Doing Sub-prime Right!
A recent report from the Social Investment Forum has confirmed what some of us have known intuitively—that many of those who fell victim to the abusive and often predatory practices of the sub-prime mortgage industry would have been better served by the services offered by community development financial institutions (CDFIs). These community banks, community development credit unions and nonprofit loans funds work with low-income or credit-challenged (i.e. “sub-prime”) clients through lending programs designed to help them succeed over the long term, not take advantage of difficult situations. They do this by providing borrower education, emergency assistance programs, fair lending policies and discipline in knowing when—and when NOT—to lend.
The Center for Responsible Lending predicts that 2.2 million borrowers could lose homes with an attendant loss of $164 billion in wealth in 2008. While some sub-prime loans were made to real estate speculators, the demographic hardest hit by predatory lending in the sub-prime market includes racial and ethnic minorities, the elderly, women and low and moderate income borrowers. The Center reports that 53% of African-Americans and 42% of Latino families who bought homes in 2006 have already lost or will lose their homes to foreclosure in the next few years vs. 22% of white borrowers.
CDFIs across the country are rescuing families hurt by predatory practices in the sub-prime mortgage industry through targeted outreach to borrowers, financial counseling, restructuring consumer debt, modifying loans for distressed borrowers, granting short-term loans and managing repossessed properties. MMA is supporting these solutions to the sub-prime crisis through investments in CDFIs held by MMA Community Development Investments (MMA CDI). Currently, MMA CDI has over $5.6 million invested in institutions helping sub-prime borrowers “do the right thing” and build a better tomorrow for their families and communities. You can read the full report on the Social Investment forum website (www.socialinvest.org) and learn more about MMA CDI through the MMA website (www.mma-online.org) .
