Under Trump, Treasury Goes Backward on Community Protections

Posted by Josh Silver on June 23, 2017

A citizen’s normal (and reasonable) assumption is that the federal government will generally enact polices that make our economic system more fair and efficient. Yet, a recent Treasury Department report on bank regulation and policy titled "A Financial System that Creates Economic Opportunities," promotes changes that would move us backward when it comes to building a financial system that is equitable, efficient, and protects consumers and communities from abusive practices.

In the early days of his administration, President Trump signed an executive order that required the Treasury Department to study financial regulation with the aim of updating and streamlining regulation. The order mandated that Treasury assess the extent to which government oversight of the financial sector achieved certain core principles. Two of these principles were:

• To empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth.

• To foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses….information asymmetry.

But the Treasury's report recommendations regarding data disclosure would directly contradict these principles, making it more difficult for consumers to make informed choices because they would exacerbate information asymmetries.

The report acknowledges the important role of the Home Mortgage Disclosure Act (HMDA) data. It states:

“HMDA continues to be an important resource today to identify lenders who engage in discriminatory activity. HMDA data also helps lenders identify strategies to expand mortgage lending into underserved communities.”

Then, in the middle of a sentence in the recommendations section, the report says consideration “should be given for discontinuing public use.” This is an astonishing conclusion given that the report recognizes that HMDA helps to identify discrimination and provides a road map for expanding lending into underserved communities.

The only way to ensure the detection of discrimination and to identify credit needs in neighborhoods is if the data is publicly disseminated so that members of the public, community organizations, and other stakeholders can scrutinize the data and make their views known to banks and regulatory agencies.

If the data becomes only the tool of regulatory agencies, there is no public accountability. The vigor of bank regulatory agency enforcement ebbs and flows depending on the philosophy and predilections of agency heads and the Presidents who appoint them. The only constant demanding rigorous oversight is the public. But if the public does not have data displaying systemic lending patterns, their demands become considerably less effective and can be dismissed as complaints of isolated instances of lender misconduct.

In addition to enforcement of the fair lending laws against discrimination, HMDA data is used by community organizations, local public agencies, and other stakeholders to enhance neighborhood housing and community development plans where the data shows lending is sparse. Of course, this planning activity becomes much more difficult, if not impossible, when HMDA data is no longer publicly available.

Data combats information asymmetries. Abuses occur when lenders or brokers use their vastly superior knowledge of lending transactions to exploit borrowers and to convince them to accept loans with high fees and onerous terms. Borrowers will usually not study HMDA data to find lenders most likely to approve their applications for loans and to guard against lenders that offer high interest rate loans. However, community organizations will study HMDA data and inform housing counseling agencies and their clients which lenders are most likely to offer them a fair deal. Moreover, Federal Reserve Banks and other government agencies use HMDA data to provide information on lending trends and to provide educational materials for consumers.

The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 mandated improvements to the HMDA data so that more information is available about loan terms and conditions and the demographic characteristics of borrowers such as age. Dodd Frank also required the collection of race and gender of the borrowers of small business loans.

The Treasury report discusses the possibility of borrowers’ privacy being invaded by the new Dodd Frank HMDA data—with bad actors being able to identify borrowers through its use. An earlier post I wrote debunks this.

In addition, the Treasury report decries the cost of the new HMDA data as well as the small business data. It states, “The provisions in this section of Dodd-Frank pertaining to small businesses should be repealed to ensure that the intended benefits do not inadvertently reduce the ability of small businesses to access credit at a reasonable cost.”

This recitation of tired assertions of cost amounts to ideology without proof. If data collection was expensive for lenders, HMDA data would have long ago reduced access to credit for modest income borrowers and people of color. When barriers to lending have been examined by academic studies, it is not data costs that are identified but rather discrimination and/or barriers to information such as sparse data on appraisals in lower income neighborhoods. Reducing or eliminating publicly available data will only exacerbate barriers to information.

Tired ideology promotes poor policy.

In keeping with the misguided assertions of the Treasury report, a bill has been recently introduced in the Senate that would exempt lenders making 500 or fewer loans from reporting the new Dodd Frank HMDA data. This bill has been introduced despite evidence that the new data reporting would not significantly increase costs, since lenders must already collect information similar to the new HMDA data in order to comply with other consumer protection disclosure requirements (such as those on loan terms and conditions given to borrowers applying for mortgage loans).  

We have had more than 40 years of experience with HMDA data (Congress passed HMDA in 1975). The HMDA data requirement not only survived, but was strengthened by Congress and the regulatory agencies during Democratic and Republican Administrations. The report itself acknowledges its value. If a bipartisan consensus does not quite exist for the data, the length of time this requirement has existed suggests a bipartisan acknowledgment of its value. For this new Administration to even suggest the deletion of this data is radical and contrary to the evidence of its value.

In 2017, The Washington Post started placing on its masthead the following slogan, “Democracy dies in darkness.” To this provocative phrase, we should add, “Communities die in darkness.” Without timely data, the public cannot keep up with lending trends in their neighborhoods. In this opaque lending environment, it is more likely that a paucity of responsible lending and/or a surfeit of abusive lending will decimate neighborhoods. Secrecy and information asymmetries breed unsavory behavior.

(Image by Luna715 via flickr, CC BY-NC-ND 2.0)

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As the Arctic Icebergs Melt, So Does Political Opposition to Housing

Posted by Randy Shaw on June 20, 2017

The times they are a changin’, at least when it comes to San Francisco and Berkeley housing.

On June 13, San Francisco’s Mayor Ed Lee signed HOME SF into law. The district supervisor-sponsored measure will add 16,000 housing units in the next two decades, 5,000 of which will be affordable.

On that night in Berkeley, a large turnout of pro-housing activists stopped the Berkeley City Council’s plans to halt new housing. In response to grassroots pressure, Berkeley Mayor Jesse Arreguin announced before the meeting that the agenda item promoting downzoning was “greatly misunderstood” and that the city “cannot put roadblocks in the way of new housing.”

The word “downzoning” has since been removed. The hearing on increasing housing fees will be held on June 27, with an item on Housing Accountability moved to July 11.

As Victoria Fierce of East Bay Forward tweeted, pro-housing activism “changed the outcome of the night.”

Of course there is much more work to be done, but one year ago the prior version of HOME SF, legislation known as the Affordable Housing Density Program, was killed by the Board of Supervisors. And it was only earlier this month that Berkeley’s City Council was poised to downzone neighborhoods and impose fees on development that would kill most new housing.

What accounts for the pro-housing movement’s growing strength? Three factors, one of which may involve the president.

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False Equivalency on Race, Once Again

Posted by Gregory Squires on June 19, 2017

In his June 7 column in The Wall Street Journal (“50 Years After Loving v. Virginia, Colleges Embrace Segregation") Jason L. Riley equates Jim Crow segregation practices with current calls for safe spaces and all-Black housing options for students who express this preference.

He concludes, “Many on the left today seem unable to decide whether all those Southern segregationists were wrong—or just ahead of their time.” This tiring trope is frequently trotted out by conservatives who either do not understand this nation’s racial history or who simply do not want to seriously deal with it.

The inability to distinguish policies explicitly designed to oppress and exploit people because of their race with efforts to ameliorate those barriers and liberate people of color is troubling. As Supreme Court Justice Harry Blackmun wrote in 1978, “In order to get beyond racism, we must first take account of race. There is no other way.” Race consciousness is not the problem.  It is how we use of our knowledge (or ignorance) of race that matters.

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20 Years Later, What HOPE VI Can Teach Us

Posted by Taryn H. Gress and Emily K. Miller on June 15, 2017

Affordable housing programs are at great risk of elimination under the current administration. In this uncertain climate, what can we learn from a program that leveraged private interest while aspiring to be a protector of affordable housing? 

Information on income and tenure can help us begin answering this question by providing insight into the nature of mixed-income developments and the impact they have on residents and communities. In the first comprehensive descriptive data analysis of the overall production of HOPE VI units, the HOPE VI Data Compilation and Analysis provides a descriptive analysis of the HOPE VI grantees’ quarterly report data from 1993 through 2014.

In order to better understand the results of the largest federal mixed-income housing policy, our research team at the National Initiative on Mixed-Income Communities asked: What is the income and tenure mix of housing units that have been produced through the HOPE VI program?

Ultimately we found that across HOPE VI developments, the income/tenure mix is quite different: there are many different types of mixed-income developments, and in the case of some HOPE VI sites, there’s no mix at all. We asked a straightforward research question and came up with a seemingly straightforward answer, but found that there are much deeper policy and research implications embedded within the findings of our descriptive analysis.

Here, we focus on four key findings and subsequent calls for action.

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Why Giving Up on Homeownership Is Giving In

Posted by Doug Ryan on June 13, 2017

Over the last couple of months, I have traveled to places and visited with people as diverse as America. In Great Falls, Montana, and Itta Bena, Mississippi; in Manhattan, Oakland, Niagara Falls, and Las Vegas. Though at a glance it seems there’s not much to tie these places together, the financial crisis devastated many people in all of these communities, taking away their homes and life savings. A few misleading politicians continue to exploit it.

And though the crisis is “over,” in some ways, it’s hard not to be despondent. Walking past Great Falls’ city block of homeless providers, driving past Oakland’s violently burned Ghost Ship, bustling through a failing Penn Station or having a good meal in the shadow of the casino that will surely save Niagara Falls, I saw cities and people that have lost jobs, lost options and, in too many cases, hope. In places like Montana and Upstate New York, it’s not hard to understand why so many gambled on Donald Trump. If only for their economic realities, it’s surprising that Oakland, the Delta, and especially Vegas, did not. Working class people of all backgrounds have faced a nearly 40-year economic decline, and it has understandably left them looking for political statements that are both at odds with and targeted to their crises.

What once tied us together was a shared sense of opportunity and purpose, certainly since the end of World War II, and more inclusively since the Civil Rights, Voting Rights, and Fair Housing Acts of 50 years ago. The ideals and ideas of the Great Society or Martin Luther King, Jr., have, of course, never been fully realized. But many had long seen them as attainable.

Why we thought these ideals were attainable had a great deal to do with economic opportunity. Our parents were better off than theirs. We will be even better off than them. Our kids even more so… But no one really accepts this anymore.

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Challenges of Space and Place in Creative Placemaking

Posted by Keli A. Tianga on June 9, 2017

I spent a few weeks last winter interviewing people affiliated with art and community development in the Valley Arts District, a 15-square block neighborhood in Orange, New Jersey. I think some of us are susceptible to thinking that when the arts are involved, the complications that can arise with traditional community building are lessened. But with a varied collection of groups such as those present in the Valley, they each work with different populations and have different goals. Those key differences and perspectives influence what they each view as challenges to their work.

In 2005, Valley Arts spawned from HANDS Inc., a CDC affordable housing developer that had been working in Orange for two decades. A citywide convening of community members and community groups several years prior had envisioned the arts as the tool that would revitalize the Valley through artist housing development, an anchor institution strategy, and outreach within and beyond the geographic map of the neighborhood to build partnerships and expand programming.

A decade in, the Valley arts family has grown to comprise gallery spaces, a professional development program for artists living with disabilities, performance venues, restaurants, and a multitude of visual, musical, and performance arts programs. Despite its growth and size, it faces challenges of space and place that many arts organizations grapple with.

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Look Outside the Box with Health and Housing Partnerships

Posted by Miriam Axel-Lute on June 7, 2017

The connection between health and community development is on everyone’s lips it seems, and for good reason. And yet the two sectors are really still at the beginning stages of learning how to work together.

A few weeks ago we published “7 Tips to Help You Forge Health and Housing Partnerships.” At last week’s People & Places conference, at a session titled “Health Equity and the Zip Code Improvement Business,” I picked up a set of additional, complementary ideas from the panelists—Katrina Badger, from the Robert Wood Johnson Foundation; Terri Baltimore, from Hill House Association, Pittsburgh; Doug Jutte from Build Health Places Network; and Destiny-Simone Ramjohn from Kaiser Permanente.

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The Silent Expansion of Fiscal Control Boards in the U.S.

Posted by Carla Minet and Joel CintrĂ³n Arbasetti on June 2, 2017

The power and process of boards that take control of a city or territory's finances is becoming more generalized, although they affect local democracy, impose austerity measures without controls, and lack mechanisms to evaluate their efficiency.



Regardless of their size or financial problems, U.S. cities under the command of fiscal control boards have faced the firing of public employees, the implementation of pension cuts, increases to the cost of public college education, and a reduction in essential services, such as health. The structures, the laws that create them, and the names of the boards vary; the public policies they impose, not so much.

Despite the normalization of the boards and their commonly broad powers, the federal government and Congress lack control mechanisms, studies, databases, or an entity that actively monitors a fiscal control board's impact or efficiency, the Center for Investigative Journalism (CIJ) in Puerto Rico has found.

“In the United States, there is no centralized information across states [about fiscal control boards],” says Deborah Kobes, author of the thesis Out of Control? Local Democracy Failure and Fiscal Control Boards, published in 2009. “There also isn’t a real definition about what a board is.”

Some cities have a receiver, which is a person appointed to take control of a local agency or government. The titles, however, can differ: coordinator, supervisor, or emergency manager, as was the case in Detroit.

“It might not be a full board. It might be just one person [who] is appointed with the backing support of the state, but the characteristics or the power [aligned] with what is thought of as a control board. Given the range of the way [in which] they are implemented, there was no single way to identify all existing examples,” said Kobes of her research.

Boards are created by state laws, such as Detroit’s, which has had two boards with different names since 2013; or by congressional laws, such as in Puerto Rico and Washington, D.C. In both scenarios, they are conceived as temporary entities, with the promise of improving the fiscal situation, balancing budgets, paying debts, and recovering access to the bond market in localities with a “fiscal emergency.”

But the social costs of the measures taken by the boards to achieve their objectives do not appear to enter the equation, are overlooked by policymakers, or are considered acceptable collateral damage in order to improve government finances. Citizens, on the other hand, often have expectations that boards will bring effectiveness to the government, improve the local economy, or end government corruption.

Detroit, for instance, entered bankruptcy in 2013 once the Detroit Financial Advisory Board was appointed. When the Chapter 9 process was completed in 2014, another board, named the Detroit Financial Review Commission, was formed. At the end of this year, the city will present its third balanced fiscal budget, an event that marks the end of the 11-member commission that controls the city's finances.

Now some say Detroit is “blooming” due to several infrastructure projects and revived commerce in the urban center. However, Adela Nieves, a Puerto Rican community organizer who has lived in Detroit for 11 years, questions: “Detroit is back, but for whom?”

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These Changes to Tax Credit Criteria Are Breaking Up Concentrated Poverty

Posted by Tim Evans on May 31, 2017

While recent news reports have highlighted the low number of affordable housing projects being built in high-opportunity areas using federal tax credits, a recent examination by New Jersey Future has found that strategic changes in the way federal funds are allocated for affordable housing in the state have meant that many more affordable housing projects have been directed away from high-poverty neighborhoods and toward areas that offer greater economic opportunity.

To evaluate whether those changes had their intended effect, New Jersey Future compared affordable housing projects that received federal Low-Income Housing Tax Credits (LIHTC) between 2005 and 2012 with projects that received credits between 2013 and 2015, after the New Jersey Housing and Mortgage Finance Agency (NJHMFA), which administers the tax credits, made significant changes to the criteria it uses to award them.

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These States Are Trying to Level the Field for Disadvantaged Students

Posted by Kamolika Das and Solana Rice on May 30, 2017

How would the trajectories of children’s lives change if they knew that their state, their community, and their parents were investing in their future success for as long as they could remember?

Creating Children’s savings account (CSA) programs is not just about addressing soaring tuition costs or putting away a few hundred dollars each year—it is about instilling the message that every child has the potential for academic success and economic mobility, regardless of where they come from or their family’s finances. Children develop expectations about their higher education plans as early as elementary school, and having college savings can increase their expectations for postsecondary graduation and future success.

CSAs are long-term investment accounts that provide incentives for saving, such as initial deposits or savings matches. They help raise educational expectations and enable children and their families to build college savings. Programs typically complement the account with financial education for children and their families, building financial aspirations, knowledge, and skills.

Over the past several years, CSA programs have proliferated across the country. As of the end of 2016, 42 programs—ranging in size from small community-based programs to universal statewide programs—were serving over 310,000 children. Seven states have launched statewide programs, and several others have promising pending legislation that will help improve children’s educational outcomes and financial well-being.

We’re seeing progress in Illinois, California, and Oregon in particular, as these states are looking to develop universal, automatic enrollment programs to reach an estimated 700,000 children. Universality and automatic enrollment are program features that we know are critical features in ensuring that low-income children can participate.

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