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Predatory Lending Practices Continue to Weaken Blacks and Hispanics

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By Charlene Crowell
NNPA Columnist

(NNPA) In the first report of its kind, the Center for Responsible Lending has examined consumer lending markets across-the-board and found that despite recent regulatory reforms – predatory lending continues to undermine American households trying to rebuild their finances after the recession.

The State of Lending in America and its Impact on U.S. Households (State of Lending, http://rspnsb.li/stateoflending) paints a picture of working families struggling to manage debt while coping with stagnant incomes and a substantial decrease in wealth. In fact, the housing crisis has produced the largest documented wealth gap ever between White households and families of color.

From 2000-2010, African-American family wealth dropped 53 percent, and Hispanic families lost 66 percent. By comparison, average White household wealth dropped only 16 percent. The foreclosure crisis and resulting economic downturn have turned back the clock on previous wealth gains, especially in communities of color.

The report states, “There is significant evidence that African-American and Latino borrowers and their neighborhoods were disproportionately targeted by subprime lenders. Borrowers of color were about 30 percent more likely to receive higher-rate subprime loans than similarly situated white borrowers. Borrowers in non-white neighborhoods were more likely to receive higher-cost loans with risky features such as prepayment penalties.”

CRL’s student loan findings echoed these same lending ills.

“Low-income students and students of color are even more likely to need to rely on student loans and to become saddled with large amounts of debt upon graduation,” the report stated. “In 2008, 16 percent of African-American graduating seniors owed $40,000 or more in student loans, compared with 10 percent of whites, eight percent of Hispanics and five percent of Asian-Americans.”

Additional findings showed that:

“Spillover” costs of foreclosures have wiped out nearly $2 trillion in family wealth;

Auto loan interest-rate markups cost consumers nearly $26 billion each year; and

Borrowers in lower credit tiers pay up to 68 percent higher monthly payments on private student loans than on safer federal loans.

The State of Lending is the first of a three-phased and in-depth view of U.S. households’ income, spending, debt, and wealth. It also outlines predatory practices in mortgage lending, credit cards, student loans, and auto loans that undercut the benefits of these products. Incorporating major CRL findings in recent years with pertinent research from sources such as the Federal Reserve Board, the Pew Research Center and the Consumer Financial Protection Bureau together provide a broad database for findings.

Despite remaining lending challenges, the report shows that consumers are better off today because of stronger protections on mortgages and credit cards. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which incorporated a number of previous state initiatives to curb abusive mortgage practices, has ended many of the worst practices of the subprime era. And, contrary to industry predictions, the cost of borrowing on credit cards has not increased since the CARD Act passed; transparency has greatly increased and the use of hidden fees has gone down.

The next two State of Lending reports will be released in early 2013. The next release will cover payday loans and other financial products that trap people in long-term debt while portraying themselves as short-term solutions.

The third and final release in the series will examine abusive practices in debt collection and servicing, and conclude with a chapter documenting how lending abuses often target the same households and have a cumulative—and particularly disastrous—impact on low-income households and communities of color.

Former Federal Deposit Insurance Corporation Chair Sheila Bair authored State of Lending’s foreword, noting that predatory lending harms the entire U.S. economy. She warns, “If abusive lending practices are not reformed, we again will all pay dearly.”

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: Charlene.crowell@responsiblelending.org.

FDIC Bank Closures: Is Your Money Safe?

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By Charles Sims Jr.
Special to the NNPA from the New Tri-State Defender

The Federal Deposit Insurance Corporation (FDIC) recently closed nine banks in one day. The closings boosted the number of failed U.S. banks this year to 115. Given that, and the recent turmoil at CIT Group, you might be worried about the safety of your money in financial services and investment companies.

What advice do financial planners have for Americans who are worried about the money they have in banks and brokerage accounts? Here’s what FPA member Sam Hull, CFP®, CPCC, a partner with Whitewater Transitions, had to say:

Investment accounts at all major brokerage houses and broker/dealers are covered by Federal law through the Securities Investor Protection Corporation (SIPC). This insurance against failure or bankruptcy covers stocks, bonds, mutual funds, exchange-traded funds (ETFs) and other assets (but not futures or commodity contracts) held up to $500,000 per account, including a $100,000 limit on cash. Money market funds are considered funds, not cash. Most major brokerage houses & broker/dealers also have large amounts of private insurance above and beyond SIPC amounts. Check with your firm to determine their coverage limits.

In addition, the Securities and Exchange Commission (SEC) has tough rules about keeping the broker/dealers funds separated from the customer’s investments. If the broker goes belly-up like Lehman Brothers, your money should remain intact. In the unlikely event of a brokerage failure, SPIC will transfer your securities to another firm. If for some reason that can’t be done, SIPC will try to rebuild your portfolio, even buying new shares for you. If that can’t be done for some reason, they will give you cash.

The bad news: all this takes time and thus gives you lots of time to worry.

SIPC does not cover Ponzi schemes or other investment fraud perpetrated by an adviser. If you have the bad luck (or bad sense) to be taken in by a Madoff-type scam, this is not covered by SIPC. Most major broker/dealers do have their own policies to cover fraudulent activities. For example, if you lose cash or securities from your account due to unauthorized activity, they will reimburse you for the cash or shares of securities you lost.

However, if a broker goes bust and your investments are missing from your account, the SPIC will replace them up to the half million dollar maximum. But they won’t compensate you for any losses in value that may have occurred while the securities were missing. It is your responsibility to file a claim with SPIC for missing assets within six months.

So what can you do to protect yourself?

1. Make sure your investment accounts are held in custody by a brokerage firm or broker/dealer – not by your investment adviser or financial planner.

2. Make sure that your brokerage house or broker/dealer is a member in good standing with the SPIC.

3. Check to make sure your trades and other transactions are made through that entity and not some unrelated subsidiary that is not covered by SIPC.

4. Make sure your account is registered by default as a cash account and not defaulted to a margin account. Margin accounts make you just another creditor of the brokerage house.

5. Read the fine print of your account registration form. Don’t authorize your broker to use your account assets for any purpose you don’t authorize. The default language allows them to lend your stock (and charge a hefty fee) to short sellers, hedge funds, corporate raiders and buyout funds without offsetting collateral in house.

6. Ask questions until you are satisfied with the answers and don’t be put off by fast talk or complicated jargon. It’s your money.

A Certified Financial Planner can help you better understand your savings and investment accounts. Visit www.fpanet.org/PlannerSearch.

(Charles Sims Jr. is president/CEO of The Sims Financial Group. Contact him at 901-682-2410 or visit www.SimsFinancialGroup.com.)

Mandela Hospitalized Again, World Prays

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Special to the NNPA from the Houston Forward Times

People around the world are praying for the health of former South Africa President Nelson Mandela as he remained hospitalized since last weekend for reasons that have not been publicly announced.

Widespread reports say the 94-year-old justice icon is doing well, but Associated Press described concerned Sunday morning worshipers at Soweto’s Regina Mundi Catholic Church as praying for the Nobel Laureate, a symbol of freedom and democracy around the world. The church “once served as a major rallying point for anti-apartheid activists,” the AP described.

The country of 50 million people, as well as people around the world, awaited word of his condition this week as an announcement from current President Jacob Zuma said only that he was admitted to a hospital in Pretoria for tests “consistent for his age” and that he is “comfortable.” Zuma reportedly visited President Mandela in the hospital Sunday, causing even greater concern since he did not visit during his last hospitalization for a minor surgery in February.

Additional information was being added early this week.

“There is no cause for alarm … He [Mandela] is in the hands of a good medical team,” said presidential spokesperson Mac Maharaj on Monday, according to GIN. An update on Mandela’s health will be relayed once his doctors update the presidency, Maharaj added.

Mandela is receiving medical attention from time to time which is consistent with his age, Maharaj insisted, adding that the family wanted to avoid Mandela’s health being treated like “a movement of share prices on the stockmarket”, and wanted his family to be with him without having to answer questions. It is believed he is being treated at One Military hospital.

A Qunu traditional ruler, Nokwanele Balizulu, told foreign news agency Agence France-Presse she saw Mandela shortly before he was taken to hospital, GIN reports.

“I was called by the Mandela family saying Tata [grandfather] is not well. I rushed there and I saw he is not well,” she was quoted as saying.

Mandela reached world fame as he served 27 years in prison for his opposition to the racist apartheid rule that once divided the country between Whites, Coloreds and Blacks. Millions of American activists, celebrities and politicians joined activitists around the world in decades of protests for his freedom. Released on Feb. 11, 1990, Mandela became South Africa’s first Black president in 1994 and served for five years. According to AP, he has lived in a remote village in the Eastern Cape area since retiring from public life two years ago after South Africa hosted the 2010 World Cup soccer tournament.

The hospitalization comes as South Africa’s National Congress prepares for another presidential election. GIN reports that Zuma appears to have picked up the most votes from the country’s nine provinces, giving him the lead in the upcoming ANC vote for party head and to be its presidential candidate in 2014.

Votes will be tallied this month at the ANC’s national elective conference in Mangaung where factional discord is expected to boil over. Many believe the Zuma regime has buried Mandela’s principles of justice amidst of string of corruption scandals.

“Zuma’s government drew widespread criticism when police opened fire on striking workers at Lonmin Plc (LMI)’s Marikana platinum mine on Aug. 16, killing 34 people. That was followed by a wave of industrial action in mining, transportation and agriculture that has stunted economic growth,” GIN reports.

“When you have someone that’s willing to lead by example like he did, it makes things easier for people to follow,” a worshipper, Thabile Manana, told AP on Sunday. “Lately, the examples are not so nice. It’s hard. I’m scared for the country.”

Leaders Craft 'Black Agenda' for President Obama

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By Freddie Allen
NNPA Washington Correspondent

WASHINGTON (NNPA) – After a four-hour meeting of some the best minds in civil rights, business, education and the media, dozens of Black leaders from across the nation outlined a “Black agenda” that would be presented to President Barack Obama and Congress early next year.

The leadership group was assembled by Marc Morial, president and chief executive officer of the National Urban League; Al Sharpton, founder and president of the National Action Network; Benjamin Todd Jealous, president and CEO of the National Association for the Advancement of Colored People (NAACP), and Melanie Campbell, president and CEO of the National Coalition on Black Civic Participation.

Morial was quick to say that the meeting did not represent the formation of another group, but a collaborative effort to send a clear message to the White House during President Obama’s second term.

More than three dozen leaders attended, including National Newspaper Publishers Association (NNPA) Chairman Cloves Campbell, Southern Christian Leadership President Charles Steele and grassroots activist Ron Daniels, president of the Institute of the Black World 21st Century.

“We seek not to create a new organization, we seek to turn a corner towards a direction of being collective and proactive in the pursuit of the challenges our nation faces, said Morial.

Many of those challenges such as unemployment, poverty and health care disparities are far greater among Blacks, a group that supported Obama with 93 percent of their votes in November.

In a joint statement following the meeting, the group wrote:

“As we approach the 50th anniversary of the Great March on Washington and the 150th anniversary of the Emancipation Proclamation, we must have a seat at the table to fully leverage the talents, intellectual capital and contributions of our leaders to craft a domestic agenda that brings African-Americans closer to parity and equality, and fulfills the promises of these milestones.”

Morial summarized five priorities that would be fleshed out in the new agenda:

* Achieve economic parity for African-Americans

* Promote equity in educational opportunity

* Protect and defend voting rights.

* Promote a healthier nation by eliminating healthcare disparities

* Achieve comprehensive reform of the criminal justice system

“This is a first step towards developing a public policy agenda and we pledge to cooperate and work together with clearly defined objectives,” said Morial.

NAACP Washington Bureau Director Hilary Shelton agreed.

“It was important that we had this kind of conversation to begin utilizing our resources and coordinating even better and moving these initiatives forward through each of our own disciplines,” he said.

Morial said that the lesson to be learned is that we have to be proactive.

“We can’t wait and sit back and expect any elected official to write an agenda,” Morial added. “We have to do it.”

Sharpton echoed that sentiment.

“We can not ask the president to write an agenda for us to himself,” explained Sharpton. “We need to take this from rhetoric to results from people saying we need an agenda to trying to sit down and collectively come up with one, from just complaining to convening and going forward.”

As a nation watched gay and Latino groups pressure President Obama to take definitive action on issues affecting their communities, critics of Black leaders have suggested that they didn’t complain enough during Obama’s first term.

Gay rights groups heckled President Obama during fundraising events and speeches. Latino leaders organized sit-ins near the White House in opposition to the deportation of undocumented immigrants.

In 2011, President Obama worked to repeal the Clinton era “Don’t Ask Don’t Tell” policy on gay’s serving openly in the military, and in 2012 Obama became the first sitting president to support gay marriage.

And while the DREAM Act, legislation geared towards immigration reform, stalled in Congress, President Obama announced in 2012 that his administration would stop deporting young undocumented immigrants.

When CNN contributor and host of TV ONE’s “Washington Watch” Roland Martin pressed Morial on how far the leaders were willing to go to ensure that the White House addressed their agenda and if they were willing to take “external action” similar to what the civil rights leaders took 50 years ago, the NUL leader refused to go into the details.

“We are not going to let anyone peep our cards today in terms of what we are going to do,” said Morial.

He said that the group of leaders will reconvene and plans to present the Black agenda to President Obama and every member of Congress early next year.

Morial said, “We have to understand that the president works for us.”

Black Unemployment Drops Faster than for Whites

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By Freddie Allen
NNPA Washington Correspondent

WASHINGTON (NNPA) – The Black unemployment rate fell to 13.2 percent in November, down from 14.3 percent the previous month. The decrease of 1.1 percent was a sharper drop than for Whites (6.8 percent, from 7 percent in October) and Latinos (10 percent, the same as for the previous month), according to the monthly report by the Bureau of Labor Statistics.

Overall, unemployment fell by two-tenths of a percent, to 7.7 percent in November from 7.9 percent in October.

The drop defied predictions of many economists who believed the superstorm combined with the shutdown of east coast financial centers and delayed fuel delivery to the region would have a severe impact on job growth.

The unemployment rate for Black men fell from 15.6 percent in October to 14.3 percent in November. Since June 2009, which marked the official end of the Great Recession, the rate for Black males has declined from 17.5 percent to 14.3 percent, a dip of 3.2 percent.

Black women saw their unemployment rate fall from 13.3 percent in October to 12.3 percent in November. While men enjoyed a drop of 4.2 percent since June 2009, the end of the Great Recession, the rate for Black women was virtually unchanged, from 12.7 percent in November to 12.3 percent over that same period.

Despite causing nearly $50 billion dollars in damages, the Labor Department said, “Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November.”

Although the number of jobs added roughly matches the 151,000 average for the year, the number of adults working and looking for work, reflected in the labor participation rate, fell 0.2 points. The Black labor force also contracted (from 62.4 percent in October to 61.3 percent in November), despite a dramatic 1.1 percent drop in the unemployment rate to 13.2 percent in November. Economists often cite the small sample size for the month-to-month fluctuations in the unemployment rate for Blacks.

In comparison, the labor participation rate for Whites was 63.7 percent and the unemployment rate was 6.8 percent roughly half the rate for Blacks.

As President Obama and Speaker of the House John Boehner, war over 2 percent of the population, economists recommend actions that could bring peace of mind to the 98 percent this holiday season.

In a statement on the November jobs report, Chad Stone, chief economist at the Center on Budget and Policy Priorities, a non-partisan economic research group wrote:

“Policymakers could create a much rosier outlook for jobless workers and the economy generally if they would swiftly negotiate a deal that avoids the ‘fiscal cliff’ and raises the debt limit at the same time. The deal should include a set of measures, including an extension of federal emergency unemployment insurance (UI) for another year, that help the recovery gain strength while deficit-reduction measures phase in.”

Stone added that, “A deal that does not include an extension of federal emergency UI and provide other shorter-term stimulus measures would not just be cruel to jobless workers, it would make the recovery slower than it has to be.”

Stone joins a chorus of economists urging lawmakers to cut a deal that includes extending the unemployment insurance benefits.

Almost 2 million Americans get $1,200 a month in UI benefits. Nearly 1 million African Americans benefit from the program.

“That’s not a complete dead weight,” said Margaret Simms, director of Urban Institute’s Low-Income Working Families project. “People will have more money to buy groceries and pay their rent and their utilities all of which feed back into the economy.”

In a post titled, “Resilient Jobs Market Needs More Policy Help” Adam Hersh, an economist at the Center for American Progress said that President Obama’s plan will not only help families keep food on the dinner table, but also “strengthen recovery today and economic competitiveness tomorrow. “

Hersh added: “President Barack Obama offers this in his proposal to resolve the fiscal showdown, with $200 billion proposed for a payroll tax cut, expanded infrastructure investment, incentives for business investment, and renewed unemployment insurance, among other policies.”

Hersh said, that if politicians don’t act to jumpstart job growth, at the current 3-month trend, it would take nearly 20 years for our economy to return to “full employment.”

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BVN National News Wire