Full text of Partners in Community and Economic Development (Federal Reserve Bank of Atlanta) : Partners in Community and Economic Development, Vol. 18, No. 3

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Federal Reserve Bank of St. Louis

Partners

I N COM MU NITY AND ECON OMI C DE VELOPME NT

FEATURES

8

Mortgage Fraud in Sixth District
:Vlortgagc fraud can in\"C>l\"C' a single borrower or
a cornplex wd>

or pc•qwt rat ors. The liircclosun·

crisis has prompted a crackdown on l"raudstc•rs.
but both eonsunH·rs and lc-ndcrs should remain
vigilant as scam -artists <i<' velop rww angk•s.

12

Rule Changes Fine-Tune
Consumer Protection
\'c'\\ mortgagt• rules will alTt>c-1 H<)El'A loans.
higlwr priced loans and loans secun'd by a
borrowpr's primary dwelling. Tlwy will also
st ipulat l'

14

IW\\

n•quin'nH·nt s for ad\l' rt ising.

Reverse Mortgages Revisited
As n •n·rse mortgages lH' c-onH' incrt'asingly pop -

COVER STORY

ular, consumc•rs should i>l' sure to gc•t adPquatP
information l>el"Ol't' signin g on thl' dotted linl' .

Reconsidering
U.S. Housing Policy

17

Forging a Green Partnership
Till' :\tlanta Fed's Grrr11 i)e1·elop1111·11/ l'rim r r
is clc-sigrll'cl to hdp financial institutions, com munit y dc'\'dopmt'nl sp<•cialists and nonprofits

A multifaceted, systemic approach is needed
to respond effectively to the wide-ranging
impacts of the housing foreclosure crisis.
James Carr of the Natio na l Community
Reinvestment Coalition outlines five
housing-related public policy areas he
beli eves demand serious attention.


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Federal Reserve Bank of St. Louis

undc•rstand tlw myths and realities
ell'\

20

or grPcn

l'll>pnwnt.

Fed Report Confronts Concentrated Poverty
Fed ( ·0111m11nity Affairs staff from around t lw
country partJH•rc•d with t ht• Brookings lnstitut ion
to t· x aminP tlw stat l' of concentrated pm·ert:,· in
tlw 1·.s. by studying Hi din•rsc locations.

24

Spotlight on the District North Florida and Louisiana-Mississippi

FROM THE CAO'S DESK

OVERCOMING FORECLOSURE INFORMATION OVERLOAD
If you search for the wordforec/osure online, you will get over 50 million hits. There are
over half a mill ion hits under theforeclosw ·e l'esource heading. These s ites vary greatly
in what they offer. Some focus on homeowners and others are designed for investors, academics, nonprofits or government organizations. They may provide consumer information,
market data, research or links to other sites. Many offer products and senrices for constm1ers
and investors-usually for a fee.
This information overload can be very confusing and frustrati ng. Furthermore it is often
difficult to distinguish between legitimate and li-audulent sites, p1ime and predatory products.
In an effort to provide the most up-to-date information about fo reclosure and the housing

market, the Federal Reserve System has launched an on line Foreclosure Resource Center
at each of our 12 Banks. These websites are one-stop-shops that offer national and regional
data and other information to suppmi a range of inquiries. Our Feel Foreclosure Resomce
Centers sho uld be useful for community-based organizations, governm ent agencies, financial institutions and concerned consumers.
For consw11ers, especially homeowi1ers and homebuyers, the Fed's Foreclosure Resource
Centers provide desc1iptions of loan options and alternatives to foreclosme. The site includes
a video that outlines fo reclosu re law, describes the foreclosure process and advises homeowners who a.re unable to make mortgage payments. Additional informa ti on on the site
helps consu mers understand how different mortgage products will affect their particular
situations. For families in financial difficulty, the site li ts contact infom1ation for reputable
agencies that can provide help, including a forec losme prevention hotline and websites that
offer resource inforn1a.tion, credit and legal services, and consumer counseling.
Foreclosure Resource Centers refer researchers and policy makers to recent research
papers, pertinent articles, speeches and presentations, a nd other usefu l materials. Also
posted a.re local and national Fed-sponsored events on develop ing foreclosure-mitigation
strategies, including the system's Recovery, Renewal, Rebuilding conference series.
For bankers, policymakers and those in the legal field, the site contains lin ks to materials
that address policy issues and changes in regulations. These include an1endments to Reg Z,
s ummary information on the Housing and Economic Recovery Act of 2008, press releases
on final m ies, and info1111a.tion about examinations and loan modification.
The Fed's Foreclosure Resource Centers a lso offer dynam ic maps and data that track
levels of foreclosure across the U.S., thus prov id ing valuable info rmation a.bout specific
markets for researchers and commun ity groups.
Our web address is http://www.frbatlanta.org/conun_a.ffa.i.rs/frc.cfm. We will continue to
update this s ite with new information about the mo1igage industry and foreclosure issues.
The Atlanta Feel is proud of our System's coll ective effort to provide usefu l information to
a diverse audience.


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Federal Reserve Bank of St. Louis

Juan C. Sanchez
Vice President and
Community Affairs Officer


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Federal Reserve Bank of St. Louis

Reconsidering
U.S. Housing Policy
Excerpts from an Interview with James H. Carr, Chief Operating Officer,
National Community Reinvestment Coalition
In a recent interview with the Federal Reserve Bank of Atlanta on the future of the
housing market, National Community Reinvestment Coalition Chief Operating Officer
Jim Carr responded to questions about which housing policies would best meet the
challenges presented by the foreclosure crisis. The following excerpts discuss measures
to address the de-stabilization of housing markets, the loss of billions of dollars in
home equity and the long-lasting negative impacts on areas with high concentrations
of foreclosed properties.

In my view, at least five major areas of public policy

E<u-lier th is yeai·, the National Communi ty Rei nvestme nt

related to the hous ing markets demand serious attention

Coalition proposed the establis hme nt of a national Hom-

and action .

eownership Emergency Loan Program or HELP Now. This
program would authorize the U.S. Treasury to purchase

Contain the current foreclosure
crisis and purge predatory lending

1

Addressing the current foreclosure c1isis in a meaning-

loans in bulk and at steep discoun t·s (equal Io their c urre nt ma rket values) from sec uritized pools a nd apply
those discounts to probl e m loans in order to achieve

ful way is essential. The longer this cris is lingers, the more

s ig nificant modifications that would ultim ate ly create

households will be impacted and the greater the damage

long-term borrower affordab ility. The advantage of this

w ill be to housin g marke ts , the fina ncial sys tem a nd

program is t hat loans could be modified , repackaged

the economy. To date there has been limited legisl a tive

a nd resold immed iately.

response lo address the magnitude and depth of the current

l n add ition to a n improved loan modification or refi -

foreclosure crisis. The most promising legislation enacted

nancing program , four catego ries of post-foreclosure

thus far has been a n expans ion of Federal Housing Admin-

activity are needed:

istration ( FHA) to e nable the refin a ncing of up to 400,000
a dd itional loans that likely a re heading to fore clos ure

Improve data on the ownership and availability of fore-

between 2009 and 201 1. While this is a start, it represents a

closed properties. The first challenge is to determine the

very small portion of existi ng problem loans. Moreover, for

fu ll extent of the damage likely to occ ur should there be

a vaiiety of legislative and administrative reasons, the pro-

no additional and meaningful support for borrowers. The

gram is not likely to go into effect fu lly until early 2009.

housing industry is in need of more robust data - specifi-

By that time, more than a n additional million househo lds

cally forecasts - on the types, as well as locations, of loans

will have gone into foreclosure. And , the recently enac ted

likely to fail over the next 12 to 36 months. This information

$700 billion financial system rescue package remains impre-

would be useful for cities to better plan ai1d prepai-e for the

cise about how foreclosures will be addressed.

continuing foreclosm e c1isis.

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3

Develop and implement post-foreclosure damage mitiga-

also be purged from the housing ma.t·kct through more com-

tion and rehabilitation strategies. Nonprofits and local

prehensive anti-preclatmy lending lcgislat ion. The Federal

govcmnwnts also need enhanced initiatives to enable th em

Rese rve Boa.rd has issued new lloml!

to coorclinate the iclentification of vacant ancl abandonccl

Pro tl!ctio11 Act (I IOEPA) regu lati ons pertaining lo a broad

01 1•11 /! r

Equi ty and

properties. Thi s allows for ea rly intc1Tent ion and preven-

range of abusive lending practi ces in the m011gage industry.

ti ve effort s to lim.it vandalism cm d crime. Programs ar e also

Th e rules address almost e\·c1y aspect o f high-cost lend-

needed to facilitate the transfer of m,11crship of foreclosed

ing, from underwriting and app raisal practices to product

propert ies into a housing trust or similar vehi cle fo r renova-

mar ket ing ancl more.

tion and rctLml to affordable housing usage. This interwn-

Tlwsc rev isions take an import ant st ep forward in pro-

t ion is needed in many communiti es, especially where fore-

\"idi ng en hanced con sumer protection in th e high-cost

closures are concentrated. Increasing neccl for affordable

mortgage market. But therC' remain a number of ways

rent al housing wi ll also be a challenge for th ese communi-

in which consumers are vul nerable to abusive mortgage

t ics as homeowners losi ng thei r propert ies contribute to a

lcnclin g practices, such as y iclcl -spreacl premi ums. That

growin g rental demand.

pra ct ic-c, as well as many ol lw rs, should bC' add re ssed
by a strong nati ona l anti-predatory lending law that ca n

Jump-start emerging market homeownership. Th is issue

complement the revised I-IOEPA regu lat ions.

relates tot he resale of housing. ln nm·at i\·c products and
approaches to homemrnership will help minority families

0

e

ancl com munities regain the losses they arc disproportion-

The current fo recl osure crisis is a clari on call for

ately exper iencing as a r esu lt o f t he forec losure epidemic.

financ ial system regulato ry reform. The U.S. Depa.ti-

Shared equi ty mortgages, fo r exa mple, hold great prom ise

mcnt o f I he Treas ur y r ecen tl y release d a r eport th at

fo r bringing consumers into th e housing market who arc

rcc-ogni zccl I he need t o restr uct urc the fin ancial regu la-

unable to make large clown payments, but who are other-

t ory sys t em. The report foc uses heav i ly on the adva nces

wise rcacly for homeownership.

in financial engineering, technological evolution, conflicts

llncler a sha.recl-equ.ity a.tTangcmcnt, an im·cstor cont1ib-

of int crest, owrlapping or confusing rcgu latory oversight

utcs some or a.II of the d0\\11 payment for a home pmcha.se

or author ity, and growth of new internat iona l competitor

in rel urn for a fixed sha.t·e of the futu re home price appreci-

fi nancia l systems.

at ion. Shared-equity mmtgagcs wou ld also be an important

Th C'SC' arC' all important issuC's, but t hC' current finan cial

antidote to the ma.t·ket's recent fai lure to prot ect financially

cli strC'ss may be clue to more ru nclam cnl al issues, such as

ntlncrablc borrowers, because th ey ensure th at an inves-

poorl y rC'gul atcd market s thal al lowed rec kl ess lending

tor's equit y is on th e li ne, and I hcrcforc the borrower's and

beh avio r to pC'rmeate thC' sys tC'm . Although much of the

investor's interests are aligned.

current fin ancial cris is resu lts from reg ional economic

LC'asc-purchase products arc also promi sing tools, pa r-

clownt urns and spcculatiYe purchases of homes in response

ti cul arly i n th e current enY i ro n nH' nt in w hi ch th e cr eel it

to rapid ly rising prices, wicl espreacl decept ive lend.ing prac-

scor es or potentially millio ns o f cons umers haYe been

tices fue led, or at lea.st suppo rted , I he market's meltdown.

damaged, in many cases due to un fair and deceptive loan

Stated oth erwise, the bas ic welfare o f the bo rrowin g

products. Despite th eir blem ishC'd cred it hi stories, mil-

public- was not the pa.t·a.i110Lmt focus of regu latory O\'ersight.

l ions or fa milies may, nevert heless, remain fully prepa red

FailurC' to acknowledge th.is issue in tlw cont ei..1: of fu1ancial

l o own uncler reaso nable financ ial circ um stan ces. And ,

syslC'm mocle111ization a.t11ounts to a rC'shuffli ng of the chairs

lease-purchase products mi ght be t he in novation to return

on th e dec k or the sh i p. Anet it leaves the ship of finan ci al

th ose consumers sa fe ly to t he homeo wnershi p mar ket .

rc gul at ion vulnerabl e to fur l her catas l rophic events in
the rut ure. As I lan·ard Ln ivcrsit y law professor El izabeth

Purge predatory lending from the housing markets.

Wa.t-rcn has a.itfully stated, consumers had better protection

l 'nfair ancl clecepti\·e lencl.ing practi ces greatly cont1ibutecl

buying a toaster or micro\,·a\·C' o\·en than they had \,·hen

to th e cu rrent foreclosure crisis. Those bcha\iors shoul d

purchasing the fam ily home.

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VO LU ME 18 , NUMBER 3

"Inefficient land use patterns artificially drive up the costs of
housing and create problems where problems need not exist."
Rethink in g the finan cia l system should beg in with
the goal or enhanc in g the economie well-being of the

the same pote ntia l to participate in tlw financ ial system.
But with nearly 10 million unbanked households, it seem s

American public. This means hC'lping people, families,

more eould be done to achie\·c a more indusi\'C financial

eommunities and the nation build wealth , enh ance

system. In fact. a recent report by the Center for Financial

eeonomie mobility, and ensure the nation's economic

Se1Ticcs l nnO\·ation estimates that then' arc ..JO million

eompctiti\·e1iess in an increasingly compet itive globa l

uncler-bankf'd households (t hose not accessing the full

ceonomy. Regulation of t he financ ia l syste m shou ld

ancl appropria te range of banking sc n ·iccs) in th e l'.S.

i nc lu cle a m easu re of how well t It(' sys t em promotes

Brin gin g I hem i nto th e fi nancial ma in stn'a m wou ld

th e econo mi c int cr ests oft he Amc ri ean p ub ! ic- noL

enable t !tern to leverage their resources and be tt er engage

just m eas u re the profitabi l ity or fina ncial in st itutions.

the housing marke ts in a more support ed ancl fin anc ially

This goa l shou ld be sel f-e\·iclent, bu t it is not . We now
h,n-e millions of problem loans ancl hundreds oft roublecl

sophist ieal eel manner.
Finally, regulation of the financial system shou ld

financial institutions that pro\·c that it is possible for finan-

encourage product innoYation, particularly among mort-

eial institul ions to make extraordinary sums of money ( in

gage procluets, in a manner that mig ht expand safe and

the short-term) whi le acting in a manner that is in contra-

sound homeownership.

vention of the financial needs or their customers. Financial
system moderni zat ion can not afford to ignore thi s point in
the future.
As a sta rtin g point for an enhanced eonsumer focus fo r
fin ancial regulation , financia l regu latory agencies should

3

Encourage more efficient, lower-cost and environ•
mentally sensitive land-use planning, building codes,

construction practic s and related pr1ctices

Prior lo the fo reclosure crisis, th e ll.S. was suffering !i·om

st udy more in depth which households are left out of the

rap idly growing problems that reached from coast to coast.

system, why, and what can be clone to bring them into the

When the current irn·entory of unsold homes is off the

financial mainstream of the 21st n'ntury. Not e\·eIyone has

markf'l, those problems will return. Inefficient land-use

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5

pattf' m s artificially cl1i,·e up tlw costs of housing and creatf'
problems where problems need not exist.
Th e sih-er l inin g of t he rece nt energy price shoc k was
I he wakP -up call that our current land-use practi ces ar c
c-o unl crprodu c- t ivc t.o th e public int f'resl. A lthough energy
prices rec-C'nt ly ha,·e fa llen dralllat ic-a lly, as a direct result
o f fpa rs o f a globa l recess ion , energy prices w ill r eturn
t o unaffo rd able leYels ,,·he n g lobal economi c markets
reboun d . As a res ult , federa l poli cies should tie HOi\IE ,
Community Dew lopment Block Grants (C DBG), and oth er
housing subsidies-along with highway, mass transit and
o th er infrastru ct ure fun ds- to th e way i n whic h com1nunities plan and build in an cfTi ci('n( mann er. T his would
help red uce th e need for public- subsidi es to buy clow n the
rents on unnecessari ly over-pric-C'd housing.
Addressing fundamental weaknesses in land-use regulat ions with th e goa l of pr m·icling opportun ities to produce
more housing, encouraging greater relian ce on innm·ath·e
building tC'chnologies, cleterlllining tlw benefits and costs
of a.lt emati,·e green technologies, updating building codes,

"What are the relationships between
housing policy and energy, trans-

rn1d streamlining permitting-and-apprm ·al processes is th e
key to IC'veraging market fore-C's mon' dkcti,·ely to meet
I he housing challenges of the fut un'.

Re

portation, education and other
national programmatic priorities?"

r

It wou ld be a stretch to say th at th e L·.s. has a housing policy. \\'ith the except ion of the general goa l o f
increasing homeownership llf' ld by mu ltiple and succes-

ulati on -i And, based on that response, what are the relation-

si,·e adm ini strations, and an occasiona lly C'Xpressed desire

ships bet ween housing policy and energy, t ranspo rtati on,

Io promote mi xed-income housing, t herf' are few, if any,

educat ion and other national programmati c- prio1ities? Suf-

meaningful nationa l obj ectives aga ins t whi ch federa l

fi ce it to say that havin g a focused discussion on the goals

housing programs might be measured. In fac t , rat her th an

of housi ng policy would enhrn1c-e our discussion of ways

a policy, we have a range of prograllls I hat elate bac k t o the

in whi ch the finrn1 cial system can play the most CJq)ansive

Great Depression- many of w hich an' in need of seri ous

and rob ust role in its suppo1t. Beyond th ese general macro

ovC'rh aul. T he demographic face and age' of th e popu lati on

issues, housing policy shoul d address each segment of the

has changed d ramatica lly o,·er t lw las t half cen tury and

population and their unique shelter challenges.

conti nues to e,·oh·e rapidly. Bot h o ft llf'se issues present a

In a rece nt lecture, Henry Cisneros, fo1111er Secretaiy of

host of challenges and opport unities fo r th e nati on's hous-

the L'.S. Department of Housing and Urban Development,

ing infrastru cture.

sugg0sted th at housing ca n be v iewed as a contin uum of

i\l oreon'r, energy and ot her e1wiron mcntal concern s

st eps. T he lowest step is homelessness, moYing next t o

me now major inputs into housing policy considerati ons-

support ive housing and ult imat ely a mo,·e up to l ong-

issues that were al l but completely ignored a half-centmy

t er m homeownership. Perh aps most powe rful about thi s

ago. These issues raise broad quest ions such as: What is th e

approach is th at by concei,·ing o f housi ng as a continuum,

role of hou sing policy i n promo! ing ,·ibranl com mu nities

it encourages pol icy makers t o thi nk o f house holds as

rn1cl the economic int erests and soc ial we ll-being o f the pop-

mm ·in g up a c hain of h ou sin g successes. This housing

6 FRASER
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VOLUME 18 , NUMBER 3

staircase can also be used as a tool to examine the federal

priority, all combine to w1clermin e progr ess on this essential

subsidies provided at each le, ·el to determine where the

national mandate.

allocation of public resources might be more effective ly
and appropriately re directed to create upward mobi li ty on

I n response to th is continued failure to enforce the law,
the National Commmtity Reinvestment Coalition has asked,
in Congress ional testimony in June oft hi s ye ar, for the

the housing continuum.

es tabli shment of a new cabinet-l evel agency fo cused on

n

Civil Rights Enforcement. Thi s agency would be respon-

l\lany of today's housing problems, particularly those

sible for measuring, monitorin g and eliminating all form s

related to minority communities, arc the result of the

of discrimination from ou r soci ety once and for all. A nd

legacy of cliscrimi nation and its continuation. Failme to cUnti-

give n the importance of housing to accessing opportun i-

natc housing cliscri.mination reinforces th e economic clistress

ties for social and economic advancement, housing-relat ed

of disenfranchised co n1111 w1ities and contTibutes to conti.nu-

laws would be among th e new agency's highest priorities.

i.ng severe levels of segregation and its attendant problems of

Enforcing the law would immediately open the door for mil-

i.n.fe1ior housing options, limited access to quality education,

lions of households who are ready and prepared to access

rest1ictecljob oppo1tun.ities, and artificially constrained home

improw cl housing opportunities and for whom th e on ly

p1ice appreciation for conrn1wuti es of color.

impediment is illegal clisc1inunatory actions.

Unfortunately, fully 40 year s after th e passage of the

Fair !lous ing Act, th e laws protecting the rig hts and inter-

Conclusion

ests of minor ity fam ili es in th e housing market r emain

Th e fut ure of housing po li cy dema nds a systemic

poorly enforced. Tod ay, a conservati ve est imate by th e

approach to th e issues. Piecemeal strat egi es have run

Nati onal Fair Hous in g A lliance suggests t hat roughly

their course and wi ll be insufficient to address our severe

3.7 million instances of disc rimin at ion occ ur annua lly.

housing challenges. Success will require that the financial

At the same time, the number of cases brought by federa l

system better seIve the American publi c. Success will hinge

agencies r esponsible for fa ir housing and equal c redit

on th e extent to whjch land-use a.r1d development practices

opportunity enfor ce ment i s abysmally low.

a.re better man aged to creat e gr eate r affordable housing

In fact, for more than a decade community leaders, civil
1ights proponents and consumer groups have warned about

opportunities w ith few er federal ho usin g resou rces.
Success will require that housing subsiclies be allocated

unfair, deceptive and abusive lending practices targeted

in a fair and equitable manner to achie,·e greater benefits

in comm unities of co lor. Yet, those pleas for better l end-

by a broader range of households. Success will depend

ing supervision were not on ly ignored, but in some cases

on special programs by local governments and nonprofit

contraclictecl by regulatory policy that weakened th e ability

organizations to address the unique problems created by

of states to protect th ei r owi1 citizens from predatory lend-

high foreclos ure activity-particularly in distressed com-

ing. The net result, accordi.ng to the Center for Responsible

munities. And, fina lly, success demands an encl to biased

Lending, is that the current foreclosw-e trend could result in

and discriminatory r eal estate practices that deny minor-

more than 10 percent and 8 percent losses i.n homeowi1er-

ity households a broader ra nge of housing and economic

ship for African American and Latino households respec-

opportunities for reasons unrelated to th eir financial abiljty_

tively. United for a Fair Economy estimates this loss could
translate into a total loss of wealth among nunori ty households of between $164 billion and more than $200 billion.
A lack of funding is a major pa.rt of the problem of poor

This is a tall order to fill , but i.f we me willing to add ress
the problems we face at a more system ic level, perh aps we
may finally see more substan tial positive results th at a.r-e
achievable a.r1cl essential. •

regulation. But money is not the only issue. A lack of appropriate coordination a.r11ong va.rfous agencies responsib le for
enforcing civil tigh ts and equal opport1mity, a.r1cl insufficient

For more information about the National Community
Reinvestment Coalition visit www.ncrc .org.

politi cal stature at the federal administrative level of government to make elim ination of discrimi nation a national

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7

Mortgage Fraud in Sixth District

OVER THE LAST SEVERAL YEARS, UPSETS IN THE HOME FINANCE MARKET HAVE EXPOSED EXTENSIVE
MORTGAGE FRAUD. ALTHOUGH CONSUMERS HAVE BECOME INCREASINGLY AWARE OF THE PRO BLEM,
OPPORTUNISTS WILL ALWAYS TRY TO STAY A STEP AHEAD BY DEVELOPI NG NEW WAYS OF PERPETRATING
MORTGAGE FRAUD.

What is mortgage fraud?

The Federal Bureau

of Inves tigation defi nes mortgage fraud as "o ny mct1 e1·iol
misstatement , mis reprnse11 tati o11

01·

upon by cm u11derw1·ife1·

to jimcl , pw'Clw se or

01 · l e11de1·

omission relied

case of refimm cing, cash equi ty. In this case, the borrower
in tends to repay the loan but has misrepresented information such as income or assets that otherwise would have
caused the loan to be denied. In the past, fraud for ho using

insure a loan. " Mortgage frau d schemes range in com-

was typically committed by a borrower acting alone. But in

plexity from misrepresentations by a s ingle borrower con-

recent years it has increasingly involved industry insiders

cerni ng income, assets or property occupa ncy to complex

who conspire to qualify borrowers for loans-sometimes

schemes orchestrated by loan ol'ficers, a ttorneys, apprais-

wi thout the borrower's knowledge.

ers, title age nts, rec ruiters, straw buyers a nd others acting

ln jim1 djo1· prnjit, the peqJetrator's intent is to bilk the

in collusion to defraud fin ancial in stitutions and pr ivate

mortgage le nder of as muc h money as possible. These

investors of mill ions of dolla rs.

fraudsters do not intend to repay the loan. Prope1ty values
a re typically inflated to provide as much profit as possible.

Three primary types of mortgage fraud

Mo1tgage fraud typically fal ls into three categories. In
jirmclfor housing, the intent is to obtain hous ing or, in the

8 FRASER
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Federal Reserve Bank of St. Louis

lndust1y insiders such as mortgage brokers, appraisers, title
compan ies and loan officers collude in th is type of fraud ,
which often involves multiple transactions a nd borrowers.

VOLUME 18, NU M BER 3

Fra ucl f or Ni 111i11al e11/ r rpri .w' uses procr r cl s from a
mortgage fraud scheme t o fund crim inal ac t iv itir s and to

phones and mail drops to verify fraudulent employment and
income inform al ion.

launder money. Prostitution, cl ru g manu fa ctu rin g, smug-

Because compensation in t hr mortgage indust Iy is com-

gling, t errori sm, fa lse document production and counter-

mission- and fre-basecl , brokers and other inclust ry partici-

feiting ar e among th e crimes th at have been undNwritten

pants ar r mot i,·atr d to oii ginat e an d close as many loans as

by mor tgage fraud. For exa mple in t he At lanta area , straw

possible to ma,._j mjze personal income. Relaxrcl unden,Tit -

borrowers were used t o purchase residential homes in

ing cri teri a and low-doc loa ns reduce the ti me from loan

upscale neighborhoods fort hr purpose of grow ing indoor

app lication to loan closing and rn ablr brokers Io grneratr

marijuana crops.

grea ter loan volum es. In some inst ances, inclust ry pro fessionals were dri,·en by personal ga in to do wh atr , ·er was

Factors driving mortgage fraud

necessary to qualify a borrower for a mo11 gagr . Dr,·r loprrs

Fierce compC'lit ion i n thr mort gage industry prompted

and builders with large invent ori es of lots and homes th at

lender s t o c ul cos ts and ex prcl it e loan clos ings. To c ut

wrrr not selling conspi.rr cl with individuals in t hr mort gage

costs, m any lencler s sh i ft ed resources from qu ali ty con-

indust1y to mm·e proprtiirs. Documents wrrr altered and

trol , \\·hich is how questionable loa ns are detect r d, to loan

nr w documents were created.

producti on. Limited document ati on loans, also known as
stated or "low-doc loans," wr rr introduced to rrclu ce costs

Borrower mi srepresentation s concernin g empl oyment ,
income, assets, liabi lities, and occupancy were common -

and hasten loa n closings. Low-cloc loans were ju tified by

place ancl oft en necessa ry to grt a loan apprm ·ed. Freddie

t he expec t at ion th at prope rt y apprec iati on would offse t

Mac estimates th at misrepresentati on concerning borrower

th e risk s. Lend ers simply rrl ird on th e borrower's wo rd

capac ity (empl oy ment , in come , asse ts and liabiliti es)

I hat i ncome and oth er fin ancial information stalrd on thr

account for more t han 50 percent of commo n mi srepr e-

applicati on wrrr true.
In additi on, rapid ly increas ing propert y ,·alurs made

sentati ons. In some instances, th e bor rower is un aware
o f the se mi sreprese ntati ons. Other comm on mi sr epre-

homeo,,11ershi p less affordable to consw1iers. Thr industry

sentati ons concerning coll at era! ,·alue, cl ow n payment ,

responded by introducing nontraditional loan s, incl uding

occ upancy and prop ert y ty pe ma ke up an es tim at ed

subprime loans, to help more consumers purchase homes.

:3!5 percent of common mi representations. Thr remaining

1

ont:ractiti onal loans allow boiTo wers to defer principal and

misrepresentati ons invoh·r credit score and identit y.

interest payments o,·er a specified time peri od. Competiti on
for subprim r loan clients induced lenders to relax under-

Mortgage fraud in the Fed's Atlanta District

w riting cri teria and offer low-doc subp ri me loans. Lenders

Depository instil utions arr required t o fil e Suspicious

have genrratrcl significant pro fi ts by sellin g subprime loans

Acti vity Reports (SARs) with thr Financial Cri mes Enforce-

to Wall St rrrt . Wall Stree t 's appetite for hi gher y ieldin g

ment Net work ( Fin CEN) w hen fraud is suspec t ed . Thr

mortgage obligati ons has brrn cited as a primary reason

number of SAR filin gs is oft en used to measure mortgage

thr subprimr market grew so rapidly.

fra ud. Thr ch art on page 10 shows mortgage fraud SAR

Technology and the Internet al so made mort gage fraud

fi lings nationwid e from 1996 throu gh 2007. During thi s

easier. Employment and i11come ,·eri.ficati ons arr easily pw~

period t he number of SARs filed by deposito1y instituti ons

chased owr thr Internet, as arr false identities. F'rauclsters

gre\\· from l ,720 to ,31,-158.

use photo editing softwar e to enhance appraisal photos

As a pr rcrntagr of SARs nati onwid e, th ose fi led in thr

t hat suppo rt inflated property va lues. Indi v idu al s w it h

Federal Resrr ve's Six th Distri ct peakecl br t wren 1999

poor credit could increase their credit scores, for a fee, by

and 200:3. In 200:3, Si x th Di stri ct mortgage fraud SAR s

piggybac kin g on the credit o f in div iduals with high credit

represe nted 16.7 per cent oft hose filed nal io n w ide. Th r

scores. Fraudulent documents such as mort gage sa ti sfac-

pr rcrntagr dropped to 8. 7 percent in 2007 when a record

tions, leases, bank statements ancl brokerage st atrments

number o f' SAHs were fil ecl nati onally. Am ong Sixth Dis-

are now easi ly crea ted using common software. In larger-

tr ict st at es, Florida has filed th e most mort gage fraud

scale moii gagr fraud operati ons, fraudsters usr prepaid cell

SA Rs, fo llo wr cl by Georgia and Tennessee.

Digitized for FEDERAL
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9

o f m o rt gage' frau d , th ough es t i m at eel in I hC' b illion s of

Nationwide Mortgage Fraud SARs Filed 1996-2007

do ll ar s, w ill ne\·er be kn own .
Mo rt gage fraud assu m es m any gu ises. For exam ple,

60,000

i ndivi duals have been l u red by th e prospec ( of b ig r etu rn s
al th e po i nt of sale i nt o fin anci ng const ru e( ion of homes
50,000

i n cl c\·elopment s w ith slow sales. In a Lou isiana scheme
ju st p r io r t o llurrica ne Kat r i na, m any in cli \' icl uals col-

40,000

luded to rec rui t i m ·es t or s to obt ai n a co nstru ct ion l oan
\\·hil C' mi srepresentin g t ha l lh c p rope rti es \\'o u ld b e

30,000

0 1\· nc r-occ· u p ied.

20,000

Prosecuting mortgage fraud
Mort gage fraud in Six th D ist ri c( st at es is being aggr essively prosecut ed. In Ju ne 2008, I he U.S. Depar tment of
Ju sti ce and th e Fed era l Bureau of In vest iga ti on ( FBI)
an no unc ed a nationa l t a k edown o f m o rt gage' fraud

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

sd lC'nws in Operation Ma licious l\1or tgage. From l\larch 1
to.June 18, 2008, Oper ati on l\ Ialicious l\ l ort gage resulted in

Fmanc,al Crimes Enforcement Network (F,nCEN). The SAR Act,v,ty Review By 1/le
Numbers. Issue 10 ~lay 2008.

l..J-1 mor tgage fraud cases cited in ewr y rC'gion of th e count r y. A t leas t ..JOG defendants were charged. Th C' FB I estim at es t ha( t hC' \'ario us schemes em ployed in th ese cases

A lthough SA R fi lings arc comm on ly used to m easure
m ort gage frau d a nd ident ify st at es w ith hi gh rat es of

ca used app rox imately $1 b i llion i n losses. U.S. A ttorney's
O ffi ces th ro ughout t he Fed's Six th Di stri c t anno un ced

mor tgage fraud , t her e are several reasons w hy SAR dat a

i ndi ctm ent s from Operati on Mali cious Mor tgage in South

may no t be an acc u rat e ind ica t o r. Deposi t or y in stit u-

F lori da, .Jac kson\'i lle, Fort My ers, A tl anl a, Nasll\'ille, New

li ons ar e required to fi le a SA R w lwn fraud is det ected

Orl ea ns and Jack son.

or suspec t ed, but fi li ng is not p roo f th at frau d ac tu ally
occ u rred. Pri \·atc m ort gage lenders, \\'hi ch account for
app rox im at ely half o f all m o rt gage o r ig i nati ons, ar e

Is the worst over?
l s th C' worst mortgage fraud behind us? The recent esca-

nol requ ired t o fil e SA Rs. In add it ion, some SA R fi l in gs

lal ion in fraud has prompt eel IC'ncln s to I ight en unclerw1i t-

report ind iv idual mortgage fraud I ran sac t ions wh ile other

i ng st and ard s and i ncr ease p re-fund ing quality control s.

SA R fi l in gs report mu ltip le tra nsac t ions ori gin at ed, say,

But we can C')qJect new and C'x.i sting variat ions of mortgage

by th e same emp loyee. The SA R data report ed by F'in CEN

fraud schemes to continue, such as air loans, builder bai l-

docs nol take into considera tion mull iple I ransac l ions or

outs, chunking or gunni ng, i ll egal propC'l' ty ni ps, the one-

th e doll ar amount o f fraucl u lcnl mort gage t ransac tion s.

I ransac t ion fli ps, foreclosure rescue' scam s, C'quity stripping,

A rc fo rec losu res a bet ter ind ica tor o f mor tgage fraud?

ic! C'nl ity I he['( sc hem es, phant om second I iens, churning,

Li ke m ort gage fraud , forec los u re's hm ·e al w ays had a

phant om leases, and pot houses, peqJC't rated by inclivi cluals

p rese nce i n th e mortgage indu stry. But mo r tgage fraud

wi th and wi th out co-conspirators motin1ted by g reed.

is only one oft he reasons fo r fo rec los ures. A borrower's
abil ity to mee t mortgage obligations n m change suddenly

■

This article was written by Linda Word, se111or exammer in the Atlanta Fed·s
Ant, Money Laundering Group.

cl ue to cli\·orce, unemploym ent, loss o f in come cl ue to poor
hca lt h, nlC'cli ca l expenses and a range o f' sit uati ons th at
ha\'C' noth in g t o do with m or tgage fra ud. Ne\·e rt hel ess,
bor rowC'l's do face fo r ec l os ure as r es u lt of m or tgage
fraud. Law en fo rce ment o ffi cia ls report t hat th e full cost

10 FRASER
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VOLUME 18 , NUM B ER 3

Tips for Avoiding Mortgage Fraud
For Consumers >>
□

Don 't overstate (or let your lender overstate) your incom e or assets to qu alify fo r a loan.

□

Don't state a com pany as your employer if you are not employed by that company.

□

Don 't overstate your position with your employer.

□

If you don 't intend to live in the property, don 't promise that you will.

□

Don 't state in the purchase contract that yo u paid a deposit unl ess you have.

□

Don't state that you rece ived a gift for the deposit if it is a loa n and has to be repaid.

□

Don 't sign two purchase contracts for a property and give the lender th e contract with the hi gher
purchase price in hope of qu alifyi ng for a larger loan .

□

A loa n officer who is the property li sting agent may not protect your intere sts.

□

Don't accept se ller incentives unless you disclose them to the lender.

For Financial Institutions >>
□

Cond uct due dili gence on all third -party originators. Kn ow who you're doing business with .

..J

Don't fun d the loan if all pre-closing cond ition s are not met.

□

Don 't all ow payments from th e se ll er's fu nds to non-lien holders.

□

Don 't accept an appraisal that is dated prior to the application date.

□

Don 't accept an appraisa l with com parab les that are clearly superior to the subj ect prope rty.

□

Don't accept bank state ment dep osits that are not consistent with income or payroll dates.

□

Don 't fun d a loan if the app li cant has an unu sual ly high in come given hi s profile, espec iall y fo r a
stated in come program.

□

Don 't fund a loan until you can explain inconsistency of ow nership between the titl e comm itment,
appra isal and sa les co ntract and un exp lained varia t ions in th e borro wer's name that appear
on documents.

□

Understand why th ere are cross-o uts on the titl e co mm itment, sa les contract or oth er loan
documents involving the borrowe r's name.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

Rule Changes Fine-Tune
Consumer Protection
In July of this year

thC' FC'clC'ral RcsC'1T(' Board

finalized new mortgage' rules unclC'r lhC' Truth in Lendi ng AC' I and Regulation Z resu lt ing in changC's that will
affect t hreC' classes of mor1 gagc loan products. Mortgage
products rC'fiecting thC' nC'w rul es inc-ludc I IOEPA loans
( I lo111cownC'rship Equity Prot C'C'I ion AC't), 11 igher-Priced
i\ l ortgagc loans ( HP;\! ), and C'onsu111C'r Principal Dwelling loans (C PD). :\lost of the new prO\isions will go into
pf°fC'C't on October 1, 2000.

A lt hough IIOEPA ru le's are largely unc hanged from t hC'
C' LI r rent prov isions in Regula! ion Z, tlw Boa rd did amend
two II OEPA sections of Regu la! ion Z re lated to loan li mitati ons for prepay ment ppnaltics as wdl as a borrower's
ability to repay a loan.

Prepayment penalties. The prcpay111ent penalty proYision originally allo\\·ecl a pC'na lt .v during the first fh·e years
foll owing consummation of t hC' loan. The final rule will
allow prepayment penalties only in tlw first two yea r s
o f a I IOEPA loan transact ion. T h is sec t io n also allows
a prepay ment penalt y for adjust able rate tran sac tion s
if th e periodic payment of pr incipal, interest or both do
not C'ha ngC' during the first fou r yc',HS oft he transact ion.
The prepayment penalty rule's also apply to high-priced

have higlwr-pricPd rates basPd 0 11 a for 111ula clPfined in thC'

mort gagC' loan transact ions.

rcgulat io n. ThC' final rul e rep rC'SC' nl s signi fi e-ant cha nges

Repayment ability. Repayment ability prm·isions prC'\'C'nt a lendC'r from making a I IOEPA loan with out con-

fro111 tlw ru !C's proposed in 2007.

Rate spread. The Board changed thC' Annual Percent -

sidC'ring ancl \'C'rifying a c-ons umC'r's repayment ab ility at

age• Rate (A PR) sp read in the final rulC' for first li en and

C'losing as indicate d by C'Xpcctccl in co me, e111ployment ,

subordina t e' l iC'n loans to 1. 5 and :J.5 IwrcC'nt age point ,

assPts o th C' r than co l lat eral, c uITC'nt ob ligations and

rC'spec·t i\·ely, abo\'e the "awragC' pri111C' offer rate" (APOR) .

111ort gagc- rPlatecl ob ligations.

APOR. ThC' nC'w APOR \\ill bC' basC'd on t hC' APR de1iwd
for tlw m·cragC' interest rates. points ,rnd other loan-pricing
tC'r111s currC'nt ly o ffered to consumPrs by a representa-

ThC' I IP:\! rul es identify a new class of 111ortgage loansthose sN·u rPd by a con su111cr·s prin c ipal dwelling that

Digitized12
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Federal Reserve Bank of St. Louis

t i\·C' samp le of creditors for 111ortgagP transa ct ions that
hm·c low-risk pricing charactcr ist ic-s. Tlw Board expect

VOLUME 18 , NUMBER 3

to pub! ish a r ate table \\·eek ly on thC' I nlC'rnet and \\·ill

c-onsumC'r tC'sting and othC'r data. ThC' final ruk includes

initiall y use th e rat es from the " Freclcli C' Mac Primary

only a ckfi nition of the term ··mortgage' broker."

Mortgage' MarkC't Survey." CurrC'nl Freclcli C' fac r ates are

It is important to note that while' thC' F'C'clera l Reserve

found on its WC'bsi l e ancl inc lucl C' rate's fort wo fixecl ancl

Board did no t acid new rules for mor tgage' brokC'rs about

two A RM produc ts.

YS Ps under the' Truth in LC' nd i ng Ac t as orig i na lly pro-

New Restrictions. Th e new 11PM ru le's also inclucle specific- r<'st ri c-t ions for prepaynwnt pC'na lt iC's ancl repayment

posed, YSPs arC' considered in th e finance' charge' and APR
disc-losures. YSPs must also be itemizC'cl ancl diselosed to

abilit .v assC'ssnwnts based on thC' I IOEPA rule's and rest ri c-

consumers on lhC' Hl-0-1 loan closing doc-unwnt , required

tions for C'sc-row accounts ancl opC'n-C'nciC'd cred it. The

by RC'al Estal<' Settlement Procedure's Act ( RESPA) .

escrow account rule's require' IC'nclC'rs making II Pl\! loans

Other prohibitions. The ot hc-r prohibit ions spC'cifica l ly

SC'c- u rC'd by a first li en on a consumC'r 's princ ipa l dwe ll-

relat i ng to c-oNcion of appraisC'rs and SNvic-ing practices

ing t o C'S t ab l ish , prior to closing lhC' t ransac-t ion, escrow

arC' similar to t hose in rul es as i nitia lly proposC'cl.

ac-c-ount s for propC'rty t axC's and mortgagC'-rdat ed insuranc-C' rC'quired by th e lender. BC'c-ausC' oft hC' operationa l
changPs rpquired for some IC'nders, lhC' Board has delayed

Th r fina l rule's also include c-hangC's to I he acl\·ertisi ng

thC' dTC'C'li\·C' dates for escro\\" accoun ts until April l, :2010

pro\·isions for bot h open-C'nclecl and closC'ci -C' nd cred it.

for 11 Pl\1 loa ns, excep t for those secu red by manufactured

T hC' changes rC'qu ire additional information about rates,

hou si ng, wh ich arC' delayed unti l Oc tobC'r I , 2010.

mo nt hly paynwnts and ollwr loan fC'aturC's. T hC' fina l
ru lC' also bans seve n deceptive' or mislC'acling acl\'C'rtisin g prac-t iC-C'S.

ThC' final rul e's also incluclC' a new SC'C- t ion for loans
SC'c- urPd by a cons umer's pr i ncipa l dwdling. Affecting
thC' broad<'sl categor y of loans, t hC'sC' rC'gu lat ions stipu -

In aclcl ition tot he Truth in LC'ncli ng/ RC'gu lat ion Z final

late' prohib ited acts or pract ic-C's for any cons u mer cr edi t

ru le changes, Cong ress recen tly passC'cl th e c-omprC'hen-

SC'C- llrC'cl by th e co nsumer's primar y homC', i ncludin g

sive I lousing and Economic Re covery Act of 2008, which

purchase' and non-purchase' monC'y tran sac t ions, prime

included c-hang<'s to th e Truth in LC'nding Act similar to

ancl subpr ime loans.

thC' rC'gulator y requirements discussed abo\·e. In particu-

Th<' proh ibited acts or prac-t ic-C's cowr rules rel ated to:
lhC' dC'finition of a mortgage brokC'r, mi srC'presentalion of

lar, C'arly Truth in Lending Act disclosure's are rC'quirC'd on
a broadC'r range' of mortgage products, at IC'ast seven clays

Uw value' of a consumer's dwC'll ing th ro ugh coercion of an

pri or to clos ing. T he Act wou ld also C'xpand civi l liabi lity

apprni sN, servicing practice's prohibitions and exemption

provi sio ns fort ransactions sec-ure cl by a dwe ll ing from

for home C'quity lines of credit ( I I ELOC's).

Mortgage broker. The regulation proposal issued in
:2007 inc-luded rules for mortgage brokC'J"s that prohibitC'cl paymC'nls bC'yo nd thos<' spC'cific-a lly ag reed to and
disc-losC'd in writing before closing t hC' transaction. The
proposC'cl rule' s particularly soug ht I o reduce broker
i nc-C'nt ivC's t o i ncrC'ase consu mC'r rates ancl Urn s lo lim it
lhC' pot C' nlia l unfai rness, clec- C'p ti on and abuse in thC' USC'

th e cu rrent amount-not less th an $:200 or grC'al er than
$:2 ,000- to not IC'ss than $--100 or grea t er than $--1 ,000. ■

For more information:
For access to all regulations and regulatori amendments go to wv.v.
federal reserve .gov, bankinforeg/ regl1st1ng.htm.
This article was written by Jeff Paul, manager for Industry Outreach and
E Bank111g/Privacy Act Comp liance 1n the Consumer Affairs Section at the
Atl anta Fed.

of y idd spread premiums ( YSP) .
While the Board r emains c-on c- C'rnC'd abo ut the yield
sprC'ad prC'm ium issue, they withdrew th<' broker rule on
thC' basis it m ay confuse consumers and undermine the
loan c!C'cision-maki ng process rat her t han improve it. ThC'
Board's c!C'c-ision was informed by an analysis of conm1ents,

FEDERA L RESERVE BA N K OF ATL ANTA

https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

13

Reverse Mortgages Revisited
Legislative Changes Introduce Greater Consumer Protections
REVERSE MORTGAGES, WHICH ALLOW HOMEOWNERS TO CONVERT A PORTION OF THEIR HOME
EQUITY TO CASH, ARE BECOMING INCREASINGLY POPULAR.

Despite recent troubles in the national mortgage

Adminis tration (FHA). Since 1989, HECMs have been orig-

ma rket, grow th in reverse mortgage lending is be ing

inated by private lenders an d purchased by Fa nn ie Mae.

driven by a fl exible govern ment-sponsored prod uct and

Although proprietary reverse mortgage products began to

a growing s upply of potential borrowers.

appea r in 1995, the recent economic tur moil has driven all

Like any mortgage product, reverse mortgages can be

I-I ECM competition out of the current marketplace.

beneficial for consumers' fina ncia l stability; but the prod-

The government-sponsored HECM product has defined

uct's complexity is a downside for borrowers. Whil e it is

the reverse mortgage market. HECMs req uire borrowers to

the consumer's responsibility to make informed decisions,

be at least 62 years old and to have a substantial an1ount of

new protections prov ided by the Housing and Economic

equity in their principal residence. HECMs use a fo rmula to

Recovery Act of 2008 (HERA) s hould enhance cons umer

determi ne the maxirn w11 amount of principal a homeowner

protection and education as thi s product develops.

can borrow. Under HERA, HUD created a unifo1111 national
m01tgage limit of $417,000, which replaced the regionally

How do reverse mortgages work?
Reverse mortgages are characterized by the pay ment
flow: rather than making mortgage payments, the borrower
receives cash from the lender. Thi s prod uct has thus far

based Lim.i ts that previously ex.isted. Borrowers can draw
do WTI payments in monthly installments, lu mp sums, lines
of credit or a combination of these options.
Bon·owers are not required to repay a reverse m01tgage

been targeted to older adults, enabli ng them to borrow

until a "maturity event," namely the death of the borrower,

against their home equity to create a tax-free source of

sale of the property or violation of the m01tgage agreement.

income while they continue living in their homes. Borrow-

Although borrowers do not make payments until they no

ers have no repayment obligation until the home is no lon-

longer inha bit the home, they are required to maintain the

ger their primary residence (the result of a move or death).

property, pay property taxes and pay the home insurance.

According to the National Council on Aging, the reverse

The loan pri ncipal for reve rse mortgages increases

mortgage is an important tool for seniors who intend to

with each payment, as interest and other accruing charges

"age in place," living at home as they grow older. AARP also

are rolled into the tota l funds advanced to the borrower.

s upports reverse mortgages as a valid financial option, but

HECMs a re avai lable with fixed or adjustable rates. Fees

urges borro wers to consider whether less costly options

for these products include sta ndard origin atio n fees, a

might meet their financial needs.

monthly servicing fee and an FHA insurance fee. Compared

The reverse mortgage market is dom inated by the Home

to forward m01tgages, the comparatively high upfront fees

Equity Conversion Mortgage (HECM), a product admini s-

associated with HECMs are typically offset by lower intei~

tered by the Department of I-lou sing a nd Urban Deve l-

est rates. As a result, HECMs may be an expensive option if

opment (HUD) an d in sured by HUD's Federal Ho us ing

the loan comes clue witll.in three years. Cost concerns have

Digitized14
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Federal Reserve Bank of St. Louis

VOLUME 18, NUMBER 3

recently been addressed by Congress through IIERA, whi ch

of th e secon d ary m ark et , w here mortgage buyers pur-

placed new lower limits on 11 ECM original ion fees.

chase loa ns from lenders. A n esta bli shed seconda r y
m arket for r eve rse m ortgages wo uld p rov ide great er

The reverse mortgage market is poised for take-off

l iquidity ancl cou ld broaden lender di stribution chan nels

After a peri od of very slow growth fro111 1900 to 2002,

ancl expan d t he investor base. A lthough the market was

t he reverse m ortgage m arket expanded exponentially in

slowly evo lv in g t he necessa r y tec hniqu es to secur itize

recent years. Though t hey now represent on ly l percent

thes e p rodu cts, the econo mi c downturn m ay stall or

o f th e overa ll 111ortgage-lend ing market, these loans were

redirect its rea li zation.

expected 10 mu shroom by as mu ch as t enfold in th e next
20 years.
Given the recent changes in th e economic climate, these

Obstacles to stronger consumer protections
Reverse mortgages are a complicat ed financ ial product,

projections m ay soon be seen as ove r stated . A lt ho ugh

and burgeon i ng vari eties o f reverse m ortgage opt ion s

th e HECM product showed margina l growt h in fi scal year

make it increasing ly difficu lt for borro wers to cl et erm ine

2008, re\·er se mortgage lend ing overall dec reased slightly.

w hi ch reve rse mortgage, if any, is su itable. It is crit ica l

The decrease in lending was driven by the w ithdrawal of

th at potential borrowers of reverse m ortgages, many of

proprietm·y procluct:s m1d the l IECM mortgage limi t changes

w hom are SC'ni ors, get adequate inform ation and, prC'fer-

resulting from the enactment of HERA. The ind ustry is

ab ly, counse ling. Borrowers w ho take out an I l ECM ar e

projecting mm·ket growth in fiscal year 2009, resulting from

required t o comp lete Hl"D-certified cou nse ling; but pri-

pent up demand fro m 2008, eligible seniors needing addi-

vate products that do not requ ire counseling lem·e consum-

tional cash to recover from substantial losses in th e stock

ers on their own to determinC' whether a reverse mortgage

market, ancl an expected increase in available capital from

product wi ll sui l their needs.

a new Ginn ie Mae securitizat ion progran1 .
Demograph ic trends point t o the likelihood of esca lat-

Govern ment and industry efforts to improve th <' value
of counseling and expand its avai lability have faced chal-

ing consum er interest in reverse mortgages. America ns

lenges. The quality of reverse mortgage cou nse ling op tions

62 years o f age and older c ur renlly hole! an estimat ed

appears to vary greatly. I-IUD-approved agencies m·e, at a

$4.3 trillion i n hom e equi ty. As baby boome rs quick ly

minimw11, required to focus on product suit ab ilit y m1d th e

become age-el igible, this number will increase clran1ati cally.

possible altern ati\·es, but I-IUD-certified cmmselors and

Con sume r interes t will also be sti mulated by increasin g

their counteq)mts face different stm1dm·cls. An d even within

product options and in novati ons.
Lenders' interest in the reverse mor tgage market co ul d
quicken if capita l b ecomes m·ailable from t he grow th

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th e certified group, expectati ons and proced ures vary:
eounseling may be offered by vicleo, telephone or in person,
and sessions range from 10 minutes to two hou rs.

15

Rrcrnlly passed HERA legislation inc-ludrs prmisions to
improvr thr quality of HECI\ I c-ounsrling by rrquiring HCD

purchasr annuit ics or insura nce is almos t al ways financially unsound.

to rstab lish additional standards for individ ual counselors.

Cong rrss has att empted to address thr se predatory

11 UD is rrsponding by implemr nti ng ongoing counselor

practicrs th ro ugh IIERA by prohibiti ng lr ndrrs from being

training as well as instituting a crrtiJicate program for bor--

associatrd with any other "fin ancial or insurance acti\·ity"

rowrrs. t ·nrortunately. the cost of thrsr improYemcnts will

unl ess thry mainta in appropri ate firewa lls. II ERA also

probably br passed on to the borrowrrs.

prohibits many mortgage brokers, who are less regu lated,

A lack of m·ai.lable cOLmselors in somr locati ons, particu-

from re,·r rsr IPnd ing by requ iring all lenders to be HC D--

larly in ar ras with a hem-y , ·olumr of rr,·r rsr mortgages, is

approH•d. ll m-,·e,·er, the reg ulation s and suprn·ision of

anothrr sourer of concern. Cun-rntly, thr nrrcl for cow1sel--

thi s Jpg islati on havr not yet bee n imp lemr ntecl.

ors sprc-ializing in reverse mo1tgagrs is c-omprt ing with the
nat ional surgr in drmand for forrclosurr counselors.

Drspi te t he ri sks , rever se mortgages offer consum er s
an incrra si ngly important op t ion for accrssing add it ional
cash as I hr y agr. But· borrowers must srek sound i nform a-

Deterring predatory lenders

ti on about. whrthc r a reverse mortgage is t.hr ri ght product

Anrcclotal evidence suggests a ri sr in prrclato ry lending
pract icrs rri atecl to reverse mo rt gagrs. T hus, co unselor s must be even more equ ipprcl t o r clucat r bo rrower s

for thr m.

■

Additional Resources
American Association for Retired Persons (AARP): www.aarp.or1?1money/ revmort/

rPgarcl ing mass marketing schemrs for high-cost products
and sa les pressu r es, as well as proYidr gr1wra l fi nancial

Department of Housing and Urban Development (HUD): www.hud.gov; offices/
hsg/ sfh/ hecm/ hecmshome.cfm

planning. One practice th at has raisrd pa rt icular concern
is a t ac t.i c th at advi ses r eversr-- mort gagr bo rrower s to
bundlr t hrir loan s with a second fin ancial product, such
as a drfrrrrd annu ity or insura ncr. Brcausr of the hi gh

Th is article was written by Heidi Kaplan. senior community affairs analyst at
the Board of Governors of the Federal Reserve System. Reprinted by permission. with upda tes. from the spnng 2008 issue of Bridges. a Community
Development newsletter published by the Federal Reserve Bank of St. Lows.

upfront cos t of reverse mortgagrs, using thi s product to

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Forging a Green Partnership:
An Introduction to the Atlanta Fed's
Green Development Primer
ANYONE WHO'S BEEN PAYING CLOSE ATTENTION
TO THE MEDIA LATELY MIGHT COME TO THE
CONCLUSION THAT GREEN IS THE NEW BLACK.

Priming the pump for green
To help financial institutions, communit y developers ai1d
nonp ro fit s under stand t he my th s and r0a lities o f green
building, tlw Federal Resen ·e Ban k o f At lai1ta is pu blishi ng
a C rrr11 Dr1•r/opm e11/ Prim rr l o inform tlwse key players
about green development practi ces. It includes ai1 overvi ew
o f gre0n bui ldi ng, a review o f th e cl ilTe rc·nt standards used

ewspapers, magazines and blogs are sw ai111ing wi t h arti cles abou t green. B ut "gr een" is not just a

in I he inclust 1y, ai1alysis of th e bcnd its and costs associated
w ith green deve lopment, discussions about the greening

markrt in g bu zz wo rd or a fas hi on trend- it's a bas ic

o f affordable ho using, ai1d a roster o f opportunit ics and

pri nci plc that w i II i ncr easingly info r m t he fu ture o f

challenges fo r finai1 cial instituti ons int erested in supporting

energy po li cy, car pu r chasin g, bu i ldi ng co nstru ctio n,

green d0velopment.

urban deve lopm ent and li fest y les in ge nera l.
Ban ks, whi ch have always been interest ed i n one par-

"Green development" is any develop ment , whether resident ial, commercial , industrial or instil uti onal, wh eth er

ti c ul ar shade of green, are ex pand ing th eir palett e and

single bu il ding or entire neighborh ood, I hat is designed,

ex per i menti ng w ith new shades. Indeed, em ·i ronmental

constru cted, maintained and operated so th at ii red uces

al trui sm , shareho lder r equest s and c ust o mer prefer-

energy and rcsmu-ce consumption, enhances the well-being

ences arc all facto rs that co ntr ibute Lo fin ancial i nstit u-

o f th e commun ity and minim izes the negative impac t on

ti ons' 0mbrace of green principles. For exa mple, Ban k of

I he nal ural en vironment. T he need for gn•cn development

A meri ca , Well s Fa r go, PNC and JP Mor ga n Chase h ave

ar ises fro m the real ization that ai1 assum ption fu ndai11ental

committed to inves tment in em ·ironmentally susta inable

to t rad il ion al bui ldi ng prac ti ces is in fac t erron eous-

prac ti ces , in clu ding th eir lending, bui ld in g and oper a-

namely th at energy and materi als wi ll always be plentiful

ti o ns pr acti ces .

ai1cl cheap. Green building also se0 ks l o halt th e st eady

A lth ough banks are ac kn o wl edgin g th e i mpo rt a nce
of en v ironmental sustain abil ity-s ome have even devel-

degradati on of natural emironment al sys tems.
Gr een development b es t ows a va ri et y o f b en efit s o n

oped i nnova ti ve, "gr een" fi nan c ia l produ c ts - m any

i nd iv idua ls and com mu n iti es. Gr ee n bui ld i ngs th at use

opportun it ies r emain for banks, savings and loans, and

energy and w at er mor e effi ciently rewa rd o wn ers and

credit un ions to help propel green lendi ng into the main-

tcmrnts through lower operati ng costs. Th e reduced use of

stream. Wh ile many r ea l est at e develope r s and non-

toxi c- chemicals decreases poll ution and enhai1Ces health

profi ts h a\·e embrace d gr ee n princi ples , few finan ci al

by providi ng bett er air quality (both indoor ai1d out), whil e

products ex i st t o support t h is de\·elopment and fin ancial

more compac t development creates gr0ater opport unities

in stit utio ns, i n general , have lagged in th eir k nowledge

for physical acti vi ti es lik e walking ai1d bi cyc ling. Ac-cordin g

in th is area.

to reseai"Ch from the C.S. Green Building Council , Capital E,

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17

First Federal Savings Bank in Mishawaka. Indiana, uses wind turbines. geothermal l1eating ancl cooling systems. and solar panels to help meet its own energy
needs. Natural lighting not only reduces energy consumption; It also provides a positive environment for employees and customers. The bank opens its doors to
scl1ools and others to show how. according to First Federal President Richard E. Belcl1er. "One bank can make a difference. One person can make a difference ...

Dav id + Langdon, Rom m & Brow ni ng, and oth ers, build-

already demonstrate that th e costs of green con stru ct i on

ings th at arc both mor e effi ci ent and healthier yield other

arc rapi dly fa ll ing and nearly equi va lent w it h th e cost of

bonuses as well, including:

traditi onal deve lopment.

• higher rental rates
• discounted insmance rates

But to account fully fo r th e advantages of green building,
banks may need to review their cu1Tent under writin g prac-

• increased property values

ti ces and Lake more of a life-cycle approach l o determining

• increased occupancy rates

a projec t's economi c vi ability. Whil e a gree n building may

• increased employee production

have higher up-front capital costs, the diminished operat-

• reduced absenteeism

ing and main tenance costs over th e lifr of a green building

• and lax rebates.

oft en more th an offset th e initial costs.

Whi le t he ad va ntages o f gree n deve lop ment are m ul-

Eve n t hough gr een devel op ment pr ac ti ces h ave onl y

ti fo ld, rea l and per ceived cha ll enges di sco urage som e

rece nt ly beg un to at tract atte nti on , pushed to the fore-

fin ancia l in stit ution s from goin g green. T he most cit eel

fron t by mo unting ener gy prices and th e t hrcat of gl obal

obst ac le is th e lac k of dat a supportin g th e potential

cl imate change, several green standard s are already w ell-

co sts sav ings of green buildi ng. Because green bui lding

cs tablishccl in th e indu stry. LEE D ( Leadership in Energy

p racti ces ar c rel at iYely n ew, ti mc-t es t eel exa mp les of

and E1w ironmcntal Design) prov ides th e most well-known

success arr relatively few. But as grrc n build ing practices

nati onal st andarcl. Oth er nati onal st anda rcl s include th e

develop and become standarcli zccl , th e evi dence in its favor

l ".S. Env iro nm ent al Prot ec t ion Age ncy 's Ener gy St ar,

is mountin g. Stud ies by Capita l E and Davi d + Langdon

E nt erpr ise Foundat i on's Green Co mm unities Cr ite ri a

Digitized 18
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Federal Reserve Bank of St. Louis

VOLUME 18, NUMBER 3

"The founders of One Earth Bank
believe their mission will give them
a competitive advantage in an
increasingly socially and environmentally minded marketplace."

Green Branch locations reduce energy use by 50 percent
or more and reduce water usage by 6,200 ga llons a year
compared to trad itional branches.
A com munit y bank Lhat is Lruly in the v,rngua.rcl of green
fma.ncing is th e proposed One Earth Bank, in Austin, Texas.
Sc heduled t o open in late sprin g 2009, One Earth Bank
announced a mission of integrating social and environmental values into the business and lending practices o f a traclitional community bank model. They intend to work with
hom eowners, bus in esses and developers to expl ore ways
to maxi mize profiL by greening Lheir projects. ln addition to
providing traditi onal loan and deposi t servi ces, One Ea.ith
Bank is developing eiqJertise in segmenls they believe have

ancl the Nat ional Association of llome Builders' National

high grow1 h poten tial and a.re also consistent w ith bu ild-

Green Bui lding Standard. At t he state and regio nal levels,

ing sustainab le co mmunities:

standards are popping up e,·ery few months.

• local ly owned businesses
• real estate proj ects that integrate green bui ldi ng, smart

Greening banks
The Green Development Primer also features banks that
ha,·e already played a role in spearhead ing green de,·elopment. Banks a.re tac kling the sustainabili ty movement in a
vari ety of ways- by investing in green buildings and busi-

growt h, and em· i ronmenta lly sensiti,·e cte,·elopment
• clean technology a.i1cl energy compa.nirs
• businesses engaged in fair trade and li\·ing wage
initi at ives
• organ ic food and sustainable a.gricult ure companies.

nesses, offering more favorab le loans for green projects,
reducing the paper consumption and transportati on cost s
assoc iated with mailing statements and other documents

The fou nders of One Eaith Bank be lie\'e their mission
wi ll gi\·e them a co mpetiti,·e ach·antagr in an increas-

by bolstering their electron ic commun ication capabi lities,

ingly socially and environmentally minded marketplace.

and by bu ilding em·ironrnenta lly frie ndly reta il branches

Fo under, CEO and President, Chip Bray, states that the

and offices.

decision to invest in sustainable prod ucls "draws on one

First Federal Savings Bank is among th ose banks lea.cling

o f th e cardin al ru les of banki ng, a. fo cus on sa fety and

Uw way in green building. In Ap1il o f thi s year, First Federal

so un dness. Work ing wi th househo lds and busin esses to

openecl t he doors on a LEED Certi fie d branch in Misha-

furl her th e goal o f' sustainabili ty, w het her it's im proving

waka, Indiana. The 5,800 square foo l fac ili ty !'ea.Lures a roof

energy e ffi c iency o r respo nsi bl e mana.ge menL o f wa.sle

system that incorporates a drainage system and grasses to

streams , is comp leLely co nsist ent w ith the sa fety and

reduce torn1 water nmoff, wind turbinrs and a geothermal

so undness o f' our business." ■

heating and cooling system to reduce th e bu ilding's ener gy
consumption, and interior finishes o f recycled or renewable ma.te1ials that irnproYe indoor air quality. According to
Richard E. Belcher, First Federal Savings Bank's president,
Lhe Mishawaka bra nch is a model for other businesses.
"[Green bui lding] becomes more advantageous as the p1ice

For a more detailed account of the poss1bilIt1es and challenges
associated with green development and green financing. order a copy of
t11e Federal Reserve Bank of Atlanta's Green Development Pnmer today!
To order contact Karen Leone de Nie at karen.leondenielalatl.frb.org.
This article was written by Jared Yarsev1ch. research assistant in the
Atlanta Fed's community affairs division.

of energy goes up," said Belcher.
PNC Fina ncial Ser\'ices Group has experience w i th
greening banks. They built their first Green Branch in 2002,
and as of 2007 they had -10 emironmentally friend ly bank
branches. According to P)JC, the high-e mciency systems of

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19

Fed Report Confronts
Concentrated Poverty
Hurricane Katrina drew the nation's attention to the acute hardships that afflicted low-income communities caught in the disaster, thus focusing a new light on the persistence of concentrated
poverty in the U.S. As government officials, community development workers and neighborhood organizers tried to respond to the
devastation wreaked by the storm, it became apparent that replacing the physical infrastructure alone would not move the people of
this community out of poverty.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

The reality of concentrated poverty

poverty place a clouble-burcle n on

concentrated poverty in the U.S. today.
It co nsiders both urba n and rural

revealed by Katrina is mirrored in

poor families that live within th e m,

ma ny cities a nd rural areas through-

ma.king the ha rd ships imposed by

comm unities, those in the "Rust Belt"

o ut t he co untry, a nd it call s for a

their own indi vid ual circ um stances

and those in the "Sun Belt," those in

co mplex response c ustom ized to

even worse. Areas of concentrated

small cities as well as large cities. The

the partic ular circumstances of ea.ch

poverty can have wi de r effects on

study looks at a variety of races and

affected comm unity. In an effort to

surround ing areas as well , limit-

ethni cities affec ted by concentrated

develop s uccessful approaches to the

ing overall economic potential a nd

poverty, in cluding African American,

problem, the Federal Reserve Bank

social unity even furt her.

White, Latino and Native American.
The 16 case studjes include immjgrant

has partnered with the Brookin gs
Inst"it ute to report on concentrated

Brookings Institution partners

communities and neighborhoods left

poverty in Am erica.

with Fed's Community Affairs staff
In 2007, the FecleraJ Reserve System

behind by economk disinvestment

What is concentrated poverty?
Th e phrase "poverty in Ame ri ca"

convened Community Affairs s taff

The fina l compos ite repo rt, "Co n-

from around t he cou ntry to partner

centrated Pove1ty in Ame rica," reviews

may conjure images of hw1ger, home-

with the Brookings Institution, a non-

research fin dings that examine t he

lessness, unemployment, low-paid

profit public policy organization based

effects of concentr a ted poverty o n

work or poor health. We may thi nk

in Washington, D.C. The goal was to

individ ua ls and fam ilies, their neigh-

of speci fie populations who a re more

learn more a.bout fac tors that con-

borhoods, commwuties, <111d the areas

likely to live in poverty, such as racial

tribute to pe1vasive poverty in certain

that surround them. The s tudy co n-

a nd e thnic minorities, ch ildren and

con1111unjties and to capture best prac-

siders sinuJa.rities among the selected

s ingle-pa.rent households.

ti ces that reach residents effectively

conumuuties, but it aJso stresses the

and spur economic revitalization .

differences amo ng t hem. The variety

But we a re also likely to th in k of

The partnership was designed to

places associated with poverty-poor

and migration to s ub urbs.

of circum stances, problems and
potentiaJs in pockets of concentrated

inn er-city neighborhood s, isol a ted

combine the expertise of Brooki ngs

ruraJ areas, or 1ative American reser-

in researching poverty with the Fed's

poverty adds to t he complexity of

vation s. Concentrated poverty con-

unique struc t ure, w hi ch prov ides a

acid ressi ng nee ds.

cern s th e te ndency, in many a reas o r

regio nal presence in commun ities

the Uni ted States, for poor populatio ns

across the nation a.lo ng with th e

to be clustered into impoveris hed

capacity to cond uct research at the

con1111w1ities.

local level. Sixteen co mmu nities

Com muni ty Affairs specia li sts

a.cross the U.S . were selected for

anaJyzed demogra.pruc and econonuc

the study, including two in the Fed's

data, interviewed neighborhood resi-

People who live in areas of concent ra ted poverty mus t contend with

Report highlights need
for customized approaches

a whole se t of c irc umstances that

Sixth District: East Albany, Geo rgia,

dents and business owners, and con-

make it difficult to tra n s ition out of

and the Little Haiti neighborhood in

sulted with comm uni ty organizations

pove rty: their neighborhoods may be

Miami, Florida.

and munkipal government representa-

While much research has been con-

unsafe, the ir schools may be failing,

tives to detemune the specific concli-

t heir housing is likely to be s ub -

ducted about poverty in the U.S. over

tions that contribut eel to persistent

sta.ncla. rcl , p ubli c a nd private ser-

the past few decades, it has tended to

poverty in pa.rt"icula r communities.

vices may be la.eking, and a sense

focus on inner cities in the Northeast

of d im inis hed hope may per vade

and Midwest or on isolated ruraJ areas.

for individuals, neighborhoods a nd

t he entire community.

The c urrent stud y aim s to c reate a

municipalities. These might include

more contemporary picture of th e

reduced local investment a nd job

divers ity of communities affec ted by

opportunities, lower-quality schools,

A large body of research a rgues
t hat these areas of concentrated

Digitized forFEDERAL
FRASER RESERVE BANK OF ATLANTA
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Federal Reserve Bank of St. Louis

They a lso identified the challenges

21

More than one-third of East Albany households own their homes (compared to 61.8 percent for the larger Albany area), but community leaders are concerned that many of the units are in need of rehabilitation. Greater Second Mt. Olive Baptist Church is responding to this need by renovating 300 liousing
units on an old military base to provide new homeownership opportunities. T11e church is the only community housing development organization (CHDO)
active in East Albany, and it is the primary recipient of the city's HOME funding, a federal block grant to create affordable housing.

higher crime rates, both physical a nd mental health

li kely ta ke comprehensive strategies a nd many years to

problem s, extra costs for p ublic services and redu ced

s uccessfully address it. Such efforts a re imperative as

fiscal capacity, as well as politi cal and societal di visions.

we strive to develop more effective commu nity develop-

In addition they determined what circumstances influ-

ment interventions.

enced the capacity to address these iss ues constructi vely to brin g about lasting imp rovements.
Rather than seekin g the perfect a nti-poverty solu-

Impact on the Fed's Sixth District
The Atlanta Feel will use the fin dings of the report to

tion, this report highlights the importance of developing

inforn1 anti-poverty initiatives throughout the Southeast,

strategies that respond to the unique c haracteristics of

including our regional Prosperity Campaigns. The study

each area.

will assis t the Atlanta Fed's on-going efforts to collaborate with govern ment, nonprofi t and fo r-profit partners to

Call for additional research
The project underscored the need for more research to
understand and address places of persistent poverty. Studies are especially needed to fu lly accou nt for the influence

address challenges in high-poverty communi ties.

of concentrated poverty on residents' economic outcomes

poverty, including some Sixth District communities. ■

and to evaluate the impact of programs and policies aimed
at relieving poverty.
While s uch work will continue throughout the Federal
Reserve System through our mission to promote economic development along w ith fai r and impartial access
to credit, more partners fro m various sectors- government, academic, nonprofit, a nd for-profit- are needed
to address t h is unre lenting and pervasive problem. As

In add ition, the Atlanta Fed is working with Brookjngs'
research projects that are already underway to trac k economic and social development in areas of concentrated

"The Enduring Challenge of
Concentrated Poverty," is available online
at www.frbsf.org/cpreport/index.html. The entire report can be downloaded
online, or you may access the subsections for each community. Specific questions regarding case studies focused on communities in the Atlanta Fed's Sixth
District can be directed to Ana Cruz-Taura (ana.cruz-taura@atl.frb.org) for Little
Haiti and Sibyl Slade (sibyl.slade@atl.frb.org) for East Albany.
This article was written by Ana Cruz-Taura, senior regional community
development director at the Atlanta Fed's Miami Branch.

this report demonstrates, a reas of concentrated poverty
are the legacy of previous generatio ns. Therefore, it will

22FRASER
Digitized for
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

VOLUME 18 , NUMBER 3

Community Response to the Foreclosure
Crisis: Thoughts on Local Interventions
In the wake

of the ongoing

"Commu nity Response to t he Fore-

national mortgage crisis, preventing

closure Crisis" a nalyzes the range of

foreclosures and fac ilitating recovery

responses to the foreclosure crisis. It

fro m the damage they cause have pre-

provides a scheme for thinking about

Introducing the
New Discussion
Paper Series

sented challenges for conununity devel-

local responses to the crisis and the

opers, policymakers, and a wide range

actors and organizations involved. Visit

of other actors in cities and metropoli-

www.frbatlanta.org/filelegacydocs/

"Community Response to

tan areas. While many of these players

dp_0108.pdf to access the paper.

the Foreclosure Crisis" is the

have, to various extents, developed
policies a nd solutions to address these

first publication of the new

About the author

Community Affairs Discussion

issues, the myriad responses and their

"Community Respo nse to t he

merits and weaknesses may provide

Foreclosure Cri sis" was written by

Fed. The series will address

useful insight for others attempting to

Dan lm mergluck, a visiting scholar

emerging and critical issues in

Paper Series at the Atlanta

develop or hone their foreclosure recov-

in Community Affairs at the Fed eral

community development. Our

ery strategy. "Conununity Response to

Reserve Bank of Atlanta and a n asso-

goal is to provide information

t he Foreclosure Crisis: Thoughts o n

ciate professor of City and Regional

about topics that will be useful

Local Interventions" examines these

Planning at the Georgia Institute of

to the many individuals and

players and their responses to today's

Technology. In addition to his work on

groups involved in community

foreclosure challenge.

foreclosures a nd mortgage markets,

development-governments,

Mortgage regulation and foreclos ure laws are generally the domain

Immergluck conducts research on

nonprofits, financial institu -

hous ing ma rkets, fa ir lending, com-

tions and beneficiaries.

of federal a nd /or state government,

mu ni ty development finan ce, neigh-

yet local governments and organiza-

borhood change and segregation, and

tio n s have a lso responded to rising

related pub lic polic ies.

foreclosures in va rious ways. Some-

The December 2008 Discussion Paper will examine the

Immergluck publishes reg ularly in

accumulation of lender-owned

times this has meant forming coali-

scholarly jo urn als a nd has testified

homes, often called REO or

tions to change state laws, or banding

before Congress, the Federal Reserve

Real Estate Owned properties,

together with groups in other parts of

Board , and s tate a nd local legisla-

in metropolitan areas across

the country to advocate for a federal

tures. His work has been widely cited

the country.

policy response. At the same time,

in research related to the foreclosure

however, local governments, nonprofits

a nd mor tgage crisis, a nd he has been

To access the Discussion Paper

a nd even some local banks have not

quoted or cited in the New Y01·k Times ,

Series visit www.frbatlanta.org/

been able to rely solely upon t heir abil-

the Wall Street Journal , TIME Maga-

comm_affairs/dp_index.cfm.

ity to effect higher-level policy change.

zine, USA Today , the Boston Globe,

Rather, their respo nses have also

the Chicago Ti ·ibune, t he Associated

included direct, local action, often in

Press, and many others.

■

collaboratio n with other gro ups.

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23

North Florida
NEW NETWORKING COALITIONS HELP ASSETS GROW
It's no surprise that

c ur rent co ndi tions are nega-

tively impacting low- an d moderate-income communWes in

provide access to financial services for low- and moderateincome individuals throughout the state of Florida.

a number of ways. In an effort to build and preserve financial assets in such comm unities, two new Flmida coalitions
have been form ed.

Florida organizations join regional asset-building program
In addi tio n, Florid a asset-building organizations are

The Flo ri da Assets and Prosp erity Collaborative, an

participating i.n a newly fom1ed regional strategy also Jed by

outgrowth of the State Prosperity Campaign, will imple-

Tuskegee University. With technical assistance provided by

ment a networking strategy among members to provide free

the Center for Social Development at the Brown School of

tax preparation and other asset-build ing services. Led by

Social Work at Washington University in St. Louis, Tus kegee

Tuskegee University, Flmida organizations will also partici-

is mobi li zing stakeholders in Southern Black Belt States

pate in a second statewide network as par t of a regionally

and the Gulf Coast regions of Florida, Lo uisiana, Ala bama

based project.

a.nd Mississippi to participate in an asset-building coalition.
The Florida Family Network and Florida A & M Un i-

Florida Assets and Prosperity Collaborative
The Florida Assets and Prospe1ity Collaborative evolved
from a n earlier statew ide coalition of local, county and

ve rsity, a long with Alabama Arise , t he Federatio n of

regional initiatives-a loose confederation of 12 groups com-

the plan . Wi th s upport of t he Ford Found atio n, th ese

mi tted to sharing practices, promoting state legislation and

organizatio ns have created asset-b uildin g coalition s

increasing access to prosperity services. The new collabora-

in thei r resp ective s tates to fo cus on a reas affec ted by

Southern Cooperatives and the Mississippi Association
of Cooperatives, have convened meetings in support of

tive will b1ing formal structure for these and other partici-

hurricanes and o n trad itional land-based communi ties

pants to share their lrnowledge and expertise.

a nd far mer s with limited reso urces. Th e key F lorid a

Over 50 members representing diverse cul tural a nd geographic perspectives met in Orlando last J uly to organize

conveners of the regional coalition a re also involved in
the Florida Assets a nd Prosperity Collaborative.

the new collaborative. The goal was to convene political

During this period of economi c uncertainty, buildi ng

leaders, private sector representatives, community-based

and preservation of assets ar·e c1itical needs. Organizations

organizations, fina ncial instit utions a nd governm ental

and partners tlu·oughout the state are working to provide

entities to maximize access to asset-b uilding a nd preser-

essential services in their communities- volu ntee r tax

vation. A foll ow-up September meeting in Tampa included

preparation, financial education , access to mainstream

about 100 participants.

fi nancial services a nd Individual Developm ent Accou nt

The collaborative- Jed by the Federal Reserve Bank of

(IDA) programs. These two new collaboratives enhan ce

Atlanta, Broward Children's Services Council, the Human

existing services a nd a.ct as a catalys t for other organi-

Services Coalition of Miami, a nd Northeast Florida Real

zations to serve t heir com muniti es.

Sense Prosperity Campaign- aims to expan d asset-building
opportunities, offer communi ty tax preparation services,

■

This article was written by Janet Hamer, senior regional community
development manager at the Atlanta Fed's Jacksonville Branch.

engage constituencies through leadership development, and

24FRASER
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Federal Reserve Bank of St. Louis

VOLUME 18 , NUMBER 3

Louisiana -Mississippi
GULF COAST RENAISSANCE WITHIN REACH
Though Hurricane Katrina

left beh ind a wake

"This prograrn will help put working farnili es into homes

of unprecedented destruction and tragedy, it al so created

by making homeownership a!Torclable again. It will give

new opportuni ties for Gulf Coast leaders to collaborate

employers needed help to stabilize ar1cl grow the workforce

strategically and establish v isionary organizations t hat

by addressing the critical issue of housing," said Renais-

will build stronger, healthier communities. The Gulf Coast

sar1ce Chairman Anthony Topazi. "The program has far-

Renaissance Corporati on is one of the shining results of

reac hi ng ben efits to the economy of the entir e r egion. By

that collaborati on.

giving employers the keys U1ey need to rebuild ar1d prosper,

Established in 2007 by the Gulf Coast Business Council ,

we will all prosper. Another widely felt benefit of REACH

the corporation's vision is to be the "capstone organization

will be to help relieve a local real estate market straining

in the rebuildi ng of the Mississippi Gu lf Coast by remov-

tmder a high inventory of homes for sale."

ing obstacles to redevelopment, creating partnerships, ar1d

orthrop Grumman Shipbuilding, t he state's largest

stimulating investment in order to create vibrar1t, diverse,

employer, has adopted the REACH program and will soon

sustainable communities that offer residents the highest

start offering housing benefits. The Corporation is engag-

quality of life."

ing i n an aggressive campaign to ed ucate and enroll other
employers in the region.

Employers pitch in for affordable housing

Th e Renai ssance Corporation is al so buildi ng a strong

Renaissance Corporation's ambitious but focused goa ls

homebuyer preparation network, with homeownersh ip

include providing workforce housing in close proximity to

coun seli ng as a integral part of the REACH program.

employment centers in the three coastal counties as well

Ed ucatio n and coun seling partners, such as DASI-I for

as removing existing barriers through an aggressive plan

the Gulf Coast, Enterprise Corporation for t he Delta,

of gap fund ing. Regional E mployer Assisted Coll abora-

Hancock Housing Resource Center and Intern ational

tion for Housing (REACH) is one of t he organ ization's key

Reli ef and Development w ill guide employees step-by-

programs. Launched four clays before the first anniversary

step through the home-buy ing process and h el p them

of Hurrica ne Katrina, it is designed to promote housing

improve t heir cred i t scores when necessary.

development, stabilize families and attract employees
back to the coast.
Throu gh REACH, qualified workers can rece ive down

The REACH program is supported by $40 million in
Community Development B lock Gra nt funds as part of
t he St ate's Lon g Term Work force Housin g Program. The

paymen t and closing cost assistance to purchase a home

p rogram was devel op ed w ith the h elp of con trib utions

through an employer contribution and a significant match

from the John S. and James L. Knight Foundation and the

by REACH. REACH Mississippi w ill triple par ticipati ng

Southern Company Charitable Trust.

empl oyers' contr ibutions for qualified empl oyeesgivin g worker s up to a tota l of $40,000 in forgivab l e

■

This article was written by Nancy Montoya. senior regional community
development manager at the Atlanta Fed·s New Orleans Branch.

loan s. Empl oyer co ntribution s must be from $5,00 0
to $10,000, resulti n g i n a total empl oyee ben efit of

$2 0,000 to $40 ,000.

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25

FEDERAL RESERVE BANK OF ATLANTA
COM MU NITY AFFAIRS DEPARTMENT
1000 PEACHTREE STREET, N. E.
ATLANTA , GEORGIA 30309 -4470

CHANGE SERVICE REQUESTED

PRESORTED
STANDARD
U.S. POSTAGE
PAID
ATLANTA, GA
PERMIT NO. 292

STAFF
VICE PRESIDENT AND COMMUNITY AFFAIRS OFFICER
Juan Sanchez

ASSISTANT VICE PRESIDENT
Todd Greene
COMMUNITY AFFAIRS DIRECTOR
Wayn e Smith
EDITOR
Karen Leone de K ie
PRODUCTION MANAGER
llarriett e Gri ssom
STAFF WRITERS
Ana Cru z-Tam a
Janet I l am er
Nan cy Mont oya
Jared Yarse vic-h
CONTRIBUTING WRITERS
James II. Ca rr
Ilei di Kaplan
.Jeff Paul
Li nda Word

DESIGN
Odie Swanegan

Free subsc ri ption an d addition al co pies are availa ble up on requ est by mail at the
Community Affairs Department address above. or e-mail us at Partners @a tl.frb.org ,
or call 404/498-7287; FAX 404/498-7342. The views expressed are not necessarily
those of the Federal Reserve Bank of Atlan ta or the Federal Reserve System. Material
may be repri nted or abstra cted provi ded that Par tners is cred ited and provi ded
with a co py of th e publication.

www.frbatlanta.org


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

FSC
Mixed Sources

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