If we had a vibrant economy where delinquincies were receding and employment was roaring back (NOT!), it would make sense that banks would take on a little more risk.  The evidence is clear, though.  We have  recovery in share prices, but the budgets of households are not back where they were. Credit card charge-offs are up, and unemployment is still high.

That is why it seems odd that some of our largest banks have decided to offer a new payday-loan product.  US Bank, Wells Fargo, and Fifth Third are three banks that are rolling out short-term loan programs where APRs exceed 120 percent.

Did I mention that each of these banks was given a huge TARP investment? True, US Bank and Wells have already repaid their TARP funds, and Fifth Third indicates that it intends to do the same in the next quarter.

I think the appearance of these new products reveals how this credit crisis is hurting middle America. Consumers don’t want to use loan products like payday loan-priced advances on their next paycheck.  They would prefer to use credit cards (interest rates of as much as 29 percent) or a line of credit (perhaps 12 percent.) These new payday products cost at least 120 percent. People aren’t dumb. They are taking this bad deal only because banks aren’t offering something more reasonable.

Let’s review the new payday products.

Fifth Third’s Access Now: “when you need money but you don’t have time to wait.” The cost is simple – $1 for every $10 advanced.  Funds are repaid with the next direct deposit. If your (more…)

CRA-NC is organizing a tour to the nation’s capital.  We’re bringing housing counselors from all over the state.  The counselors are angry.  They are tired of getting the run-around from servicers.  They see the press about HAMP’s 500,000 loan modifications.  They aren’t seeing that on the ground.  Maybe that is because they are trying to get real modifications – not ones that merely extend the life of a loan, or reach a modification agreement that actually results in a higher monthly payment.

We’re going to bus people from Durham, Rocky Mount, Winston-Salem, and Rich Square.  The Durham bus holds 55, and the other buses are taking about 15 people.

The Modify This Tour takes place October 29th.

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I just reached a contract to purchase a home.  In doing so, I had a chance to survey loans from about 10 lenders.  While there is no change in the homogeneity of interest rate pricing, I was surprised to see incredible variations in origination fees.

About the deal: I bought a home with the intention to utilize it as an investor property.  It is a modest brick three-bedroom in a quiet neighborhood.  I got a distress price, in my mind, because it was being sold by two heirs that needed their money quickly.  The house itself is in fine shape.  It won’t require a 203 loan.  The home cost $83,000 after the sellers threw in $2,000 for closing costs.  Was it a distressed price?  Well, I believe so.  The county assessment, conducted in May 2008, (more…)

Today’s Miller-Moore amendment makes more sense than would first appear.  The new rule, coming out of the House Financial Services Committee, exempts most financial institutions from new regulatory review by the proposed CFPA.

Banks with assets under $10 billion, and credit unions with assets under $1.5 billion, would not be examined by the CFPA.  It seems like a cave-in, right?  What’s up with the lobbyists giving up on so much work from those 8,000 clients? What’s up with helping the country prevent another meltdown?

Advocates initially responded with some frustration.  The National Community Reinvestment Coalition published a (more…)

The Federal Financial Institutions Examination Council (FFIEC) released the new Home Mortgage Disclosure Act records for 2008 this week.  The data, referred to as “HMDA data,” covers 14.2 million mortgage loan applications and another 2.9 million mortgage loan purchases on the secondary market.  Want to see what I am talking about? You can download the data here.

The HMDA data is released to help citizens understand how banks and other lenders are working in their neighborhoods.  It was legislated through the Home Mortgage Disclosure Act, and it dovetails within the broader aims of the Community Reinvestment Act.

New legislation is on the table in DC that would counter the shortcomings of this data.  HMDA is broken.  (more…)