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New Research: Requiring Large Mortgage Down Payments Would Hurt the Economy

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75 percent of African-American families could be denied homeownership

By Charlene Crowell, NNPA Columnist –

As the nation continues to grapple with a weak housing market, policymakers are seeking safeguards to ensure that American families will never again face such massive foreclosures and billion-dollar losses of wealth. Some have suggested that the best guarantee against future housing crises would be to require down payment for many home purchases to be 10 or even 20 percent.

But after the Center for Community Capital and the Center for Responsible Lending analyzed nearly 20 million loans originated between 2000 and 2008, researchers found that while high down payment requirements might lower foreclosure rates somewhat, these larger down payment requirements would prevent a much greater share of credit-worthy borrowers from getting lower-cost mortgages. If mandated down payments were at 20 percent of a home’s purchase price, that requirement alone would exclude 75 percent of qualified African-American and 70 percent of Latino borrowers from lower-priced loans, or from becoming homeowners altogether.

By CRL’s estimates, the average American household earning $50,000 a year would need more than 10 years to save for a 10 percent down payment on a home. For black households, averaging $32,000 a year, the years needed to save would rise to more than 14 years to save for that same down payment.

The new research also found that it was dangerous loan features and the lack of mortgage underwriting standards – not low down payments – that caused the current housing crisis. Lenders that never considered a borrower’s ability to repay a loan, broker kickbacks for steering mortgage applicants into high-cost loans, and prepayment penalties were far more responsible for the foreclosure tsunami than down payments.

The Dodd-Frank Financial Reform Act already eliminated many of these risky loan terms.

If the American Dream is to be real for this and future generations, it must be accessible — especially for those who have historically been locked out homeownership.

Right now, without government-mandated high-down payments, minority homeownership already lags behind that of white families.

Last year in a related study, the Harvard-based Joint Center for Housing Studies also found that low wealth levels make down payments a major barrier to homeownership especially for minorities. “At last measure in 2007” cited the Harvard report, “the median minority renter had only $300 in cash savings and $2,700 in net worth, while the median white renter had roughly three times those amounts.”

No one wants or needs another housing crisis. So government has an important role to play in developing safeguards against the billion-dollar losses of recent years. That would be a good thing.

But we also know that government policies work best when they level the playing field and expand opportunities for everyone. Working families who pay their bills on time and keep debt to modest levels should not have to wait 10 years or longer just to amass down payments for modest homes. High, government-mandated down payments would do just that.

If as a country we believe in the pride of homeownership and the ability for every family to own a home, let government reforms reflect that basic value. A balance between fair access to homeownership and safety in mortgage markets would help everyone – consumers of all colors and businesses alike.

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

Coke and the Scheme to Depose the King

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By William Reed, NNPA Columnist –

How far should corporate social responsibility go? Can groups seeking to depose Swaziland’s king use Coca-Cola to help do it? Citing charges of “human rights abuses” and “looting of the national wealth” groups opposed to King Mswati are seeking the world’s support in their demand that the beverage behemoth “withdraw its support” from him.

Mswati III (born Makhosetive Dlamini on April 19, 1968) is the King of Swaziland and head of the Swazi Royal Family. He succeeded his father Sobhuza II as ruler of the kingdom in 1986 at age 18. Mswati III is one of the last absolute monarchs in the world. He has the authority to appoint the prime minister, members of the cabinet, and the judiciary. The king is the means by which state policy is enforced, as well as the mechanism for determining the policy of the state.

The Swaziland Democracy Campaign says: “Coca-Cola must know they’re doing business with the wrong people … Their profits don’t help the average Swazi while the king is getting richer by the day.” The king’s opposition is steeped in efforts to get him to accept “democratic reform.” Labor unions and pro-democracy campaigns have joined forces to stage noisy public protests calling for political change. The king’s critics also blame him for “poor economic management” and “widespread corruption.

It seems that Swaziland activists ascribe too much power to Coca-Cola. A country the size of Connecticut, Swaziland has an annual GDP of $3.65 billion, mostly from agriculture, forestry and mining. Swaziland has excellent farming and ranching land, and 80 percent of the population is engaged in subsistence agriculture. The Coca-Cola Company is a $15 billion a year transnational and the concentrate that is the most important ingredient in the company’s African product comes from a huge industrial plant in Mapatsa, Swaziland that it has operated since 1987. Coke is not in Swaziland to arbiter its politics, it is there because of favorable taxes and an abundance of cheap labor and raw sugar.

The consensus is that “Mswati isn’t likely to be deposed.” Swaziland has a population of 1.4 million homogeneous people who share language, culture and loyalty to their king and country. There are no tribal conflicts; the country is stable, orderly and at peace with her neighbors. The Socialist People’s United Democratic Movement is Swaziland’s largest opposition party.

Coca-Cola has 160 plants and 7,000 employees in Africa, but it’s “not the boss” of the King of Swaziland. The kingdom is a land-locked country in Southern Africa, bordered on the north, south and west by South Africa and to the east by Mozambique. Reports show that 63 percent of the population lives on less than US$2 per day, and 30 percent live in extreme poverty. The nation, as well as its people, is named after the 19th century King Mswati II. The capital city, Mbabane has a population of 50,000.

Mswati III is not about to abdicate his throne. According to the former CEO of the Office of the King, Mswati III earns a salary as head of state, has investments within and outside the country and owns an unspecified amount of shares in different companies within Swaziland. King Mswati is reportedly worth $200 million. This does not include about $10 billion that King Sobhuza II put in trust for the Swazi nation during his reign, in which Mswati III is the trustee.

King Mswati has more than 200 brothers and sisters and the task of taking care of them all. So beyond Coke, Mswati’s fate is in profits from the royal-owned company, Tibiyo TisukaNgwane, established by his father, King Sobhuza II to provide for his offspring. Nearly 60 percent of Swazi territory is publicly held by the crown in trust of the Swazi nation. All seems in accord with the law of the land as Mswati enjoys wealth through the Tibiyo Tisuka parastatal investment companies and extensive shares in numerous businesses, industries, property developments and tourism facilities.

William Reed is publisher of Who’s Who in Black Corporate America and available for speaking/seminar projects via the BaileyGroup.org

Educators Alarmed: Minority Teenagers Performing at Academic Levels of 30 Years Ago

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By Teresa Wiltz, America’s Wire –

WASHINGTON—Educators are expressing alarm that the performance gap between minority and white high school students continues to expand across the United States, with minority teenagers performing at academic levels equal to or lower than those of 30 years ago.

Despite the hope that improving education for children of color would propel them to better life outcomes, Latino and African-American students are not being prepared in high school classrooms for brighter futures. While achievement levels have improved considerably for minority elementary and middle school students, educators say their academic performance drops during high school years.

How prevalent is the achievement gap at the high school level?

On average, African-American and Latino high school seniors perform math and read at the same level as 13-year-old white students.

“We take kids that start [high school] a little behind and by the time they finish high school, they’re way behind,” says Amy Wilkins, vice president for government affairs and communications at the Education Trust, a Washington-based educational advocacy group. “That’s the opposite of what American values say education is about. Education is supposed to level the playing field. And it does the opposite. . . .While many people are celebrating our postracial society . . . there is still a significant hangover in our schools.”

The Education Trust says African-American and Latino students have made little to no progress in 12th-grade reading scores since 1994, continuing to lag behind white students. Math achievement has also remained flat, with the gap between white students and those of color widening.

Educators cite these causes for the disparity in performance:

• Lowered expectations for students of color
• Growing income inequality and lack of resources in low-income school districts
• Unequal access to experienced teachers
• An increased number of “out of field” teachers instructing minority students in subjects outside their area of expertise
• “Unconscious bias” by teachers and administrators.

These factors, experts say, produce an opportunity gap for students of color.

“A 12th-grade education in a more affluent neighborhood is not the same as the education in a less affluent neighborhood,” says Dominique Apollon, research director of the Applied Research Center, a national nonprofit with offices in New York, Chicago and Oakland, Calif. “Top students in low-income schools don’t have the opportunity to be pushed further and further.”

Wilkins adds that “school is their best chance of escaping horrible circumstances. To cut them some slack in school is not the appropriate response to racism and poverty in American culture. It is a response that ends up being deadly to the students.”

School advocates say students of color, regardless of class, are frequently met with lowered expectations from teachers and administrators. With such expectations come lowered requirements in the classroom, they say. Students in low-income schools are more likely to be given an “A” for work that would receive a “C” in a more affluent school, according to “Raising Achievement and Closing Gaps Between Groups: Lessons from Schools and Districts on the Performance Frontier,” an Education Trust study released last November.

Students of color are also less likely to be given advanced-level coursework. John Capozzi, principal of Elmont (N.Y.) Memorial Junior-Senior High School, is among educators who call that a civil rights issue. Capozzi says he frequently battles those coursework perceptions, even from fellow educators and accreditation officials evaluating his school.

“They have preconceived notions about minority kids,” says Capozzi, whose students are primarily African-American and Latino. “A large part of my job . . . [is] dispelling the stereotypes of our kids. It’s long been embedded in society.”

“African Americans and Hispanics have been denied access to the more rigorous courses,” Capozzi says. All students, he says, “should be thrown into vigorous classes” and be given proper academic support to ensure their success. If they don’t have access to those classes, he says, they won’t be adequately prepared for college.

Research from the Education Trust study supports his assertion: More white high school graduates were enrolled in college prep courses than were their African-American, Latino and Native American counterparts. Often, schools attended by those minorities do not offer advanced classes.

According to Pedro Noguera, professor of education at New York University, “Where there’s tracking, [you have] obstacles to getting into the more rigorous classes, and the teachers aren’t that committed to teaching. Those are all signs of a dysfunctional culture. . . .In many schools, instead of encouraging kids [of color] to take [advanced courses], they’re discouraging them and putting up obstacles.”

Coming from a middle-class family doesn’t protect minority students from such obstacles. Wilkins says middle-class black youngsters aren’t doing as well as their white peers. Many are placed in less competitive classes, and a black child with high fifth-grade math scores is less likely to be enrolled in algebra in eighth grade, according to the Education Trust study.

“A lot of the time, those [middle-class black] kids are in schools where they are in the minority,” Noguera says. “If they don’t have teachers that are encouraging them, they feel alienated.”

Another obstacle for poor and minority students is that they are more likely than white students to have inexperienced and “out of field” teachers. According to Wilkins, minorities at high-poverty schools are twice as likely to be taught by “out of field” teachers — for instance, a math instructor teaching English or a science instructor teaching history. That, education experts say, is a recipe for disaster.

Low-income minority students are also more likely to have newly minted teachers, many of whom aren’t equipped to help underperforming students get on track. According to the Education Trust, low-performing students are more likely to be assigned to ineffective teachers.

“Some of the least experienced teachers are put in classrooms with our most needy kids,” says LaShawn Routé Chatmon, executive director of the National Equity Project based in Oakland. “This doesn’t mean that new teachers can’t serve needy students. But there is a trend of large numbers of teachers who aren’t fully prepared.”

The result? According to Chatmon, inexperienced teachers inadvertently perpetuate the achievement gap. Students performing below their grade must be taught at an accelerated level, she says. Teachers must be “warm demanders,” showing students respect, encouraging them to be partners in their learning and communicating clearly that they are expected to master the subject matter, Chatmon says.

This is particularly critical in the early years of high school when students learn groundwork for more advanced coursework.

“All the research shows that ninth grade is a pivotal year, for all students, but in particular minority students,” Capozzi says. “If you don’t catch them in ninth grade, the rise in dropouts increases dramatically.”

Poverty also hampers minority student achievement. Blacks and Latinos have been disproportionately affected by the economy, with more and more children falling into poverty, according to Apollon.

Minority students typically attend schools that lack resources. They are also more likely to attend schools where the student-teacher ratio is high, books and computers are outdated and teacher aides aren’t available to provide extra help for those who need it most.

“Young people of color are overrepresented in the poorest schools and the poorest neighborhoods,” Apollon says. “There is a cumulative and compounding effect of structural deficiencies in many schools.”

The sluggish economy has forced many school districts to slash budgets, eliminating after-school programs and arts instruction. Many schools are underfunded, even in more affluent districts. But wealthier schools benefit because parents can organize fundraisers or pay for private tutors.

Poor parents working two and three jobs often don’t have the wherewithal to advocate for their children, education experts say. Often, the parents themselves received a substandard education. This creates a dynamic in which generations of families are stuck in a cycle of underachievement.

Also part of the poor performance of minority students is “unconscious bias.” Teachers may think that students from poor families are so traumatized that they can’t learn, experts say, and so they don’t push those children to excel. Chatmon says that as African-American boys grow physically, teachers often talk about being afraid of “their size” and tend to overpunish them. As a result, a disproportionate number of black male students are suspended and miss class instruction, making it that much harder for them to catch up.

“Unconscious bias clearly plays a role in tracking young boys of color in particular into the slower track courses,” Apollon says. “Unconscious bias clearly plays a role in terms of discipline as well. Obviously, if you’re being suspended from school, all the teachers think you’re disruptive. They’ll have lower expectations of students that have been labeled ‘undisciplined.’ That certainly will have a negative impact on a student’s ability to succeed.”

(America’s Wire is an independent, non-profit news service run by the Maynard Institute for Journalism Education. America’s Wire is made possible by a grant from the W. K. Kellogg Foundation. For more information, visit www.americaswire.org or contact Michael K. Frisby at mike@frisbyassociates.com.)

New Jersey Pastor Calls for National Anti-Payday Lending Campaign

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Campaign hopes to free one million Blacks from debt

By Charlene Crowell, NNPA Columnist –

An activist New Jersey pastor has decided to take his economic-focused gospel across the country. Rev. Dr. DeForest Soaries, senior pastor of the 7,000 member First Baptist Church of Lincoln Garden in Somerset, NJ is launching a national effort against one of the most predatory lending products: payday loans.

This church-based movement was inspired by hundreds of contacts and phone calls Soaries received following his appearance in a 2010 CNN documentary, Almighty Debt. Hosted by Soledad O’Brien, the documentary shared the financial struggles of Lincoln Garden members facing foreclosure, finding student financial aid and adjusting to long-term unemployment.

According to CNN, the documentary also became the network’s second-highest rated program that year with 13.8 million viewers. Now in 2012, what began as a 90-minute television program has become the impetus for a year-long advocacy effort with four specific objectives:

▪ Education – information distributed through churches, barbershops, community centers;
▪ Direct Action – coordinating a series of protests in front of payday stores;
▪ Alternatives to payday loans – identifying viable alternatives available through credit unions, minority banks and other lenders; and
▪ Public policy – working with local leaders to initiate actions to restrict payday and other predatory practices.

In the January 2012 edition of the American Bar Association’s journal, Pastor Soaries said in part, “Too many Americans find themselves in the perfect storm of diminishing economic opportunity and legal predatory financial practices that have a reverse Robin Hood effect – stealing from the poor to benefit a few voracious enterprises.”

“What is needed is a national campaign that addresses the aggressive efforts of promoting payday lending and luring customers into their web of debt”, continued Soaries.

Over the past decade, the ills of payday lending have been a focus of the Center for Responsible Lending. Through a series of state-based efforts partnering with local advocates, 17 states and the District of Columbia have enacted payday reforms, saying ‘no’ to triple digit interest rates and downward spiraling debt. Additionally, federal law protects military members and their families from the typical 400 percent interest rates of payday loans.

In recent years, however, the growth of new versions of small-dollar, short term loans — Internet and bank payday loans — threaten to circumvent all of these hard-fought consumer victories. In particular, bank payday loans lead to 175 days of indebtedness for the average borrower – twice as long as the maximum length of time the Federal Deposit Insurance Corporation has advised.

With many banks allowing up to half of a customer’s monthly direct deposit income, or up to $750, an average 44 percent of a bank payday customer’s next deposit is used to repay bank payday loans. For older borrowers already living on fixed incomes, the average bank payday loan repayment from a Social Security check was 43 percent. Senior customers are also 2.6 times more likely to have used a bank payday loan than bank customers as a whole.

Even without bank payday loans, more than 13 million older adults are considered economically insecure, living on $21,800 per year or less. One-fifth of older households have annual incomes below $50,000 but report spending more than 40 percent of their income on debt payments.

CRL research has shown that communities of color are particularly vulnerable to payday loans. Across the country, the concentration of storefront lenders is typically greater in black and brown communities. Additionally, Missouri is the only state outside the Deep South with the greatest number of payday stores per capita.

Persons and organizations desiring to join the advocacy effort are advised to contact Pastor Soaries at: fbc@fbcsomerset.com.

CRL is ready and willing to work with Pastor Soaries, other clergy and community leaders across the nation to eliminate the financial degradation wrought by payday loans. Let 2012 be the year our community is freed from this ‘almighty debt’.

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

Investigation Sought to Determine Motive in FAMU Death

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Special to the NNPA from the Afro-American Newspaper –

The National Black Justice Coalition has begun an online petition drive (www.change.org/petitions/justice-for-robert-champion-jr) urging the U.S. Department of Justice and the U.S. Department of Education Office for Civil Rights to investigate whether the death of a Florida A&M University student was actually a hazing accident, the result of retaliation because of his opposition to hazing, or an anti-gay hate crime.

The parents of Robert Champion Jr., told “CBS This Morning” Jan. 10 that their son may have been targeted because he was gay and vocally opposed to hazing.

“There’s no way around it. It was wrong,” Pam Champion said.

According to “Journal-isms,” an online column written by veteran journalist Richard Prince, Champion family lawyer Chris Chestnut told the network that the family had “spoken to over 10 potential witnesses. Some of them say Champion was singled out because of his sexual orientation and opposition to hazing.”

The Champions also have filed suit against FAMU—which has since named a scholarship in Champion’s memory—as well as Fabulous Coach Lines, the company that provided the charter bus where the attack against the marching band drum major occurred Nov. 19, following the Florida Classic football game in Orlando, Fla.

“I’m waiting on a solution,” Pam Champion told CBS. “Our goal is not to shut down any school. Our goal is not to stop the music. Our goal is to stop the hazing.

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