[ Pobierz całość w formacie PDF ]
.7 That a great many borrowerswho own their homes free and clear take out loans from the predators (asnoted by Patricia McCoy) is likely due to the need to pay off high-interestcredit card debt.More research is needed to establish the importance ofthis link.The limitations and declining impact and coverage of the CommunityReinvestment Act (CRA), as Squires notes in Chapter 1, is a major causeof the problem.CRA has been of enormous benefit to lower-income andminority communities, paving the way for  the investment of more than$1.7 trillion.since the law was passed in 1977, nearly half of it in af-fordable housing and most in the last 10 years. 8 The financial institutionconsolidation that took place in the 1990s permitted/abetted by govern-ment action led to entry of new types of lenders not subject to the CRA.And there seems to be little impetus in Congress (see point above regard-ing campaign contributions) to reform the act to cover all the lenders andlenders agents/brokers who need to be regulated.And in fact, as of thiswriting (mid-2004), federal banking officials are seeking to weaken the actby relaxing requirements for smaller lending institutions.Absence of main-stream market lending leads, obviously, to predatory lending.Behavior issues, as reviewed by Patricia McCoy, present a complex anddisturbing picture.She lays out the case that  predatory lenders inducesuboptimal decisions by homeowners by exploiting anomalies in consumerbehavior through marketing  perhaps an overly academic and circumlo-cutory way of expressing the obvious: the marketers are clever ( relentlessand fiendishly clever marketing that manipulates cognitive imperfections,in her apt description), and those marketed to are needy and in many casesdesperate and less clever.And while the newish field of behavioral eco-nomics can provide some insight into the interplay between predatory Predatoriness, and What We Can Do About It 207lenders and those they prey upon, it is important not to fall into the trapof blaming the victim. Cognitive biases there may well be, and  rationalactors can be a useful yardstick.But when people are in real trouble, oftendesperate due to issues they cannot control and the  solutions (ag-gressively and manipulatively) proffered them are few and deceptive, ex-pecting fully rational behavior is unreal. Cognitive anomalies arise andexist in a context they are not sui generis; we can change or eliminatethese anomalies by altering the context.Poor people play the lottery at farhigher rates than do rich people, not because they are less rational (i.e.,aware of the infinitesimal probability of winning) but because it s their des-perate hope of digging out of the poverty trap (and again contextual, be-cause of the heavy advertising and disproportionate placement of salesoutlets in poor and minority neighborhoods).The value of McCoy s ap-proach is to understand better both the behavior and the behavioral con-straints of those seeking to borrow when they shouldn t.While the behaviorof the predatory lenders is better known and fairly obvious, the more weknow about the environmental and personal weaknesses and limits thatthose in need suffer, the better positioned we are to put remedies in place.WHAT IS TO BE DONE?Credit CounselingCredit counseling is one great need although some of the authors castdoubt on its effectiveness.But there are serious abuses in the current sys-tem, as recent U.S.Senate hearings have revealed. Some of the nation snonprofit (i.e., tax-exempt) credit-counseling agencies are engaged in abu-sive marketing practices that funnel millions of dollars from cash-strappeddebtors to the agencies executives in violation of federal tax and fair tradelaws, according to a report by the Senate Permanent Subcommittee on In-vestigations9 ( predatory counseling ).The report notes that these agenciesare  charging excessive fees, putting marketing before counseling and pro-viding debtors with inadequate educational, counseling and debt manage-ment services. Many of these nonprofits (the term obviously is used quiteloosely) advertise extensively on television in order to enroll householdsinto debt-management plans which then  charge exorbitant fees that aresiphoned off by affiliated for-profit companies. While this is consumerdebt generally, the majority of it related to use of credit cards, such finan-cial hole-digging is of course not unrelated to mortgage debt, usually thelargest regular expenditure for most households, particularly at the lowerend of the income scale.Problematic debt is epidemic in this country:  Pre-vious reports from consumer groups estimate that 9 million Americans con-tact credit-counseling agencies annually !10 Again, somewhat lax oversightby regulatory agencies in this case, primarily the Internal Revenue Ser- 208 Why the Poor Pay Morevice, is a not insignificant part of the problem.More and better home owner(and potential home owner) education and counseling is clearly needed,which requires funding and sensitive and competent (particularly, in thecase of immigrants, culturally and linguistically competent) counselors.Pa-tricia McCoy puts forward the dour view that  In the long run, it is doubt-ful that sufficient financial resources would ever be devoted to effectivenationwide counseling. It would be useful to generate some estimates ofthe costs of an effective counseling program (one model to draw on in re-lation to a somewhat different housing issue is the counseling providedby the Leadership Council for Metropolitan Open Communities to facili-tate Chicago s Gautreaux housing mobility program).11 I suspect it wouldby no means be a staggering figure; that it would be offset by eliminatingthe personal and societal costs that lack of counseling incurs in the preda-tory lending world; and that effective community and political organizingcan bring it about.Spotlight Mortgage BrokersClearly, more oversight is needed on the front persons, principally mort-gage brokers, in addition to more research on who they are and how theyoperate.As Ira Goldstein writes,  Brokers remain a troubling part of thetransaction especially for individuals of more modest means.Intervieweesrepresentative of the Title and Appraisal businesses report many more prob-lematic transactions when brokers are involved.Brokers in Pennsylva-nia have a very low threshold of licensure and have no fiduciaryresponsibility to the borrower.Although most states have some sort oflicensure or registration, most do not require registration of employee orig-inators nor do most have a continuing education requirement. More needsto be done both to regulate this activity and profession (the word is usedloosely) and to induce its trade association, the National Association ofMortgage Brokers (www.namb.org), to play a more responsible role,through a code of ethics that is aggressively enforced, in the manner thatthe National Association of Realtors has taken serious steps to make itsmembers aware of fair housing laws [ Pobierz całość w formacie PDF ]