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August 25, 2010

One of the problems with the enforcement of the Community Reinvestment Act has been the inability of examiners to create standards that can distinguish the level of effort made by different banks and thrifts. The problem isn't just with the ratings, although they are certainly guilty of this sin. It lies in the construction of examinations, as well.

Community development loans are one of the most significant ways that a bank can extend credit that would otherwise not be available. Loans for

August 23, 2010

Since Lehman Brothers imploded in 2008, publishers have stocked our bookstores with dramatic stories about the fall of Wall Street. Newspapers regularly report on how small businesses and home owners can get loans on Main Street. Fewer people have paid attention to what's happening in downtrodden districts. That is, until Gary Rivlin wrote "Broke, USA."

Broke, USA

This book tells the story of the back-and-forth battle between a spirited group of consumer advocates and the merchants of sub-prime debt. It has been waged in legislatures, in the press, and on street corners for the last twenty years. It threads are anchored in just a few epicenters. Certainly, the first would be in North Carolina, where Martin Eakes and his peers convinced the North Carolina General Assembly to outlaw payday lending. Then there are the scores of

August 13, 2010

Wal-Mart says that serving low-income households "plays to our DNA," and it seems that this concern extends to their analysis of banking.

Wal-Mart's analysis of the un-banked and under-banked is frank.Here are a few spicy tidbits:

August 9, 2010

May you live in interesting times...

August 2, 2010

The problem with Section 8 is not that so many families are able to use their vouchers to rent nice homes.

The Wall Street Journal published a story today that points out the sudden shift in bargaining power among voucher holders. In overbuilt housing markets, landlords are increasingly eager to rent to tenants that are guaranteed to pay rent. That preference would seem to be crystal clear: Who can blame landlords for wanting to get paid on-time, every month?

It would be one thing if this was merely a story about a program that is working to shore up demand for housing at a time when rental vacancy rates are high. Unfortunately, that

July 20, 2010

Although there could be some value in a merger between Block and Liberty, there are also some good reasons to believe that it won't happen. Here are a few:

July 15, 2010

The number of permanent loan modifications is up. There are more than 340,000 households with permanent loan modifications.

July 14, 2010

It is hard to tell what will come out of Wednesday's showdown on prepaid cards.  The event, a half-day seminar sponsored by CFSI (the Center for Financial Services Innovation), claims to highlight how prepaid cards can transform financial services for the unbanked.

That is not a reach, because the promise of their premise is undeniable. These cards are going to be the new banking system. Mobile banking isn't quite here yet, but it won't be long, and at that point there will be an entirely separate banking system for low-income households. Just you wait. By the way, low-income households are a growing demographic in America. The FDIC estimates that there are already 40 million households without a standard checking or savings account.  Hold on, though, because now there are also more Americans with bad credit. News out yesterday

July 13, 2010

More and more, it seems like any changes to the Community Reinvestment Act that come out of a new CFPA will be limited to data collection requirements. That is a missed opportunity. Still, if updates to the CRA can repair the framework for data, that is still a plus.

Everyone knows that HMDA data could be better. It doesn't really offer a means to separate the prime loans from those that are subprime. There is one clue: since 2004, the data has included information about interest rates. Even that data is limited, though. It isn't sensitive to adjustable rates that reset. Moreover, the exotic loan terms that are the feature of so many subprime loans are also ignored. There is no indicator for a stated income product, or for a balloon, or for an unusual loan term. In general, if it isn't a practice that was characteristic of the mortgage market in 1985, then it isn't in HMDA.

This frustrates bankers and policy wonks alike. Bankers cringe when prime loans are indistinguishable from subprime.

I spoke with the head of the mortgage division at one of the larger banks in the country yesterday. I put the question to him. "If you could change one thing

July 7, 2010