Top Tier Banks invade the ghettos

[becnc at igc.org]

All:

There is an interesting article in the Monday Jan. 18 New York Times (on the
front page no less!) about unscupulous lending practices committed by
agressive lenders particularly in low income areas of Brooklyn. The basic
strategy is to identify owners of homes with significant equity and then
persuade them to take out high interest loans they can't repay. Old news.
The new news is that much of this lending is being done by Delta Funding,
which is selling its mortgages as securities and that Bankers Trust is the
broker for these securities. Bankers Trust is the eighth largest bank in
the US and about to be acquired by Deutshe Bank. The article identifies
numerous other top tier commercial banks also engaged in similar strategies.

Much of the blame for the spread of this type of pernicious lending can be
laid at the feet of regulators, who not only permit notorious lenders of no
doc/low doc products such as those used by Delta to exist, but actually give
them outstanding CRA ratings!

As traditional credit markets dry up, as the lenders find fewer and fewer
customers can qualify for, or are interested in tradiational "A" credit
products, "B" and "C" products such as those that Delta specializes in will
become more and more prevalent. And stories like those in today's NYT will
become more and more common place.

Can the regulators regulate? Time will tell.

Greg Todd


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BEC New Communities HDFC, Inc.
541 Atlantic Avenue Brooklyn NY 11217
tel. (718-)858-8803
becnc@igc.org
"Housing That Helps"



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[Holland6 at aol.com]

There is no question that the federal financial institution regulatory
agencies have done a poor job of enforcing CRA and have done little to provide
credibility to community based organizations. Just look at how many financial
institutions receive Satisfactory and Oustanding CRA ratings (see Woodstock
study). This has been a problem for a long time--and not just with banks who
do poorly. When I worked in Pittsburgh, we fought hard to get an Outstanding
rating for a bank that was truly doing outstanding work. Instead, the
regulators gave it a Satisfactory.

But there is another side to this coin. We must take it upon ourselves to
ensure that the regulatory agencies are held accountable. Do we "cc"
regulators on our CRA comments and other correspondence with banks? Do we
include regulators in meetings and conferences? How much pressure do we put
on regulators to tour our neigbhborhoods and understand our points of view?
We need regulators in our offices just as much as they spend in the banks'
offices.

When First Union acquired one of the most notorious finance companies, The
Money Store, in 1997, how many credible comment letters were sent to
regulatory agencies? Did anyone follow up? We should double our efforts on
ensuring that federal financial regulatory agencies do their job and holding
them accountable to their stated mission under CRA.
-Dan Holland, National Community Capital Association
holland6@aol.com


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