Empty Houses and Broken Dreams: An Analysis of the Impact of Foreclosures in Durham’s Neighborhoods

This report, by by Adam Rust and Peter Skillern, with Steve Fabian and Jordan McMillen from The Community Reinvestment Association of North Carolina, examines the impact of the mortgage foreclosure crisis will have upon homeowners, banks, and the broader real estate market in Durham, North Carolina. The impact will shortchange years of work by the City of Durham, non-profits, and other community development agencies that have sought to reinvigorate declining neighborhoods. In stripping home equity from homeowners, it will wipe out significant assets and remove homeowners from the trajectory of building wealth.

Key findings include:

• The mortgage foreclosure crisis is not limited to just a few areas. In Durham, all neighborhoods have been impacted.

• There will be a significant loss of equity among homeowners.

• Few homes that are sold at auction attract bids greater than the amount of the outstanding mortgage. In most cases, the lenders or servicers hold the mortgage. Banks now own hundreds of residential single-family homes in Durham County.

• Renters, who can be evicted when a landlord is foreclosed upon, are also at risk in the foreclosure crisis.

• By influencing property values and contributing the conditions that foster urban blight, the impact of foreclosures threatens the successful outcomes of many ongoing City and County efforts in community revitalization and crime reduction.

To read the full report in .PDF, please click here to download.

Springing the Debt Trap

In Springing the Debt Trap, Center for Responsible Lending finds that high numbers of borrowers are still caught in payday loans for long periods of time, even in states that have passed certain measures intended to stop this cycle. No measure short of an interest rate cap has effectively addressed the repeat borrowing that advocates, policymakers, and the industry itself agree is the central problem with payday lending.

Some states have allowed payday lenders to operate with virtually no restrictions. Others have solved their payday lending problem with the interest rate cap. And a third group has tried to create a middle ground by passing measures that put restrictions on payday loans while exempting them from interest rate caps.

Unfortunately, this middle ground is still quicksand for borrowers.

North Carolina's Unfinished Transformation: Connecting Working Families to the State's Newfound Prosperity

The NC Budget & Tax Center/NC Justice Center has recently released North Carolina's Unfinished Transformation: Connecting Working Families to the State's Newfound Prosperity. This publication documents many of the challenges facing low-income North Carolinians. To dowload the report in .pdf format, click here.

The NC Justice Center has some excellent research available on their website for download, including information on North Carolina's living income standard. To view their list of publications, please click here.

NC Fair Housing Act

The North Carolina Fair Housing Act makes it illegal to discriminate in housing because of race, color, religion, sex, national origin, physical or mental handicaps, or family status (families with children). The law applies to the sale, rental and financing of residential housing. Apartments, houses, mobile homes and even vacant lots to be used for housing are covered by the Fair Housing Act. With a few exceptions, anyone who has control over residential property and real estate financing must obey the law. This includes rental managers, property owners, real estate agents, landlords, banks, developers, builders and individual homeowners who are selling or renting their property. To view the Fair Housing Act, available in both English and Spanish, click here.

Financial Quicksand: Payday lending sinks borrowers in debt with $4.2 billion in predatory fees every year

Every year, payday lenders strip $4.2 billion in excessive fees from Americans who think they're getting a two-week loan and end up trapped in debt. A new study released by the Center for Responsible Lending calculates the cost of predatory payday lending state-by-state. The report finds that across the nation payday borrowers are paying more in interest, at annual rates of 400 percent, than the amount of the loan they originally borrowed.

Eleven states are projected to save a collective $1.4 billion in 2006, offering hope and an effective solution -- a cap on interest rates for consumer loans in the 36-percent range.

Payday loans are marketed as short-term cash advances on the borrower's next paycheck. But previous research has found -- and this study confirms -- that the business model depends on flipping payday loans repeatedly; 90 percent of loans go to borrowers who must renew them five or more times per year. The average payday borrower pays back $793 for a $325 loan.

In spite of more public scrutiny and recent attempts to reform the practice by state policymakers, loan flipping has only been eliminated in states that don't allow payday lending; these states hold all lenders to their consumer loan laws, which usually include a double-digit interest rate cap.

Congress recently adopted this approach when the Pentagon asked the lawmakers to protect their troops from payday lenders. The Defense Authorization bill President Bush signed in September included a 36% cap on consumer loans to military families.

CRL's study, "Financial Quicksand: Payday lending sinks borrowers in debt with $4.2 billion in predatory fees every year," provides an estimate of the 2005 cost of predatory payday lending in each state, based on state regulator data and information from the public filings of payday lending companies.

To download the report, click here.

Subprime Lending is a Drain on Home Ownership

"Yeah, people got bad mortgages. But others were able to finally buy a home" begins a recent article in a national magazine, repeating the common assumption that subprime mortgage lending has helped increase the overall level of homeownership. 

But a new CRL analysis shows that while the subprime market has produced more than $2 trillion in home loans over the past nine years, these loans have led or will lead to a net LOSS of homeownership for almost 1 million families.

The reason for this net loss?  From 1998-2006, only 9% of subprime loans went to first-time homebuyers, but over 15% of subprime loans ended (or will end) with borrowers losing their homes through foreclosure.

To download this document, click here.

The High Cost of Refund Anticipation Loans in North Carolina

Prepared by The Community Reinvestment Association of North Carolina
January 25, 2007.

Refund Anticipation Loans (RALs) are high cost loans with interest rates ranging from 36% to 700%, depending on the amount of the loan, the fees, and the time it takes to receive a refund. The loans are secured by the anticipated tax refunds due tax filers. The loans are marketed and made through tax preparers such as H&R Block, Jackson Hewitt, Liberty tax service and independent tax preparers in partnership with out of state banks to pre-empt North Carolina’s usury limit of 36%.

Preparers are now offering unsecured consumer loans as early as mid-November based on the anticipated tax refund. In the case of Jackson Hewitt, a combination of a holiday loan, paystub loan and traditional RAL for $2,286.50 could cost more than $258 in finance charges alone and does not include related fees for tax services or debit cards or temporary check account services.

The Community Reinvestment Association of North Carolina (CRA-NC) asserts that too many North Carolina taxpayers are paying too much to receive their own money from the government. Unfortunately, these are often low income families who least can afford these loans that offer little benefit. The RALS take more than $28 million from an anti-poverty program. They violate North Carolina consumer protection laws.

For more information, and to read the complete report, click here to download a .pdf version.

Click here for links to other North Carolina organizations.