
busy lifestyles, making it sometimes a better alternative.”
The most important factor in
counseling is not the method, but
the time a homeowner spends
actively engaged in the process.
“Our research shows that
the longer the time spent in
active counseling, the lower
the chance the homeowner will
lose their home to foreclosure,”
Collins said.
The emphasis of our collective dialogue needs to shift
from affirming the problem of
foreclosures to promoting the
solutions. Counseling does
work. We must compel families in trouble to reach out for
help by calling their lender or
servicer or by calling 1-888995-HOPE.
Colleen Hernandez is president of
the Homeownership Preservation
Foundation (www.hpfonline.org),
and Chris Krehmeyer is president and CEO of Beyond Housing (www.beyondhousing.org), a
NeighborWorks organization in
St. Louis.
This is the first of a two-part series
on foreclosures. The winter issue of
Bridges will look at neighborhood
solutions to foreclosures.

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Regulators Join Forces
To Improve Supervision of
Subprime Mortgage Lenders
Federal and state regulators are
collaborating on a pilot project to
conduct targeted consumer-protection compliance reviews of selected
nondepository lenders with significant subprime mortgage operations.
The project will focus on nondepository subsidiaries of bank and
thrift holding companies and mortgage brokers doing business with,
or working for, these entities.
The state agencies will also
conduct coordinated examinations
of a select sample of independent,
state-licensed subprime lenders and
associated mortgage brokers.
The agencies will share what they
learn during the reviews, take action
as appropriate, collaborate on the
lessons learned, and work to improve
cooperation to ensure effective and
consistent reviews of the institutions.
The regulatory agencies involved
in the project are the Federal Reserve
System, the Office of Thrift Supervision, the Federal Trade Commission
and state agencies represented by
the Conference of State Bank Supervisors and the American Association
of Residential Mortgage Regulators.
The agencies will examine the
companies’ underwriting standards
and the senior management oversight of risk-management practices
used for ensuring compliance with
state and federal consumer protection regulations and laws. These
laws include the Home Mortgage
Disclosure Act, the Equal Credit
Opportunity Act, the Truth in Lending
Act, the Real Estate Settlement
Procedures Act, the Federal Trade
Commission Act, and the Home Ownership and Equity Protection Act.
When the pilot project ends, the
agencies will study the results and
decide whether the project should
be continued.

The Ups and Downs of Infill Housing
What is infill housing? Many in community development think of infill housing as new houses constructed on vacant,
underused lots interspersed among older, existing properties in established urban neighborhoods. However, others broaden the
definition to include major refurbishing or reuse of existing homes or buildings. This article will focus on the former definition.

By Michael Minor
Community Affairs Specialist
Federal Reserve Bank of St. Louis

A

ccording to the Urban
Land Institute’s Urban
Infill Housing Myth and
Fact Report, “the rapid growth of
infill housing in U.S. cities has
been spurred in large part by
the emerging market demand
from people moving back to the
city.” However, the institute’s
report also stated that “despite
the construction and population
gains, doubts remain that this
trend can continue.”
We will explore anecdotal
evidence of which way the
trend in infill housing development is going in four major
urban areas in the Federal
Reserve’s Eighth District: Little
Rock, Ark.; Louisville, Ky.;
Memphis, Tenn., and St. Louis.
Information was collected
from key people in community
development organizations.
In Memphis, Emily Trenholm, executive director of the
Memphis Community Development Council (MCDC),
arranged a special community
development organization
workshop to discuss a wide
range of issues. When it came

to infill housing, the discussion
focused on four major challenges: new construction that
does not match the styles of
existing homes, finding qualified buyers for these homes,
obtaining funding for administrative costs of such efforts, and
pricing caps of some governmental programs that underpriced homes relative to buyer

in some neighborhoods were
re-energized at the sight of new
construction for the first time
in 30 or more years. Finally,
infill housing has reduced the
number of problem properties
and certain types of crimes in
neighborhoods.
Melissa Pearce of the University District, Inc. (UDI) led
a “development in action tour”

Overall, anecdotal evidence
supports the notion that the
St. Louis District is mirroring
the national trends for continued growth of infill housing.
household incomes. Most infill
housing in Memphis is purchased by low- and moderateincome households.
However, MCDC cited positive
aspects as well. Construction
financing has generally been
available through governmental
units, regulated financial institutions, and national intermediaries. Although infill housing
has not always fit the profile
of existing homes, residents

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of the area surrounding the
University of Memphis. UDI
is a member of the community
development council. The tour
revealed contrasting neighborhoods, from high-priced mansions to dilapidated houses, all
within about a two-mile radius
of the University of Memphis.
There were many examples
of infill housing in the UDI
area, including new homes
built along the style of existing

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homes. There was a sense of
continuity in these neighborhoods. However, there were
several examples of discontinuity. Pearce said spot zoning had
resulted in multifamily housing units being built alongside
single-family dwellings.
Pearce addressed other
concerns as well. As stated
previously, community based
organizations often lack funding
for administrative costs, such as
staff salaries and benefits, office
space and marketing. Without
these funds, the organizations are
limited in their ability to develop
a neighborhood housing strategy,
identify available parcels and
provide home-buyer education.
Still, Pearce said she expects
infill housing to continue at
a strong clip, not only in the
UDI area but in other neighborhoods in Memphis.
Middle- and higher-income
infill housing is dominant in
Louisville. Rob Locke, executive director of the Louisville
affiliate of Habitat for Humanity, said the design of their
homes for Louisville had to
be refined from the typical
“cookie cutter” design to that of
higher-income households with
distinctive architectural cues.

In Little Rock, Cynthia Stone,
executive director of The ARC
Arkansas, offered yet another
perspective on infill housing.
Arc Arkansas (www.arcark.org)
is a statewide membership
organization providing support,
advocacy, education and leadership to people with developmental disabilities and their families.
Some of their infill housing
includes multifamily units.
Stone said challenges for
community organizations
wanting to build infill housing
include significant red tape,
a lack of knowledge about
available development tools
and difficulty securing construction financing.
“Banks and lenders equate
strength with financial liquidity,”
she said. “Lenders don’t understand nonprofits. A nonprofit’s
strength is measured by its
ability to meet the mission of the
organization and the business
integrity of its leadership.”
The ARC Arkansas uses tax
credit and bond opportunities
in conjunction with typical
construction and mortgage
financing. Furthermore, the
tightening of lending standards
hampers their work, Stone said.
However, Stone spoke highly of
the work of national intermediaries like LISC and National
Equity Fund, which provide
technical assistance.
St. Louis is the final focal
urban area. Kimberly McKinney, executive director of the
St. Louis affiliate of Habitat for
Humanity, offered comments
based on her more than 20 years
in the field. She said growth

trends for infill housing will
continue. This growth depends
on collaboration among community based organizations,
governmental entities and the
private sector, she said. In the
end, efforts in St. Louis seem
to offer benefits through better neighborhoods and higher
property values.
One of the obstacles to
building infill housing is the
increasing cost of land, McKinney said. Her group has been
able to secure some parcels
from local government at no
cost or with HOME funds from
the U.S. Department of Housing and Urban Development.
Finally, Habitat for Humanity is
in a unique position. It is both
the builder and the mortgage
company. In St. Louis, Habitat
for Humanity has a less than
1 percent foreclosure rate.
Peter Murtaugh of the Ranken CDC in St. Louis continued the discussion on infill
housing in St. Louis. He said
infill housing efforts should
be focused on one block at a
time, ensuring that no vacant
lots or dilapidated structures
are left. If not, these problem
properties could make neighborhoods unclean and unsafe.
Furthermore, infill housing
developers need to consider
residents already living there.
How will this new development
affect them? Urban designs for
infill housing must reflect the
architecture and landscaping of
the neighborhoods.
Throughout the Eighth District, anecdotal evidence shows
continued growth in infill

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housing in the near future.
While some locations are
seeing efforts focusing across
all income strata, infill housing in urban neighborhoods
often provides home ownership opportunities for low- and
moderate-income households.
Financing for such development
was mostly available.
In addition to providing
affordable, safe housing for
residents, cities benefit through
better neighborhoods, increased
property values and increased
property tax role valuation.
Overall, anecdotal evidence
supports the notion that the
St. Louis District is mirroring
the national trends for continued growth of infill housing.
In contrast to the ULI forecast
cited earlier, the St. Louis District looks to continued growth
in infill housing.

Bridges
Bridges is a publication of the Community Affairs department of the Federal
Reserve Bank of St. Louis. It is intended
to inform bankers, community development organizations, representatives of
state and local government agencies and
others in the Eighth District about current issues and initiatives in community
and economic development. The Eighth
District includes the state of Arkansas
and parts of Illinois, Indiana, Kentucky,
Mississippi, Missouri and Tennessee.
Glenda Wilson
Community Affairs Officer, Assistant
Vice President and Managing Editor
314-444-8317
Linda Fischer
Editor
314-444-8979
Community Affairs staff
St. Louis:

Matthew Ashby
314-444-8891
Ellen Eubank
314-444-8650
Jean Morisseau-Kuni
314-444-8646
Eileen Wolfington
314-444-8308

Memphis:

Michael Minor
901-579-4106

Little Rock: Lyn Haralson
501-324-8240
Amy Simpkins
501-324-8268
Louisville:

Lisa Locke
502-568-9292
Faith Weekly
502-568-9216

The views expressed in Bridges are not
necessarily those of the Federal Reserve
Bank of St. Louis or the Federal Reserve
System. Material herein may be reprinted
or abstracted as long as Bridges is credited.
Please provide the editor with a copy of
any reprinted articles.
If you have an interesting community
development program or idea for an
article, we would like to hear from you.
Please contact the editor.
Free subscriptions and additional copies
are available by calling 314-444-8761 or
by e-mail to communityaffairs@stls.frb.org.

#

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Calendar
October
17, 18
Governor’s Housing Summit—Nashville, Tenn.
Sponsor: Tennessee Housing Development
615-741-4979

18

14-16
EDFS Annual Conference: Business
Development Peer Networking—
Chattanooga, Tenn.
Sponsor: National Association of
Development Organizations
202-624-7806
www.nado.org/conferences/edfs.php

“A Dialogue on
Economic Opportunities
in the Delta”

Strategies for Reaching the Unbanked
and Underbanked—Little Rock, Ark.
Topic: Stored Value Cards, Second-Chance
Checking Accounts
Sponsor: Federal Reserve Bank of St. Louis
501-324-8296
www.stlouisfed.org/community/conferences

16, 17

30

6

Location :

Neighborhoods in Bloom—Memphis, Tenn.
Sponsor: Federal Reserve Bank of St. Louis
901-579-4102
www.stlouisfed.org/community/conferences

Mortgage Lending Seminar—St. Louis
Sponsor: Federal Reserve Bank of St. Louis
314-444-8761
www.stlouisfed.org/community/conferences

Mississippi e-Center
Jackson State University
1230 Raymond Road
Jackson, MS 39204

November
1, 2
Economic Development Course:
Business Retention and Expansion—
Cape Girardeau, Mo.
Sponsor: International Economic
Development Council (IEDC)
202-223-7800
www.iedconline.org/?p=Training_BRE_MO

1, 2
Tax Increment Finance Course—
Washington, D.C.
Sponsor: Council of Development Finance
Agencies
216-920-3073
www.cdfa.net

12, 13
Mid-South GIS Users Conference—
Memphis, Tenn.
Sponsor: Memphis Area Geographic
Information Council
www.midsouthgis.org/Conference/
conference.htm

Nov. 29, 2007
9 a.m. - 3:30 p.m.

Arkansas Venture Conference—Rogers, Ark.
Sponsor: Arkansas Venture Forum
www.arkansasventureforum.com

(Registration begins at 8 a.m.)

December

10-14
NeighborWorks Training Institute—
Portland, Ore.
Sponsor: NeighborWorks America
202-220-2300
www.nw.org/network/training/training.asp

Sp onsors :

11-14

I nf ormation /R egistration :

The 2007 Opportunity Finance Network
Conference—Miami, Fla.
Sponsor: Opportunity Finance Network
215-923-4754
www.opportunityfinance.net

13
Strategies for Reaching the Unbanked
and Underbanked—Little Rock, Ark.
Topic: Using Community Partnerships to
Reach the Unbanked
Sponsor: Federal Reserve Bank of St. Louis
501-324-8296
www.stlouisfed.org/community/conferences

Community Affairs offices of the Federal Reserve Banks
of Atlanta and St. Louis

Cost: $25
visit www.stlouisfed.org/community