By Sean Luechtefeld on 05/18/2012 @ 12:00 PM

Tags: Events, Housing and Homeownership

Keyboard image by Bigstock Photo.

We’ve got a couple events coming up in the next few weeks, and we wanted to make sure all of our readers were in-the-know. Note that the events below are online events. For these, advanced registration is free, but required. If you have questions, don’t hesitate to shoot us an email at cfednews@cfed.org.

• Opening Doors to New Funding Streams
  A free webinar co-presented with NeighborWorks America
  This webinar will discuss how two housing organizations, CASA of Oregon and Beyond Housing, have cultivated new funding streams for programs to expand their work into other areas of asset building such as financial education and college savings. Register here.
• State & Local Frameworks for Federal Funding: Manufactured Housing in Consolidated Plans
  This free webinar will explore how consolidated planning can serve as a powerful tool for leveraging federal resources for affordable manufactured housing preservation, replacement and development. Register here.

We hope that you’ll be able to join us for some or all of the events above!

By Katherine Lucas-Smith and Michelle Nguyen on 05/17/2012 @ 11:30 AM

Last week, the House of Representatives approved appropriations legislation that would eliminate the American Community Survey (ACS), a Census Bureau product that provides much of the best data on American families' income and finances, as well as demographic and socioeconomic characteristics. Losing this tool would significantly impede our ability to understand communities and states.

Without the ACS, federal agencies would not know how to distribute nearly a third of federal funding for low-income families and communities; block grant funds such as Medicaid, Temporary Aid to Needy Families (TANF) and Community Development Block Grants (CDBG) are allocated based on the needs of each state’s population. Researchers, such as the Urban Institute, would not be able to analyze the relationships between poverty and educational attainment, family structure, and race and ethnicity. Businesses that rely on ACS data to determine where to locate new stores or make major investments would be left “flying blind.”

If the ACS is eliminated, the asset-building field will also lose access to critical information about people’s savings and wealth. Examples include:

• The Assets & Opportunity Scorecard relies on ACS data to paint a picture of financial security at the state level, providing data like cost-burdened homeowners, high school attainment and asset poverty.
• The unbanked population data tool available at www.joinbankon.org was built using Census tract-level information from the ACS. It provides estimates of un- and underbanked households for every city and county in the nation.
• Our research team uses ACS data to understand aspects of wealth in the communities featured in Local Profiles.
• ACS data was also instrumental in developing Upside Down: The $400 Billion Federal Asset-Building Budget, CFED’s analysis of federal support of asset building.

Insights from these publications and resources inform our program offerings and policy advocacy efforts, and they help us identify specific needs and trends in the states and local areas we work in across the country. The American Community Survey is integrated into nearly every aspect of CFED’s work.

CFED has joined The Census Project and more than 450 organizations to urge the Senate to support the ACS when it debates and votes on its version of the House bill. We have also shared this information with our partners across the United States, in sectors ranging from manufactured housing, to financial access, to matched savings. The diversity of organizations and firms that have joined this effort demonstrates that federal funding for high-quality data that describes American households, communities and states is not a partisan issue. We hope that members of the Senate agree and prevent the elimination of the American Community Survey.

If you value the ACS, help protect it! Email your senators, or call their offices and speak with the Appropriations staff. As the Senate moves forward with its bill, we will keep you informed.

By Ethan Geiling on 05/16/2012 @ 04:00 PM

Tags: Assets & Opportunity Initiative

Predatory small dollar lending strips wealth from financially vulnerable families and leaves them with fewer resources to devote to building assets and climbing the economic ladder.

A number of cities and states have recently enacted or are currently considering policies to curb predatory small dollar lending, and in particular, payday lending. At the local level, county supervisors in Santa Clara County, California recently approved a ban on new payday lending operations. The San Jose City Council approved a similar ban at a meeting on Tuesday. This recent victory makes San Jose the largest U.S. city to limit payday lenders and the first city to prohibit them from opening in low-income areas.

At the state level, the Delaware legislature is considering HB 289 – a bill that would limit borrowers to no more than five payday loans in a 12-month period and create a statewide payday loan database. The Rhode Island Payday Lending Reform Coalition is supporting legislation that would cap interest rates at 36% APR. Similarly, Missourians for Responsible Lending submitted 180,000 signatures to the Secretary of State for a ballot initiative that would cap payday loans at 36% APR. In late 2010, advocates in Montana were able to successfully cap predatory loans at 36% APR through a statewide ballot initiative, demonstrating that the power of ballot initiatives to create policy change.

Moving in the opposite direction is Pennsylvania, which currently caps payday loans, but is considering a bill to raise the cap. A group of advocates, led by STOP Predatory Payday Loans in PA, is actively opposing the measure.

Many states have already recognized the negative impact of predatory small dollar lending. The majority of states regulate these practices in some way, although laws offer varying degrees of protection. CFED's Assets & Opportunity Scorecard examines states' policies on three predatory small dollar lending products:  payday loans, car-title loans and abusive installment loans. The Scorecard also looks at whether states include predatory lending in basic consumer protection laws. 

Ten states have prohibited or capped all three types of predatory loan products and include short-term lending in basic consumer protection laws. Fourteen states do not effectively regulate any of the three predatory loan products, although nine of these states include short-term lending in basic consumer protection laws. All other states protect consumers against some, but not all, predatory short-term loan products. Below is a map showing the strength of states' policies across the country.

Strength of State Policies: Predatory Small Dollar Lending

By Sean Luechtefeld on 05/16/2012 @ 12:30 PM

Tags: Federal Policy, Policy Alerts

Yesterday, DCist indicated that world-renowned Manhattan chef and talk show host Mario Batali announced he is taking the “Food Stamp Challenge.” In short, the Food Stamp Challenge involves people – typically of greater-than-average means – subsisting on the $31 that would be provided to low-income families by SNAP, the Supplemental Nutrition Assistance Program. To be sure, Batali isn’t the first well-known figure to take the Challenge.

In the DCist piece, Batali shares (in rather gruff terms) the struggles that he has had subsisting for a week on what a single meal costs in his own restaurant. These problems go well beyond having to give up free-range chicken. “I’m [freaking] starving,” Batali notes.

The good news for Batali and others who take the Food Stamp Challenge is twofold. First, the Challenge only lasts seven days. For the low-income families that rely on SNAP every week, there’s no end to the lack of nutritious (or altogether lack of) food. Second, and more importantly, folks taking the Challenge don’t need to worry about qualifying for food stamps; they simply need to budget based on what they would earn if they did need food stamps.

Low- and moderate-income families, on the other hand, aren’t so lucky, and their ability to qualify for food stamps might be in further jeopardy given a recent proposal to eliminate Broad-Based Categorical Eligibility. In short, such a policy would reinstate asset tests for SNAP, meaning that up to three million people would lose their food stamp benefits altogether. While $31 per week isn’t much, it’s still better than the $0 that could be coming to the families who acquire enough assets to make them “just not quite poor enough” to be eligible.

While this is bad news for these families, there’s good news for you: there are things you can do to help that don’t require you to take the Food Stamp Challenge. First, visit CFED’s Advocacy Center to send a message to your legislators. Second, share this blog post on your Facebook and Twitter feeds to encourage your friends and colleagues to let Congress know that it’s not okay to strip hardworking individuals of these important benefits.

By Jimmy Crowell on 05/15/2012 @ 10:30 AM

Tags: Housing and Homeownership, Recommended Reading

Last week, ROC USA® and Enterprise Community Partners released a report titled “Sustainability in Manufactured Home Communities: Cost Effective Energy, Water and Community Infrastructure Strategies to Maximize Long-Term Value.” The report challenges many of the stereotypes associated with manufactured homes and presents manufactured housing, when installed properly, as more cost and energy efficient than site-built homes and condominiums. Several sustainability strategies are presented which include; a cost-benefit analysis of replacing manufactured homes with EnergyStar homes, approaches to retrofitting and weatherizing individual manufactured homes, and community infrastructure improvements.

The report provides a compelling case study that quantifies the energy performance of manufactured homes versus site-built homes. The report identified a manufactured housing community in California located near different types of site-built homes and used a set of sustainability indicators to compare energy and cost efficiencies. The analysis demonstrates that manufactured homes can be more sustainable and have less of an environmental impact than single family site-built homes and condominiums.

With approximately 6% of the total U.S. housing stock being manufactured homes (and with more than 17 million Americans living in manufactured homes), these findings carry great implications for the industry. Based on the key findings of the report, recommendations are made to maximize the potential of manufactured homes as affordable, energy efficient housing. The report recommends the replacement of manufactured homes built before the U.S. Department of Housing and Urban Development enforced building codes for manufactured homes in 1976. When these homes are replaced with EnergyStar rated manufactured homes, homeowners have a payback period of less than 20 years. The report also recommends several weatherizing and retrofitting strategies costing $2,500 or less that have payback periods ranging from a few months to seven years. Finally, community-wide recommendations are offered on how to improve electrical, plumbing and heating infrastructures to optimize water and energy savings.

This report only helps to prove that, when certain issues such as energy efficiency are addressed properly, manufactured housing can be a viable affordable housing strategy. Responsibly built and financed manufactured homes can provide economic security and stability for thousands of American families.

By Lauren Williams on 05/14/2012 @ 04:30 PM

Tags: Entrepreneurship

New Ways to Monetize Entrepreneur Services

Over the past couple years, SETI has worked with the Brooklyn Cooperative Federal Credit Union to help them develop a way to make their small business tax assistance program pay for itself by offering this service for a fee below market-rate. Countless other small business development organizations are exploring ways to improve the financial sustainability of their own business models as well. I got a glimpse into the strategies being used by microenterprise development organizations to do this at the Association for Enterprise Opportunity’s 2012 National Conference, The Power of Microbusiness two weeks ago.

I attended a session on “New Ways to Monetize Entrepreneurship Services,” where two high-performing microenterprise development organizations shared the creative ways they’ve identified to start generating more revenue. Angie Hawk-Maiden, President of the Appalachian Center for Economic Networks (ACEnet) shared a compelling story of the strategy she’s helped devise to raise the percentage of self-generated revenue at ACEnet from 25% in 2006 to 72% in 2012. ACEnet serves small business from 67 of Ohio’s 80 counties and some from other states as well; many of their clients are food manufacturers, so their expertise lies in developing the infrastructures and business strategies to help these microenterprises succeed. The strategies they employed to increase their self-generated revenue included offering more services in exchange for a fee:

• Technical assistance for business owners
• Incubation
• Infrastructure development
• Access to capital services
• Capacity building through product innovation, branding and adoption of technology

The technical assistance line of service they built includes working for loan funds with struggling business clients; ACEnet offers technical assistance to those business owners to create a win-win situation where loans can be salvaged and business owners can retain access to capital. They also deliver entrepreneurship for business owners through regional banks and universities. By consulting with other agencies, ACEnet has launched a new line of business around preparing economic assessments, value chain mapping and developing the infrastructures necessary for food production in other regions. The shared use of their incubator spaces and shared kitchens for food production have allowed them to drive their overhead costs down and encourage business owners to reinvest the savings they get from using communal spaces. ACEnet developed a group brand—“Food We Love”—to help their clients market collaboratively and more easily enter into specialty food producer markets. They also developed an incubator focused on wellness services, an easy fit for the region given the local market—many of the consumers buying their food producers’ products are interested in healthy, organic foods and holistic health services.

Another practitioner, Kathy Keeley from the Northeast Entrepreneur Fund, shared her story of a loan fund that underwent an extreme makeover—cutting staff and reorganizing programs—in order to survive in the midst of a recession and ultimately generate enough earned income to support at least 50% of its operations. Within three years, they reached this goal and grew the loan fund to their target amount—$5 million.

Naturally, the audience wanted to know they could reach the same level of self-sufficiency as these two outstanding organizations. Here’s their advice to the microenterprise field:

• It’s increasingly more challenging (nearly impossible) to get funding to support entrepreneurs in the “thinking” stage. Refer these very early stage entrepreneurs to SBDCs that have access to resources to support this type of activity.
• Other organizations seeking to generate more revenue have to make realistic projections about their costs, identify clear and realistic long-term goals, and get serious about downsizing if necessary.
• Always under-promise and over-deliver.
• Don’t continue programs that aren’t funded and always refuse grants that don’t cover 100% of your operating costs.
• Build your public value by communicating to your community what you have to offer, increase your organizational capacity and leverage political capacity where possible.
• Specialize, specialize, specialize! Don’t duplicate other organizations services, and if you see another organization duplicating yours, stop offering them.

By Lauren Williams and Jimmy Crowell on 05/11/2012 @ 11:00 AM

Tags: Entrepreneurship

Click to download a video clip of Jack accepting AEO's lifetime achievement award.

Last week, we had the chance to attend the Jack A. Litzenberg Lifetime Achievement Award Luncheon at the Association for Enterprise Opportunity’s 2012 National Conference “The Power of Microbusiness.” As newcomers to the field of microbusiness, we did not know much about Jack’s legacy or how much he contributed to the creation of the field. However, after attending the luncheon, meeting Jack and listening to the touching testimonials to his leadership, creativity and dedication, we feel indebted to Jack. For nearly thirty years, Jack Litzenberg’s grant making at the Charles Stewart Mott Foundation played a fundamental role in the development of a movement to empower low-income entrepreneurs to start their own businesses and move up the economic ladder.

Leaders from all across the field of microenterprise, including CFED’s founder Bob Friedman, gave passionate remarks about Jack and his many years of work with the Mott Foundation funding amazing projects. Bob Friedman’s words especially resonated with us. The poem below, “Jack’s Hands,” written by Bob, expresses the awe-inspiring nature of Jack Litzenberg’s work:

Jack’s Hands

Calloused and rough,
Brave and bold,
Pointing to promise --
The product of reality’s sanding.

Cramped crafting the script,
Now piercing the sky,
Dancing with imagined possibility
That leaves millions more standing.

Jack’s heart,
Too big for his chest:
Embracing, understanding
Present and future.

Welfare moms,
Kids who deserve more,
Entrepreneurs but for lack of a seed,
Skilled workers but for a path,
Social entrepreneurs, imagining better:
To all, an encouraging and gentle lift,
That rarest and most valuable of gifts.

Jack’s head,
Brimming with ideas
Of a better world
And the ways there.
A furrowed, full and expansive brow,
A generous world to plow.

In Jack’s hands, heart and head,
We have been shaped and bred,
Taught, nourished, loved and fed
Freed, calmed, centered, led.

We are in the best of company.
Thank you, Jack.

Bob Friedman
March 30, 2012

The field that Jack helped build is the field in which we are now building our careers. Jack retired in January from the Mott Foundation, and as new entrants to the microenterprise field, we’re excited to have inherited a legacy as monumental, unique and celebrated as Jack’s.

By Jimmy Crowell on 05/10/2012 @ 03:00 PM

Tags: Entrepreneurship, Events

Last week, I attended the Association for Enterprise Opportunity’s 2012 National Conference “The Power of Microbusiness.” The conference brought together over 400 executives, investors, industry partners, practitioners, policymakers and Administration Officials to discuss the potential of microbusinesses to create jobs and grow America’s economy. There were many concurrent sessions that focused on the transformative power of microbusinesses and their current limitations. One major hurdle that weakens the power of microbusinesses is a lack of access to capital for low-income entrepreneurs. ‘Cracking the Code on Bringing Low-Wealth Immigrant Entrepreneurs into the U.S. Financial Mainstream’ was one of the many sessions at this year’s conference that offered a resolution to this problem. Presenters in this group discussed their innovative use of lending circles to help low-income entrepreneurs access capital and build credit

José Quiñonez, Executive Director of Mission Asset Fund (MAF), gave the audience a bit of background information about lending circles to start the conversation. Lending circles are commonly practiced abroad and among immigrant communities in the United States. A lending circle is formed when a group of people come together and agree on weekly payments that are manageable by everyone in the group. For example, if 12 people form a lending circle and each agree to pay $50 every Friday, the group will collect $600 every week. Every week the $600 is given to a different member of the group. Thus, the lending circle has two functions; on one end, it presents a zero-interest loan to the first recipient of the $600 and, on the other end, it is a savings program for the last recipient of the $600. Quiñonez pointed out that low-income immigrants usually do not trust financial institutions, but with this program he is bringing the unbanked into the financial mainstream.

Quiñonez then explained that a lending circle is a financial service that is invisible to the U.S. financial mainstream. MAF formalized this process and brought the benefits of lending circles to light. Thus far, they have administered 99 lending circles and have a 0% default rate. Not only is MAF helping low income entrepreneurs access capital and save funds, the organization is also helping to improve clients’ credit scores by reporting weekly payments to credit agencies. Within 6 to 7 months of joining a lending circle with MAF, participants saw their credit scores increase 20-36 points on average. In this way, MAF graduates people to responsible mainstream borrowers.

Another organization, Finanta, has also implemented lending circles to provide access to capital, banking services and credit building services to low-income entrepreneurs. Their model differs from MAF’s in that they provide the capital to the group. The group is co-responsible for the loan and collectively decides how much to pay and when to meet. Finanta then reports payments to credit agencies to help improve participants’ credit scores.

Lending circles are just one of the innovative solutions to strengthen the collective power of microbusinesses and create jobs. I’m looking forward to next year’s conference to learn more about innovative strategies to support the proliferation of microbusinesses.

By Sean Luechtefeld on 05/09/2012 @ 01:15 PM

Tags: Economic Inclusion

This is a re-post of a piece that CFED's Chief Program Officer, Ida Rademacher, wrote for ACCION International's Center for Financial Inclusion's Expert Exchange. CFED is honored that Ida was invited to join CFI's conversation and wishes to extend special thanks to Sonja Kelly.

A mentor of mine once told me, “If you want to sell a man lawn seed, talk about his lawn, not your seed.” It’s not hard to see how this applies to financial inclusion. To state the obvious, “If you want to sell a woman financial services, talk about her needs, not your products.” What are her risks? What products does she need at various points in her life? What does she need to know in order to be able to choose the options that best meet her needs?

We often fall into the trap of thinking about banking from the perspective of the banks. Especially now, having come through a financial crisis in which banks maintained a starring role, we frequently hear people equating financial stability with fiscally responsible bank action. But in the end, markets are about people. So an additional part of the product development equation has got to be based on solid consumer-facing research —their lawns, not our seed.

And here are some figures from recent surveys about the “financial lawns” of families in the US:

• Over half of the population in the US with a credit score has what can be considered a subprime score. In some states, that number closes in on 70%.
• One in four Americans either have no bank account, or are considered “underbanked,” meaning even though they have an account, they still use alternative and largely unregulated financial products and services that are often very costly. In the African-American community, the number of un- and underbanked households rises to one in two, or 50%.
• Nearly half the population isn’t confident they could find a way to scrape together $2,000 if they had an emergency.
• Less than half of American workers participate in any form of employer-based retirement plan.

These statistics are evidence of a broken system. That is why CFED advocates for an approach to financial inclusion in the U.S. that incorporates the transaction, credit and savings needs of low- and moderate-income individuals over their life course as a critical part of the input that informs the offerings of the financial services sector. A similar understanding should inform policy solutions so that every individual has an opportunity to save and invest in a better life for themselves and their children. The good news is that if we focus our efforts on meeting these needs of individuals – allowing them to fully participate in and contribute to the mainstream economy – our financial systems around the world will be far more stable as well.

By Stephanie Halligan on 05/08/2012 @ 12:00 PM

Tags: Behavioral Economics, Individual Development Accounts

In February, CFED hosted a webinar Behavioral Strategies for Successful Individual Development Account (IDA) Programs. The webinar was presented on behalf of the Assets for Independence (AFI) program, the largest source of federal funding for IDAs and featured former CFED Innovator-in-Residence, Mindy Hernandez. Mindy, one of the leaders in the field of applying behavioral economics research to real world challenges, Mindy presented on findings from behavioral research and provided strategies for asset building and IDA programs to improve program outcomes (for a recording of the webinar, please visit the IDA Resources website).

Applying Behavioral Economics to the Asset Building Field:
But how exactly can behavioral economic strategies help asset building programs? We all know about the benefits of opening a bank account, making regular deposits and saving for the future. Yet getting clients through the door and enrolled in an asset building program – like an IDA program or free tax prep – and follow through with their intentions to save money is often surprisingly challenging.

That’s where behavioral economics comes in. Research and experimentation from the field are continuously finding new ways to help people act on their intentions and form good savings habits. Program “tweaks” can help:

1. Improve program enrollment and retention;
2. Promote better participation through automation, reminders, and simplified processes; and
3. Enhance clients’ capacity to follow through on their intentions.

During the webinar, CFED also announced the release of the Behavioral Strategies for Successful IDA Programs guide, developed in partnership with behavioral economist Mindy on behalf of the Assets for Independence (AFI) IDA Resource Center. The guide outlines easy, cost-effective tactics for improving IDA program recruitment, enrollment and retention.

Examples of Behavioral Economics and Asset Building
We think there are a lot of promising opportunities to apply behavioral economics principles to other asset building programs. You can find a lot of examples and research of behavioral economics in action in CFED’s publication Applying Behavioral Research to Asset-Building Initiatives. In this paper, Mindy describes her partnerships with three different asset building practitioners to design and test behavioral program tweaks. What she found (and what other studies around the world have confirmed) is that little adjustments in a program can make a big difference in client behavior. Here are just a few examples of some effective strategies from the field (you can learn more about these examples in the webinar recording):

• Mental accounting: An experiment in India working with low-income construction workers found that they were saving just three percent of their income. Working closely with social workers, the construction workers were asked how much they would be able to save beyond that 3% and asked to commit to either one savings goal or multiple savings. The workers were then paid every month with their earnings divided into two envelopes: one for saving and one for spending. Some workers received envelopes with a photo of their savings goal written down (for example, their children or a new motorbike). If a worker wanted to spend his savings, he would literally have to tear through the photo of his own child to get to the money!
  
  What the study found was that just dividing the money was incredibly helpful. Even more valuable, however, was naming the savings goal and adding the visual picture. Finally, the study also concluded that having multiple savings goals corresponded with a decrease workers’ savings.
  
  How does this apply to my program?
  First, label saving goals: the more specific clients are about their savings goals, the more it will resonate and the more likely they will save. Second, literally separate money: just as people often create mental “buckets” of how and when they can spend their money, physically separating the money will encourage that clients follow through with their intentions. Third, be visual: using photos is a powerful tool to remind clients of why they are saving in the first place. Finally, keep it simple: the more complicated, and the more goals a client has, the less-likely he is to succeed or save money.
• Well-designed reminders: Reminders are an easy and relatively inexpensive way to help people adhere to behaviors, like saving consistently or for entrepreneurs, filing quarterly taxes. CFED and Mindy have begun working with one IDA program to test the effectiveness of text messages to promote more consistent savings by young clients. Text reminder studies in abroad have shown positive results: clients that received texts reminding them to save increased their savings by 6%, and clients receiving a reminder with a message associated with their specific goal increased their savings by 16%.
  
  How does this apply to my program?
  First, be specific: The text message study shows a 10% difference in client savings between generic savings reminders and goal-specific savings reminders. The more personal the message is to the individual, the more powerful.
  
  Second, focus on the how: just as being specific about the goal is important (the end result), articulating the how and when (the means) can influence a client’s likelihood to follow through on his intentions. It’s not just a reminder to save, but to remember to “drop off your deposit to the bank downtown after you leave work.”

Want to learn more about applying Behavioral Economics to your work?
CFED will be holding several behavioral economics sessions during the Assets Learning Conference in September. To learn more and to register, please visit www.assetsconference.org. We’re excited about the synergies between behavioral economics and asset building, and we hope you are too!

By Mark Rukavina, Guest Contributor on 05/07/2012 @ 04:00 PM

Tags: Economic Development, Federal Policy, Innovators

An American Medical Association study found that one of every five claims is inaccurately processed by health insurers. Millions of Americans are regularly confused by medical bills, despite receiving a significant number of medical bills each year. Of the $2.6 trillion in total U.S. healthcare spending in 2010, $300 billion was paid out-of-pocket through deductibles, co-payments and out-of-network fees.

Employers struggling to contain health care costs often switch to higher deductible plans or increase co-payments in exchange for lower premium costs. Changing insurance coverage leaves many people unsure of whether they should pay the bill. Often people hold off paying to see if their insurer will pay a claim. While it may be tempting to wait for clarity, this can be a big mistake. If delayed payment results in the medical bill being turned over to a collections agency, it is nearly certain to cause headaches in the future.

Thirty million Americans were contacted by collections agencies for medical bills in 2010. Many believed that these medical accounts would not hurt their credit score. However, collections agencies routinely report medical bills to the credit bureaus. They view all collection accounts as “delinquent” with no regard for why the bills were sent to collections. Many people promptly pay their medical bills in full after hearing from a collections agency, but they are surprised to find that even after paying these accounts, blemishes remain on their credit reports.

According to studies published in the Federal Reserve Bulletin, more than half of all accounts in collections on credit reports are medical in nature. Medical collections accounts can stay on a report for up to seven years, even with NO balance due. Collections accounts are reported in the credit history section of a credit report and this section accounts for 35% of a credit score. Because of this, these fully paid “delinquent” medical bills can be devastating. According to a FICO spokesperson, a medical collection — paid or unpaid — can lower a score by 105-125 points for someone with otherwise good credit and a FICO score of 780.

Whether opening a new credit card, buying a car or taking out a home mortgage, the cost of borrowing will be inappropriately increased if there is a medical collection on your credit report. The resulting higher monthly fees on loans leave American consumers with fewer dollars to spend on consumer goods or services. This problem has come to the attention of the U.S. Congress.

In the House, Representatives Heath Shuler (D-NC) and Don Manzullo (R-IL) have put together a common sense, bipartisan proposal. They feel that medical debt is unique and that it deserves to be treated differently than other types of debt, so they introduced HR2086, the Medical Debt Responsibility Act. Jeffrey Merkley (D-OR) introduced the Medical Debt Responsibility Act in the Senate as SB2149. The legislation, which you can read more about here, requires that medical bills that are fully paid off or settled be removed from a consumer’s credit records within 45 days. That’s it, pure and simple.

This straightforward proposal can help to get the economy going again; that’s why it enjoys bipartisan Congressional support. It is also supported by organizations as diverse at the Corporation for Enterprise Development, the American Medical Association, Consumers Union, the Mortgage Bankers Association, the NAACP and the National Association of Home Builders. It’s not too often that such strange bedfellows line up behind a proposal.

While the Medical Debt Responsibility Act does not fix the medical billing system, it does provide relief for those who’ve paid off their medical bills. Congress should immediately enact this proposal, protect families from further financial harm due to medical collections, and help get out our nation’s economy moving again.

Mark Rukavina is Executive Director of The Access Project and was named a CFED Innovative Idea Engineer in 2009.

By Ethan Geiling on 05/04/2012 @ 03:00 PM

Tags: Assets & Opportunity Initiative

The most commonly used data point to measure the financial security of low-income families is income poverty. However, the official income poverty rate highlights just one aspect of household finances; namely, the percentage of people with insufficient income to cover their day-to-day expenses. At CFED, we’ve been working to expand the dialogue on financial security to include measures like asset poverty, liquid asset poverty and net worth, all of which take into account the resources a household has to meet emergencies and other longer-term needs.

One of the big takeaways from the recently-released 2012 Assets & Opportunity Scorecard is that no matter how you measure it, financial insecurity in the U.S. is on the rise. One of the most interesting ways to understand financial security and opportunity is by examining household net worth.

Net worth equals the sum of assets – like a home, car, business, or money in a bank account – minus any liabilities – like credit card debt, mortgage debt or student loan debt. Below we break down household net worth data from the 2012 Scorecard across multiple spectrums of society. The data tell a story of uneven and inequitable distribution of wealth, especially among low-income households and households of color.

Household Net Worth over Time

In 2009 (the year data were most recently available), the net worth of the median U.S. household was $70,600. This is a significant drop from just three years earlier, when the U.S. household median net worth was $94,502. Part of this drop is likely attributable to the recent economic recession and foreclosure crisis. For the majority of households, the main source of net worth is still their home.

Household Net Worth by State

Median household net worth also varies tremendously by state. The graph below shows states arranged from lowest to highest net worth. The District of Columbia has the lowest net worth ($20,800), while Vermont has the highest net worth ($220,801). All other states fall somewhere in between. Many states in the south and southwest – like Arizona, Oklahoma, Texas, New Mexico and Georgia – have low net worth, compared to smaller and more northeastern states – like Rhode Island, Delaware, Massachusetts, and Maryland.

Household Net Worth by Race

Net worth by race describes how equally assets are distributed between white households and households of color (Black, Asian, Hispanic, and other races). Due to a variety of factors, including different initial wealth endowments and outright discrimination, households of color accumulate – at the median – fewer assets than white households.

The median net worth of white households in the U.S. is $112,647, compared to $8,803 for households of color. This means white households hold almost 13 times the wealth of households of color. Of the five states where data are available, Wisconsin has the largest disparity by race: white households have 28.5 times the net worth of households of color, $124,500 compared to $4,375, respectively.

Household Net Worth by Income

Net worth by income describes the disparity in net worth between rich and poor households. Not surprisingly, rich households have much more wealth than poor households. Nationally, the median net worth of a household in the top income quintile is $271,550, compared to $3,898 for the median household in the bottom income quintile. Of the five states where data are available, the disparity is greatest in Massachusetts, where upper income households have 234.2 times the net worth of lower income households, $408,869 compared to $1,750, respectively.

Part of the explanation for this large disparity relates to how the federal government helps households build wealth. The federal government provides almost $400 billion in incentives to help families save and build financial assets. However, because those incentives are largely available in the form of tax deductions, low-income households with little tax liability cannot benefit from these incentives.

Research shows that the distribution of benefits is highly skewed toward upper-income households over middle- and lower-income households. CFED’s analysis of the 2009 Federal Asset Budget showed that the top fifth of taxpayers in that year received the vast bulk (84%) of asset-building benefits, primarily in the form of tax deductions for mortgage interest and property taxes and preferential rates on capital gains and dividends. In contrast, the lowest 60% of taxpayers (those making $50,000 or less) received only four percent of the benefits, amounting to $5 on average for each taxpayer.

Household Net Worth by Family Structure

Net worth by family structure describes the disparity in net worth between one-parent and two-parent households. Nationally, two-parent households have 28.5 times more wealth than one-parent households. This large disparity exists for two main reasons. First, the resources of two individuals combined are clearly greater than the resources of one individual alone. Second, two-parent households enjoy economic benefits that make it easier to build wealth. For example, the ability to share certain resources – like housing, utility expenses and health insurance – create economies of scale that are not available to one-parent households.


All data on net worth in this blog post is from: Survey of Income and Program Participation, 2008 Panel, Wave 4. Washington, DC: U.S. Department of Commerce, Census Bureau, 2009. Data calculated by the Bay Area Council Economic Institute.

By Jimmy Crowell on 05/03/2012 @ 09:56 AM

Tags: Housing and Homeownership, Recommended Reading

Click here to listen to the NPR story.

ROC USA® and CFED have long recognized the struggles faced by owners of manufactured homes when they rent the land beneath their homes in communities or “mobile home parks.” Yesterday, the plight of these individuals was garnering some much needed national attention. Dan Gorenstein of NPR featured Paul Bradley, president and founder of ROC USA, on the All Things Considered to shed light on his organization’s noble efforts to help owners of manufactured homes gain control of their own futures and achieve greater economic security.

In the interview, Gorenstein highlights Bradley’s innovative affordable housing strategy, which brings together residents of manufactured housing communities and helps them form limited-equity cooperatives. The cooperative then purchases the manufactured housing community where their homes are located with financing for acquisition and pre-development expenses often provided by ROC USA Capital. Not only does cooperative ownership increase the value of their homes, it also allows residents to protect themselves from excessive rent increases and poor quality maintenance and infrastructure.

Gorenstein does a fantastic job of framing the issue by bringing in the major actors involved in this conversion process. He draws from both sides of the argument by interviewing homeowners who have benefitted from ROC USA’s work and even a community owner who questions the community management capabilities of cooperatives.

Visit ROC USA's website at rocusa.org.

However, the testimonials from residents who have worked with ROC USA affirm the organization’s belief that manufactured homeowners should be afforded the opportunity to preserve their communities and build wealth through resident-ownership. In the interview, one homeowner described how empowered he felt after joining a cooperative and purchasing his community: “I really can have my own place and be a respectable part of community. We were never allowed to do that before, people living in my environment. I’m not a second class citizen anymore. And my wife…we are not second class citizens anymore. And I’ll be damned if we are going to be thought of that way. We won’t allow it.”

Read more about ROC USA here.

The ROC USA approach to resident-ownership is based on the New Hampshire Community Loan Fund’s model; since 1984, the Community Loan Fund has converted 100 communities into resident-owned cooperatives and nearly 20% of all manufactured home communities in New Hampshire are now resident-owned. ROC USA was launched—with investments from CFED, NeighborWorks® America and the Community Loan Fund— as a direct response to demand from homeowners and community-based affordable housing providers in other states. Since its inception in 2008, ROC USA and its nine network members have come a long way: converting over 35 manufactured housing communities to resident ownership and preserving 2,186 homes across the United States. At CFED, we’re optimistic that ROC USA will continue to grow its network and financing capacity in order to reach a much larger share of the estimated 50,000 manufactured housing communities nationwide.

By Kim Pate on 05/02/2012 @ 03:15 PM

Tags: Entrepreneurship, Jobs

As part of its 1 in 3 Campaign, the Association for Enterprise Opportunity has unveiled a new report at its annual conference further proving it’s proposition that, “If one in three microenterprises hired just one employee, the U.S. economy would reach full employment.”

In addition, the report concludes “If demand for microenterprise-intensive services and products was met locally in communities around the United States, we could create 10-16 million new jobs.” That’s based, the report says, on a survey of business owners who identified the local consumption impact on the 20 most microenterprise-intense industry sectors. That’s the key: people must start buying from the mom-and-pop shops.

This aligns with CFED’s Self-Employment Tax Initiative (SETI), funded by Sam’s Club Giving Campaign because SETI supports the notion that state and local governments can facilitate job creation by providing federal tax preparation assistance to new businesses and the self-employed.

By Inemesit Imoh on 05/01/2012 @ 03:30 PM

Tags: Federal Policy

On May 1, 2009, President Barack Obama proclaimed the month of May as Asian-American and Pacific Islander Heritage Month. In a similar vein to African-American History Month, the President wants the United States to come together to recognize and celebrate the rich diversity of languages, religions and cultural traditions of Asian-Americans and Pacific Islanders that continues to shape American culture and society.

Since the first Asian-American and Pacific Islander immigrants arrived over 150 years ago to those who arrive today, there are now over 17.3 million U.S. residents of Asian descent living in the United States, or 5.6 percent of the total population. This population is also the fastest-growing population in the United States today, growing 46% between the 2000 and 2010 censuses. Addressing the needs of a quickly increasing population of Americans is important for lawmakers; however, Asian-Americans and Pacific Islanders (AAPI) populations are often the last demographic that many consider in relation to poverty.

AAPI households are often stereotyped as “successful” minorities who have achieved the American Dream, who earn higher wages and who are not dependent on government assistance as a result. This is a generalized and overly simplistic view of AAPI households, which neglects to examine the complexities and differences within the population. While it is true that the AAPI population as a whole is economically better off than African-American or Hispanic populations (in 2009, Asian households had the highest median household incomes among race groups at $65,469 and had the lowest poverty rate among race groups at 12.5%), there are great discrepancies between Asian groups that are rarely addressed.

• Cambodian, Vietnamese, Hmong and Laotian workers were most likely to work in low-wage industries (e.g. production, transportation and material moving), according to 2000 Census data.
• The incomes of these groups were substantially lower than the median for all Asian families. The median incomes of Hmong and Cambodian families were the lowest of all Asian groups ($32,400 and $35,600, respectively).
• While Chinese, Filipino, Japanese, Indian and Korean households had a higher high school graduation rate compared with the national average, Vietnamese, Laotian, Hmong and Cambodian individuals had graduation rates that were substantially lower. For example, Japanese high school graduation rates were 91.4%, compared with Hmong rates of 40.7%.

AAPI households are not a monolith. Lawmakers and advocates should be promoting and encouraging efforts to address the needs of low-income groups and populations, while recognizing that America is a diverse nation comprised of groups that have different but specific needs. CFED supports asset-building policies that would benefit all American households, including AAPI households.

• Retirement security policies would greatly benefit AAPI seniors. Many Asian seniors are foreign-born, linguistically isolated, have little education and have poverty rates higher than the national average for all seniors. Policies like Automatic IRA would allow younger Asians and Pacific Islanders to save towards their financial security in their later years and increase the economic security of households shared by adult children and their elderly parents.
• Policies that encourage families to save for higher education would also greatly benefit low-income AAPI households. Research has found that having a savings account significantly improves the likelihood of students attending college. Reforming asset tests to allow for families to save in vehicles like 529 College Savings Accounts, Coverdell ESAs or Individual Development Accounts would allow students to plan and save for their academic futures and, as a result, their economic mobility.

The economic security of low-income, minority households will continue to be an increasingly important issue as the demographics of the United States change and evolve. Policies and programs must be put in place to help these families move up and out of poverty as it is imperative to the long-term economic stability and growth of the country. Honest and open discussions about the individual needs of different groups in America will help advocates, lawmakers, researchers and communities craft the necessary tools and strategies to carry out that mission.

By Michelle Nguyen on 04/28/2012 @ 12:30 AM

Abstract submissions for the research forum at the 2012 ALC are due this coming Monday, April 30!

Papers will be presented at “Ideas Into Action: An Applied Research Forum for the Assets Field” at CFED’s 2012 Assets Learning Conference (ALC) on September 19-21, 2012 in Washington, DC. We are welcoming empirical, applied evaluation and policy research papers broadly related to asset building, financial inclusion and capability, household and consumer finances, and economic mobility issues.

Please submit a detailed abstract (1,000 words) for consideration by this Monday, April 30, 2012 to research@cfed.org. For direct questions, please email Kasey Wiedrich (kwiedrich@cfed.org) or Michelle Nguyen (mnguyen@cfed.org).

For the full announcement, please click here.

We’re looking forward to hearing about your research!

By Lauren Williams on 04/26/2012 @ 01:30 PM

Tags: Entrepreneurship, Jobs

Small business defines American economic growth. CFED certainly believes that it can help families build financial security and Karen Mills, Administrator of the Small Business Administration, agrees.

At an event on April 12 hosted by the Aspen Institute as part of the “Building the Economy We Want: Aspen Asks What Will it Take?” series, Administrator Mills was interviewed by Jared Sandberg, Editor of Bloomberg.com about what is needed to make small business a robust engine of development for jobs that offer financial security for workers. Though many would argue that the SBA has a long way to go in order to better fulfill the needs of really small businesses—or microenterprises—she shared several encouraging insights regarding SBA’s commitment to small business development:

• What is the role of small business in that process and how is SBA supporting that role? Small business is, without question, the job creating engine of the American economy. Of the more than 27 million businesses in the United State, 99.9% are defined as small businesses with fewer than 500 employees. According to the Kauffman Foundation, without business startups, there would be no net job growth in the United States economy. The Recovery Act allowed SBA to increase its maximum guarantee on 7(a) loans to 90%, which was intended to reduce lender risk and encourage them to offer more and larger loans to small business owners. Administrator Mills argues that we are now in a recovery of substance fueled by entrepreneurship, regional cluster building and innovation.
• What about access to capital? Why are banks so averse to actually banking? What is SBA doing to improve access to capital? Early on in this most recent financial crisis, banks pulled back on their small business lending activity in order to avoid risk and some simply didn’t have enough capital to lend. Even after the Recovery Act attempted to lessen the risk to lenders of conducting business, access to capital has remained constrained in the American economy. Additionally, some argue that it simply costs banks too much to make small dollar loans for it to be profitable, which creates challenges for microenterprises seeking small amounts of capital in particular. SBA has tried to resolve some of the cost burden on banks making SBA 7(a) loans, minimize duplication and allow for quicker turnaround by reducing the number of pages of the SBA loan application from 46 to 8.
• Many sources of personal wealth and resources of low- and moderate-income families were depleted during the recession. How do we build that wealth back? The Administrator didn’t offer up any specific methods for helping families build wealth that was depleted during the recession, but did highlight the central significance of home equity in many of the communities hardest hit by the financial crisis, and encouraged the importance of a more inclusive vision of entrepreneurship going forward.

When it comes to helping families build personal wealth, CFED is rich with ideas. We know that achieving household financial security is a dynamic process in which families iteratively gain skills, increase income, begin to save, leverage savings into assets and protect gains made along the way. We know that families’ ability to build assets depends greatly on the quality of their access to public benefits, tax credits, quality job opportunities, affordable basic goods and services, debt reduction, low-cost financial products, public incentives and consumer protections. We also know that small business ownership, often starting with self-employment, is one way that many low- and moderate-income families create their own jobs and that policymakers and federal agencies that support small business are integral in developing a framework to support those families along the way.

By Inemesit Imoh on 04/25/2012 @ 11:30 AM

Tags: Federal Policy, Assets & Opportunity Initiative

House Agriculture Committee votes to cut Food Assistance Program and require states to reinstate asset tests

On Wednesday, April 18, the House Agriculture Committee voted to cut the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) by more than $33 billion over ten years. If the Committee’s proposal is approved by the full House and eventually becomes law, this devastating cut would reduce benefits for all recipients and would force states to reinstate asset tests. Millions of low-income families would once again have to choose between saving for the future and putting food on the table today.

The Committee’s proposal would reduce benefits for all recipients and require states to reinstate asset tests for SNAP by eliminating Broad-Based Categorical Eligibility. Under this policy, households are automatically eligible for SNAP if they receive non-cash Temporary Assistance for Needy Families (TANF, formerly called welfare) or maintenance of effort (MOE) funded benefit or service, such as an informational pamphlet. Since this policy has been implemented, approximately 40 states have used this option to waive the asset test for SNAP applicants, allowing millions of low-income families to build the savings they need to successfully lift themselves out of poverty.

The House Agriculture Committee proposes to roll back these reforms, add an unnecessary administrative burden to the states by requiring them to process additional applications, and undermine millions of families’ efforts to build their financial security and self-sufficiency. According to the Center on Budget and Policy Priorities, the proposal would cut off SNAP assistance for two to three million low-income Americans, including children, seniors and people with disabilities, beginning in 2013.

Savings and assets are the foundations for a strong middle class. Everyone agrees that the long-term economic security of the nation should be a priority for members of Congress, but lawmakers should not punish families working to build investments for themselves or their families while struggling to make it out of poverty.

Congress should protect, not eliminate, policies such as Broad-Based Categorical Eligibility that allow low-income families to save and build wealth. The full House of Representatives will debate the Committee’s legislation in May and the Senate Agriculture Committee has already started discussions for their own version of the proposal.

Your lawmakers need to hear from you about how important Broad-Based Categorical Eligibility is for families that are striving to improve their financial security! Our advocacy center currently features an action alert with template messages to your Representative and Senators. CFED will be following this issue, keeping you up to date, and providing the resources you need to reach out to your legislators in opposition to these cuts. Please join our efforts to protect asset-building opportunities.

By Ethan Geiling on 04/24/2012 @ 10:30 AM

Tags: Children's Savings Accounts, Financial Empowerment, Matched Savings

More than one in four children – and roughly two in five minority children – are born into families with negligible savings to weather emergencies or invest in their futures. According to the 2012 Assets & Opportunity Scorecard, 35% of households with children (an estimated 12 million households) are asset poor, while 50% of households with children (an estimated 17 million households) are liquid asset poor. Research has shown that poor financial habits are passed on from parent to child; from generation to generation. Sadly, these are the financial lessons that many of our children are learning.

Source: CFED, The Financial Security of Households with Children (May 2010)

Teaching children the fundamentals of financial education early in life means that they will have a chance to build healthy financial habits and enjoy financial success later on in life. Saving and building assets in the earliest years can promote educational attainment and create a sense of hope for the future.

In 2003, CFED and a group of partners launched the Saving for Education, Entrepreneurship and Downpayment (SEED) Initiative, a multi-year endeavor that developed, tested, and implemented matched savings accounts and financial education for more than 1,300 low-income children and youth across the country. On average, children in SEED accumulated more than $1,500 in savings during the course of the demonstration. SEED generated a substantial body of learning, research and lessons from practical experience that are already playing an invaluable role in efforts to expand savings and asset-building opportunities to millions more children nationwide.

Within the past couple of years, additional research from the Center for Social Development at Washington University in St. Louis has come out showing the incredible power of children’s savings:

• Controlling for other factors – including household income and children’s academic achievement – children with savings dedicated for college education are four times more likely to attend college. (Elliot and Beverly, 2010)
• Children’s savings accounts are strong predictors of college matriculation. Among youth who expect to attend college, youth with a savings account in their names are about six times more likely to actually attend. (Elliot and Beverly, 2010)
• Savings and other financial assets are a consistent predictor of college graduation, even after controlling for variables such as income. (Zhan and Sherraden, 2009)

Today is the 16th anniversary of Teach Children to Save Day, a national campaign to raise awareness of the importance of encouraging lifelong savings habits to young people. Teaching children good financial habits early on and providing an account to make these lessons real opens doors to new possibilities. Children will be free to dream big. Better, they will have the means to begin pursuing their dreams

By Jimmy Crowell on 04/24/2012 @ 09:45 AM

Tags: Jobs

Last week, the Department of Health and Human Services (HHS) Community and Economic Development (CED) program announced that they will be providing $27 million (up to $800,000 per project) in grants to community development corporations (CDCs) for projects that create jobs and business development opportunities for low-income individuals. Through this grant, the CED program aims to create new employment opportunities for Temporary Assistance for Needy Families (TANF) recipients and individuals living on incomes at or below 125% of the Federal Poverty Level.

The CED program, in coordination with the Healthy Food Financing Initiative (HFFI), will also provide up to $10 million for CDCs working to increase access to affordable and healthy foods in low-income communities. HFFI was created by the Obama administration in early 2010 to combat the growing number of food deserts, or communities with little access to fresh, healthy foods, in America. This funding from the CED program is designed to enable CDCs to develop food retail outlets and enhance healthy food infrastructures in low-income communities.

Applications for the CED program are due June 5, 2012 and can be submitted electronically here. We hope our partners in the field will be able to take advantage of this new funding opportunity!