Purpose

The Community Action Committee of the Lehigh Valley promotes asset building as an essential mechanism to help low- to moderate-income families move toward self-sufficiency.  Protecting those assets, though, is an important part of the strategy, so advocacy against predatory lending practices is undertaken as part of the agency’s Community Action Financial Services division.

Description

The mission of the Community Action Committee of the Lehigh Valley (CACLV) is to improve the quality of life by building a community in which all people have access to economic opportunity, the ability to pursue that opportunity, and a voice in the decisions that affect their lives. A Values Statement has been developed as a framework for CACLV’s overall approach. The Values Statement encompasses the agency’s multi-faceted role as:

• An advocate
• A community development organization
• A human services agency
• A non-profit corporation
• An employer

CACLV is a member of the National Community Reinvestment Coalition (NCRC) that defines Financial Literacy as “a basic understanding of banking, savings and the importance of good credit that allow a low- or moderate-income individual or family to actually buy a home or start a small business that can encourage economic stability in a given community.”  NCRC views Financial Literacy as being “at the very core of healthy families and communities” since “the development of assets, large or small, is the very first step in the dynamic process of introducing a person into the financial mainstream, increasing family stability, encouraging better consumer habits, and eventually increasing an individual’s stake in the health and wealth of a community.”

NCRC offers training and materials to educate Community Partners on how to provide Financial Literacy training to its residents.  Technical assistance is also available to community groups and financial institutions to identify collaborative opportunities around financial literacy and how to establish long-term mutually beneficial relationships.

CACLV’s Community Action Financial Services (CAFS) is an innovative, consumer education/asset development program.  CAFS provides low-income residents of the Lehigh Valley with education, counseling, and assistance about:

• Home Ownership Counseling Program (HOCP)
• Tenant and Landlord Rights and Responsibilities/Right Stuff About Renting (RSAR)
• Homeowner Emergency Mortgage Assistance Program (HEMAP)
• Family Savings Accounts (FSA)/Individual Development Accounts (IDA’s)
• Earned Income Tax Credit (EITC)
• Child Care Tax Credit (CTC)
• Free Tax Preparation (e-filing)
• Predatory Lending

CAFS incorporates the Home Ownership Counseling Program (HOCP), the Right Stuff About Renting program (RSAR), and the Family Savings Account program (FSA), in addition to the creation of new services.  Currently in the planning stages are the development of a predatory lending hotline in partnership with the U.S. Attorney’s Office, Philadelphia Legal Assistance, and North Penn Legal Services.  In addition, a consultant will be hired to explore the feasibility of developing a mortgage brokerage.  The intent of CAFS is to provide consumers with a continuum of coordinated services in one location in order to better meet their housing and consumer credit needs and build individual and community wealth.

Home Ownership Counseling Program

The Home Ownership Counseling Program (HOCP), created in 1992, offers potential homeowners the education, counseling services, and special training that will enable them to realize the dream of home ownership.  HOCP provides home ownership seminars, pre- and post-settlement counseling, mortgage counseling, predatory lending education, advocacy, and outreach.  Services offered are described in a HOCP brochure in both English and Spanish versions.  HOCP is the only organization in the Lehigh Valley that provides this full-range of home ownership counseling services with assistance from so many community partners, including its own advisory board.  HOCP is the only agency in the Lehigh Valley that is a HUD-certified counseling agency.

Seven seminars are conducted yearly, five in English and two in Spanish. Seminars are offered in each of the three urban communities of Allentown, Bethlehem, and Easton at a variety of accessible locations.  Each seminar consists of six classes.  The curriculum schedule includes: 1) Preparing for home ownership, 2) Shopping for a home, 3) Obtaining a mortgage and Predatory lending, 4) The closing process, 5) Energy conservation and home maintenance, and 6) Risk management.  In addition to the seminars, mortgage classes are scheduled five times a year; four in English and one in Spanish.  Participants learn about the mortgage process, pre-qualification, bad credit, and availability of grants.

In addition to the seminars, pre-settlement counseling (1.5 hours) is held every Tuesday and Thursday and pre-purchase counseling (1.5 hours) is held Mondays and Fridays.  Counseling is offered in both English and Spanish.  Participants learn about the closing process, financial management/budgeting, risk management, basic home repair/maintenance, and energy conservation.  Individual counseling (1 hour) is offered Monday through Friday.  Individuals have the opportunity to review their credit report, get assistance in document preparation, review budgeting and pre-qualification, and discuss mortgage programs.  HOCP personnel also advocate for prospective homeowners by intervening with realtors, lenders, and others involved in the home buying process.  Staff reaches out to potential homebuyers by distributing brochures door-to-door and conducting speaking engagements at businesses and community organizations.

The Home Ownership Counseling Program has established partnerships with various local, state, and federal public and private agencies for the provision of various kinds of assistance to clients. These partnerships reflect the broad base of community support by realtors, title companies, lending institutions, housing organizations, abstract companies, and a city redevelopment authority.  Support for HOCP also comes from the Philadelphia office of the U.S. Dept. of Housing and Urban Development. HUD representatives speak on the subject of Predatory Lending and Luis G. Pellot, Equal Opportunity Specialist, has spoken about the issue of Fair Housing.

Right Stuff About Renting

The Right Stuff About Renting Program (RSAR) is the only organization in the Lehigh Valley that provides educational seminars, individualized counseling, and information and referrals to tenants, landlords, persons at risk of homelessness, and persons who are homeless. Tenants, landlords, and shelter residents learn about their rights and responsibilities, city codes and legislation, proper care of rental units, legal options, resources, and housing opportunities.  Program participants are informed about HOCP and FSA programs, encouraging renters to save for a home and increase self-sufficiency.

A Program Coordinator coordinates RSAR. Educational seminars for tenants are offered bi-monthly on Saturdays in various locations throughout the Lehigh Valley - RSAR Friendly Guide to Rental Housing.  The curriculum for the tenant seminar includes a pre-test, post-test, evaluation, information about the legal aspects of renting, finding a rental unit, budgeting, reading a lease, living in an apartment, code requirements, and moving out of a rental unit.  Experts in the field teach seminars.  For example, Nicholas Butterfield of Allentown Human Relations teaches ‘Fair Housing and Code Enforcement’ and Lori Molloy of North Penn Legal Services teaches ‘Legal Aspects’.  In addition, education outreach meetings (mini-seminars) are held twice per month at area agencies and shelters.  Flyers are distributed to all community agencies, communities of faith, district justice offices, libraries, and local businesses.

Landlord seminars have been held twice yearly, but the program will only offer one landlord seminar per year.  Landlords are informed of the rewards, risks, and responsibilities of becoming a landlord.  Landlords learn about leases, fair housing law, lead-based paint disclosure, and reasonable accommodation for disability, tenant references, and evictions.  Landlord seminar topics are taught by attorneys, district justices, rental property managers, and representatives from Code Enforcement and the Dept. of Housing and Urban Development.

An important service of the RSAR program is the provision of information and/or assistance through phone calls and individual counseling.  Conflict resolution and mediation skills are employed in helping to solve landlord/tenant disputes.  RSAR assists renters with budgeting, links renters to appropriate housing, and informs tenants about legal services available. RSAR refers renters to employment services, financial and fuel assistance programs, and human service agencies.  The RSAR program makes available the resource booklet, The Right Stuff About Renting, A Friendly Guide to Rental Housing, which contains basic information on landlord and tenant rights and responsibilities, guidance for common rental situations, sample letters and an extensive guide to other services available in the Lehigh Valley.

Ultimately, The Right Stuff About Renting works to encourage both tenants and landlords to act responsibly, contributing to more decent, safe, and affordable housing for Lehigh Valley residents.

Homeowners Emergency Mortgage Assistance Program

The Homeowner Emergency Mortgage Assistance Program (HEMAP) to provide financial assistance to families who, through no fault of their own, are in danger of losing their homes to foreclosure.  Program participants can receive financial assistance to bring delinquent payments current, and may be eligible for continuing payment assistance for as long as 24 months. In order to be eligible:

• Homeowner has to receive an Act 91 Notice
• Be a PA resident who owns
• Occupy the property of foreclosure
• Be at least sixty days delinquent in their mortgage payments
• Be suffering financial hardship through no fault of their own
• Demonstrate reasonable prospects of being able to resume normal mortgage payments after HEMAP loan assistance ends.

Family Savings Account Program

The Family Savings Account Program (FSA) is a community building initiative established for the purpose of promoting self-sufficiency through asset development for lower income individuals through a matched savings program.  Based on an approved plan, the matched savings can be used to help finance the purchase of a new home, home repair, business start-up, assets purchase for business, education for self, education for child, child care, car purchase, and another approved goal.  Income eligible savers are required to open up an account at a Firstrust, Sovereign, or Fleet Bank and make weekly deposits of $20 over a two-year period.  Savers who deposit consistently and attend a minimum of four financial literacy classes will receive a match of 100% up to $2,000 from PA DCED, with the total amount saved used towards the individual's savings goal.

The FSA program is a collaborative effort with other community partners who enroll savers in the program and then provide savers with appropriate services, counseling and/or technical assistance designed to assist the saver in achieving identified savings goal. Program partners include Neighborhood Housing Services of the Lehigh Valley, Alliance for Building Communities, New Choices/New Options Program, Habitat for Humanity, and Lehigh County Housing Authority.  Each enrolled saver is required to attend a minimum of four workshops in basic economic literacy that includes the topics of savings and money management, credit and credit repair, banking products and options, and taxes.  Savers whose goal is to purchase a home must attend the HOCP seminar.  CACLV is the only organization in the Lehigh Valley that provides the Family Savings Account Program.

CAFS is developing additional initiatives for 2004 including:

• Information on how to receive the EITC (Earned Income Tax Credit) and CTC (Child Tax Credit)
• Free tax service with e-filing capability to provide refunds within 7-10 days, not 4 weeks
• Post-Settlement Counseling
• Predatory Lending Hotline

Earned Income Tax Credit, Child Tax Credit and Free Tax Preparation (e-filing)

The Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) are two ways in which low-income individuals and families can supplement their incomes and make ends meet. Unfortunately, many eligible persons are not taking full advantage of these tax credits for two reasons: they either don't file tax returns or they pay professional tax preparers huge fees for preparing and submitting their taxes; fees that offset the savings from the tax credits.  In addition, tax preparers offer predatory Refund Anticipation Loans with interest rates in the triple digits.

As part of CACLV's newly-created consumer services program, CAFS now provides free tax preparation services in Allentown, Bethlehem and Easton; developed and coordinated by the an AmeriCorps*VISTA member.  While there are other organizations that provide tax preparation services, CAFS provides a free service that focuses on low-income families and ensures that taxpayers receive the tax credits they deserve.

Predatory Lending Hotline 

For many years CACLV has worked hard at expanding housing and, especially, home ownership opportunities.  In the last few years, though, an insidious development has threatened to strip our success.  Lenders and brokers whose activity can only be described as predatory have lured low- and moderate-income households into scandalously bad deals.  Over the past two years CACLV has engaged in research, education, legislative advocacy, and meetings with law enforcement authorities and lenders; all in a campaign to rid the valley of predatory lenders who prey on the elderly and minorities.  As a result, Patrick Meehan, the United States Attorney serving this region, has set predatory lending as a top priority for education, outreach, and prosecution; particularly in response to the incidence of property flipping in Allentown.  It is anticipated that this year-long investigation will yield arrests within the coming months.  In order to continue our efforts against predatory lending, CACLV will be developing a predatory lending hotline, the first in the Lehigh Valley, in partnership with the U.S. Assistant Attorney's office and Philadelphia Legal Assistance, and North Penn Legal Services.  This hotline could provide a 'life-line' for predatory lending victims while educating consumers about predatory lending.

FOCUS ON PREDATORY LENDING

According to the Center for Responsible Lending (CRL), predatory lending practices strip $16 billion in wealth from low-income consumers and communities in the U.S. each year.  These practices include subprime mortgage loans, payday loans, tax refund loans, and other lending scams.  CRL was developed to address the recognition that community development work “would be useless if we could not stop the finance industry from stripping wealth from minority and poor communities faster than we could help create it.”

CACLV has developed a broad-based approach to fight against predatory lending practices to counteract the fact that “we build the assets and then somebody steals them.”  This approach was developed through the agency’s functioning as a “Think Tank on Policy Issues at the Local Level.”  Several phases occur as part of CACLV’s “Think Tank” process:

• Research
• Public Awareness (i.e. through a press conference and/or editorial coverage to affect the public's mindset and community thinking, voting, development of public policies, programmatic responses, etc.)
• Negotiate/Develop Actions

A study of predatory lending practices was conducted by CACLV as part of an interdisciplinary course entitled “Practicum in Community Politics” through Lehigh University’s Graduate School.  A report on Predatory Lending in the Lehigh Valley was issued covering various aspects of predatory lending including:

• Preying on Home Equity to trick or coerce homeowners into taking loans against the equity in the home with little or no expectation that they will be able to repay.  Foreclosure often occurs when the homeowner falls behind on payments.  Case studies on home equity scams are cited in the study.
• Subprime Lenders and Their Broker Partners that charge higher interest rates to customers, depending upon the customer’s credit status.  A list of subprime lenders in the area was obtained from the National Community Reinvestment Coalition (NCRC).  Efforts were made with little success to contact borrowers who may have been subject to predatory subprime lending.  Likewise, the primary subprime lenders were unwilling to disclose information on their practices.  Nonetheless, subprime lending is viewed as an increasing problem among lower-income and minority buyers.
• Payday Lending was analyzed through a 34-item questionnaire to individuals approaching cash advance storefronts and to residents of a local shelter facility.  Case studies are also cited in the study.
• Check-Cashing was analyzed through surveys conducted with customers at check-cashing stores and with participants of local anti-poverty programs.

The full report is available upon request and provides recommendations in seven areas:

• Data Collection – Improve Access to Information
• Loan Terms and Conditions
  • Prohibit Practices that Strip Equity from Homes
  • Increase Consumer Protection
• Legal Services (develop pro bono services)
• Consumer Education and Financial Literacy
• Law Enforcement
• Creative Alternatives to Predatory Lending
• Socially-Responsible Investing

The report includes various appendices:

• Anti-Predatory Lending Model Legislation developed by NCRC
• Maps of bank and check-cashing locations
• Bank Hours of Operation and Checking Account Practices
• Check-Cashing Survey Instrument
• Payday Lending Survey

CACLV is involved with State and National advocacy initiatives to fight against predatory lending.  In addition to NCRC, the Association of Community Organizations for Reform Now (ACORN) is active in numerous communities across the nation.  ACORN provides extensive information on predatory lending practices and an overview of its Campaign Against Predatory Lending.  Contact information is also provided for persons who feel they have been discriminated against or are a victim of predatory lending.

Outcomes

The following CAFS outcomes are included in CACLV's 2008-2009 Annual Report:

• HOMEOW NERSHIP COUNSELING SERVICES
  • Conducted seven 14-hour seminars attended by 166 prospective home buyers, of which 130 received certificates of completion; three of those seminars were conducted in Spanish.
  • Of those earning certificates, 62% were Latino, 18% were African-American, and 90% had incomes at or below 80% of the region’s median household income.
  • 15 families received individual counseling and 42 were provided with presettlement counseling; over 100 program participants bought homes.
• FAMILY SAVINGS AND INDIVIDUAL DEVELOPMENT ACCOUNTS
  • 16 savers graduated, having established a savings pattern that resulted in their savings being matched; of those, one saved to start a business, one saved for education, six saved to purchase an automobile, two saved to purchase a home, and six made home improvements.
  • Graduates saved $23,762, with the program matching those savings dollar-for-dollar; these savings leveraged $182,286.14 in cumulative funds spent (for example, home repairs, mortgages, tuition, or automobiles).
  • There were 81 active participants in the program, including nine in the Individual Development Accounts funded by Susquehanna Bank.
• FREE TAX PREPARATION
  • 125 volunteers, trained and certified by the Internal Revenue Service, prepared 1,218 tax returns, a 4% increase over 2007-2008.
  • Low- to moderate-income taxpayers received $1,702,967 in refunds, an increase of more than 16% over the previous year; taxpayers saved more than $243,600 by avoiding commercial tax preparers and the high-cost refund anticipation loans they offer (assuming the average taxpayer would have spent an average of $200 for these services).
• FORECLOSURE MITIGATION COUNSELING
  • Provided counseling, refinancing, loan “work-outs” and emergency mortgage assistance to 228 financially distressed homeowners; of these, 52 were able to avoid foreclosure.
• RIGHT STUFF ABOUT RENTING
  • Distributed “Right Stuff about Renting” books to 335 individuals and 775 to local agencies; CACLV’s tenant resource guide has been copied by several Pennsylvania communities and is in its fourth edition, with over 43,000 copies distributed since the original publication.
  • Received 422 phone calls (394 from tenants, 15 from landlords, and 13 from others) seeking advice about rental issues. 
  • Conducted 27 education seminars at area agencies, schools and shelters; 310 attended.
• LEHIGH AND NORTHAMPTON COUNTIES’ MORTGAGE FORECLOSURE “DIVERSION” PRO GRAM
  • Begun in May, this innovative initiative, modeled after Philadelphia’s “diversion” program, is designed to minimize foreclosures by creating a process for the lender and borrower to negotiate alternatives to foreclosure (see “Community Problem- Solving,” in this report).
  • Staff developed 28 proposals to re-work loans.