Getting a Head Start on Financial Security

By Sean Luechtefeld on 08/06/2012 @ 05:30 PM

EDITOR'S NOTE: This story initially appeared in our August 2012 Newsletter. Make sure you're receiving news and updates like this one by signing up for CFED's mailing list.

This morning, CFED released the first in a series of guides exploring how the delivery of services that emphasize asset building can be integrated into other types of human and social service delivery programs. Getting a Head Start on Financial Security, co-authored by Leigh Tivol and Jennifer Brooks, examines a range of strategies that stakeholders in the Head Start community can use to engage asset-building practitioners in their work to strengthen the overall household financial security of the families they serve.

Because Head Start reaches nearly one million children annually, it is a logical venue for connecting low-income families with programs and services that improve long-term economic prospects. Built on this notion, Getting a Head Start on Financial Security is broken down into seven main categories that correlate to the activities around which Head Start and asset-building practitioners can collaborate. Specifically, these communities should work together to inform and empower children and adults through financial education, facilitate family access to public benefits, link families to EITC and free tax preparation, get families banked, encourage savings by matching deposits, help families buy and keep homes, and advocate for policy change at the state and federal levels.

To read more about how asset-building approaches can be integrated into Head Start service delivery, visit CFED’s Knowledge Center and download Getting a Head Start on Financial Security today.

Buoying Underwater Homeowners to Rescue the Economy

By Anne Kim on 08/02/2012 @ 11:00 AM

With fresh news of a slowdown in growth—the economy grew at just a 1.5% annual rate last quarter—there’s new urgency for measures to jumpstart the recovery. Among the factors dragging down the economy is housing, which despite some recent good news is still lagging.

In particular, the market is still struggling to deal with the roughly eight million homeowners who are “underwater”—owing more on their mortgages than their homes are worth.

These borrowers might be current on their mortgages but lack the equity to qualify for a refinancing into a lower-interest loan. They might be trapped in their homes, unable to sell or to move to areas with greater economic opportunities. As a consequence, they’re more likely to default, which in turn compounds the foreclosure crisis and puts even more downward pressure on home prices.

Last week, Senator Jeff Merkley (D-Ore.) proposed one bold and creative solution for helping both the American economy and these underwater homeowners. His idea: To allow any American who is current on their mortgage and meets certain underwriting standards to refinance into a 4% loan.

Under Sen. Merkley’s plan, homeowners would have three refinancing options: (1) a 15-year loan at 4% interest; (2) a 30-year loan at 5%; or (3) a two-part mortgage, the first on 95% of a home’s current value and the remainder a “soft second.”

In a white paper released by his office, Sen. Merkley argues the benefits of refinancing underwater borrowers:

“Families would benefit from loans that rebuild their equity more quickly or that reduce substantially their monthly payments. The reduced rate of foreclosures that would result would strengthen communities and help to stabilize or grow housing prices, improving the home construction economy and other sectors tied to the housing market. Moreover, the greater spending power of these families would help improve the overall economy.”

Sen. Merkley’s proposal builds on President Obama’s call for a “grand refi” during his State of the Union address this year and follows in the footsteps of similar, bipartisan proposals championed by Senators Barbara Boxer (D-Calif.), Johnny Isakson (R-Ga.), Bob Menendez (D-NJ) and Rep. Dennis Cardoza (D-Calif.).

Like these other proposals, it is worthy of serious consideration.

Most significantly, it tackles head-on the continuing problem of “negative equity.” Underwater borrowers can’t currently refinance, despite historically low interest rates, because they don’t have enough equity to qualify. The extra interest they’re paying crowds out other priorities, such as saving for college or retirement savings.

Negative equity is not only at the root of the housing downturn, it’s also at the heart of Americans’ catastrophic loss of wealth since the start of the economic crisis.

According to the Federal Reserve’s Survey of Consumer Finances, the crash wiped out nearly two decades of accumulated wealth, with housing accounting for nearly three-fourths of those losses. Americans are not only poorer than they were before the crash, they’re saving less and are less prepared to survive, let alone succeed.

A defining challenge over the next decade will be how to rebuild America’s lost wealth and potential for economic opportunity. Restoring homeownership will be central to meeing that challenge—a view that CFED has long championed.

Second, Sen. Merkley’s proposal has the benefit of bypassing Congress, which is effectively out of commission until after the November elections. The Merkley plan would be administered through a “Rebuilding American Homeownership Trust,” to be housed in the Federal Housing Administration, the Federal Home Loan Banks or the Federal Reserve, and would require no legislation to create.

Of course there are potential concerns. The proposal doesn’t spell out the underwriting standards borrowers would have to meet to qualify or the extent of the fees that would be charged. Nor is it clear that private lenders would readily participate. All of these are factors potentially limiting the program’s reach. Funding is another concern, particularly if default rates on the refinanced mortgages are significantly higher than expected. While the white paper makes a strong case that this plan will pose no net burden on taxpayers, this case rests on assumptions that may or may not bear out with time.

Nor is the plan immune from politics. For example, the proposal doesn’t choose among the three possible agencies that are homes for this program. Moreover, from a PR standpoint, it may be difficult to help jaded and skeptical homeowners differentiate this program from the apparent failures of HARP and HAMP. And given the current hostility to “big government,” whatever its form, Americans may reject the idea of a new government-administered trust, even for what should be a politically popular purpose.

Nevertheless, Sen. Merkley deserves kudos for offering a carefully-conceived proposal that seeks to help restore the fortunes and economic security of millions of Americans. And in the current pre-election environment where politics trumps substance, his bold call to action stands out as an example of what policymaking could and should be.

Savings Photo Contest Extended!

By Veronica Weis on 08/01/2012 @ 01:30 PM

Tags: ALC 2012, Just For Fun

In July, we launched a photo contest to find out what Americans have been saving for this summer. Inspiring stories have poured in from all over the country and as far away as Hawaii.

To give everyone a chance to enter, we’ve extended the deadline to August 31!

Snap a picture of what you’re saving for and send it via email to photocontest@cfed.org, through Twitter page @CFEDnews or on Facebook.com/CFEDNews. The winning entry will receive $500 and two runners-up will win $100 each.

We look forward to your stories!

What Can We Learn from International Youth Savings?

By Stephanie Halligan on 08/01/2012 @ 10:45 AM

Tags: Children's Savings Accounts, Events, Recommended Reading

On Thursday July 28, the New America Foundation hosted the event Youth and Their Money: New Insights on the Financial Lives of Youth in Developing Countries. Supported by The MasterCard Foundation, YouthSave is a consortium initiative led by Save the Children in partnership with the Center for Social Development at Washington University in St. Louis, the New America Foundation and CGAP.

Youth savings and behavior economics experts at the event highlighted findings from youth focus groups and early savings data, and discussed promising ideas on how to influence youth savings behavior and future directions in the field.

Video streaming by Ustream

Video of the event, from the New America Foundation website.

What does this mean for youth saving in the US?

While YouthSave is only in its pilot phase, children’s savings practitioners and advocates in the U.S. can still glean early insights from this international program:

• There is a business case to be made to banks for youth savings: For over 90% of the youth participating in the pilot, the YouthSave account is their first bank account. This represents an important customer acquisition opportunity for the financial institutions. Depending on the structure of the account, the same business case can be made in the U.S. in unbanked or underbanked communities.
• Programs and products are re-focusing on clients and the needs of youth: YouthSave accounts were developed to specifically address the needs of low-income children in developing countries. Focus groups found that teens valued accessibility, simplicity and privacy, and that poorer youth have a complimentary set of holistic needs related to their finances, such as supporting a family, health concerns and on-going education. Just as YouthSave found with its focus groups internationally, understanding and listening to the target market is an important step toward maximizing program participation and impact in the U.S.
• There are opportunities to influence youth behavior beyond savings: Panelists discussed youth savings behavior, noting that consistent savings habits are more likely to “stick” at an earlier age. This holds promise for children’s savings programs that focus on early childhood and adolescence. At the same time, Alexandra Fiorillo, Vice President at ideas42 pointed out that the incentives for youth to participate in a savings program may differ from adults. When motivating a 13-year-old to open up an account or put aside money for savings, a 2:1 savings match maybe not be as attractive to a teen as a new backpack and a piggy bank.

Interested in learning more?

CFED is featuring a panel of experts to discuss effective youth savings strategies at the Assets Learning Conference, September 20 and 21 in Washington, DC. We are also hosting a day-long Children’s Savings Conference Institute on September 19, focused on the nuts and bolts of planning, program design and fundraising for children’s savings programs in the US. If you’re looking to start or grow a children’s or youth savings program, join us in September at the ALC!

Call for Papers: Restoring Household Financial Stability

By Anita Drever on 07/31/2012 @ 12:00 PM

Tags: Financial Empowerment

EDITOR'S NOTE: The following is a note that I received from longtime CFED friend Ray Boshara. The RFP presents an exciting opportunity that will be of interest to many our readers.

Colleagues:

The Federal Reserve Bank of St. Louis invites the submission of research papers to be presented at a symposium entitled, “Restoring Household Financial Stability after the Great Recession: Why Balance Sheets Matter.” The event—organized in conjunction with Washington University in St. Louis—will be held February 5-7, 2013 at the Federal Reserve building in downtown St. Louis, Missouri.

To be considered for the symposium, please submit a detailed abstract (750-1000 words) in PDF format by September 24, 2012 to HFS.Symposium@stls.frb.org. Authors of accepted papers will be notified by October 15, 2012, and completed drafts must be submitted by January 4, 2013.

The full Call for Papers is attached, and also may be found at http://stlouisfed.org/HFS/HFS_Call_For_Papers.pdf. Please direct all queries to Bryan Noeth at bryan.j.noeth@stls.frb.org.

Regards,
Ray Boshara

2012 Microenterprise Census: Micro Matters

By Katherine Lucas McKay on 07/30/2012 @ 01:15 PM

Tags: Entrepreneurship

2012 Microenterprise Census Uses Data to Make the Case that Microenterprise Matters

Every year the Aspen Institute’s FIELD Program collects data on the products and services offered by microenterprise development organizations across the United States. Over time, the Microenterprise Census has become the most comprehensive and widely used source of information on this field, providing quality, up to date information illustrating the size and scale of the U.S. microenterprise industry. The 2012 Microenterprise Census is now open. If your organization offers microenterprise development, training and technical assistance or microfinance, we encourage you to be counted and take the survey today!

Much of the data the survey collects is available for free to anyone who registers to use microTracker, the tool that FIELD developed to analyze and share Census findings. Taking the Census will help you make the case for your programs to funders and policymakers and can be a marketing tool to reach new clients.

This year’s Microenterprise Census includes new Performance Measures relating to client outcomes and loan performance. Collecting and transparently displaying this data will be a powerful statement especially for funders and policymakers because it demonstrates the value of impact investments in the field and the worthiness of government investment in microenterprise. The new Performance Measures will help the industry establish reliable comparisons and standard benchmarks for success.

By participating, you will benefit from additional analytical tools to evaluate your organizational performance and capacity, as well as help the field and raise your organization's profile. Sources as diverse as Opportunity Fund, Minnesota Public Radio, Businessweek, and the Los Angeles have linked to past censuses and referred visitors to programs' data profiles.

Curious about who else has taken the survey this year? Check out the latest data from the Intersect Fund and Washington Community Alliance for Self-Help. To take the 2012 Microenterprise Census, visit www.microtracker.org/census.

New Research Dispelling Payday Lending Myths

By Ethan Geiling on 07/27/2012 @ 02:30 PM

Tags: Assets & Opportunity Initiative

Twelve million adults, or about 5.5% of Americans, use payday loans, according to new research from Pew. Payday loans are short-term loans (usually two weeks) of a few hundred dollars with average fees and interest the equivalent of an annual percentage rate (APR) of around 400%. Predatory payday lending strips wealth from financially vulnerable families and leaves them with fewer resources to devote to building assets and climbing the economic ladder.

Certain demographic groups are more likely to use payday loans than others. For example, the odds of using a payday loan are:

• 57% higher for renters than for homeowners
• 62% higher for people earning less than $40,000 than for those earning more
• 82% higher for people without a college degree than for those with a four-year degree or higher
• 105% higher for blacks than for other races/ethnicities

Most of this is not surprising. But one data point stood out in particular: 8% of renters earning between $40,000 and $100,000 have used payday loans, compared with 6% of homeowners earning between $15,000 and $40,000. Homeownership was an even more powerful predictor of payday loan usage than income

In statehouses across the country, the payday loan industry has been butting heads with consumer advocates over questions of whether these loans need to be more strictly regulated. The industry argues that payday loans are a short-term lifeline that helps cash-strapped families weather unexpected emergencies. Consumer advocates say that the outlandish fees and interest rates on these loans are unfair and predatory, and that consumers often wind up with debilitating debt.

Pew’s research helps dispel some of the myths that the payday loan industry has tried to push over the years. Pew surveyed 33,576 adults in 48 states and the District of Columbia – the first-ever nationally representative in-depth telephone survey with payday borrowers about their loan usage.

Myth 1: Consumers use payday loans just to cover emergencies

Payday loans are marketed as short-term loans intended only for unexpected emergencies, like a car repair or an unforeseen medical expense. However, in reality, only 16% of borrowers use payday loans for unexpected and emergency expenses. More than two-thirds of payday borrowers use loans for recurring expenses, such as mortgage or rent, food and groceries, utilities, car payment, or credit card bill payments.

The average borrower takes out eight loans of $375 each per year and spends $520 on interest, meaning the average borrower is in debt for five months per year. This is an incredibly expensive and inefficient way to finance regular expenses.

Myth 2: Consumers are worse off without payday loans and have no other options

The payday loan industry often argues that without access to payday loans, low-income consumers would have nowhere else to turn for short-term credit needs. To test this, Pew asked payday loan users what they would do they were unable to use a payday loan. More than 80% of borrowers said they would cut back on expenses. Many also said they would delay paying some bills, borrow from friends and family, or use other credit options like loans from banks/credit unions or credit cards.

Interestingly, many borrowers do not realize that financing debt on a credit card is much less expensive than using a payday loan. Borrowers in focus groups often believed that a 15% APR credit card interest rate is the same as $15 for a $100 payday loan (which is 391% APR).

The takeaway is that, despite what the payday loan industry says, borrowers have a variety of options besides payday loans to handle cash shortfalls.

Myth 3: Banning storefront payday lenders leads to increased online payday loan usage

Many states regulate payday lenders, although these regulations offer varying degrees of protection. Fifteen states do not allow payday loan storefronts at all or cap rates at 36% APR or less, eight states have payday loan storefronts but provide some level of regulation, and 28 states essentially offer no protections at all.

One of the key issues often discussed in state legislators is whether banning payday loan storefronts leads borrowers to obtain loans from online payday lenders. The payday loan industry says that it does, consumer advocates say that it doesn’t.

Pew’s research found that restricting payday loan storefronts does not result in substantial online payday loan usage. In fact, in states where storefronts are prohibited, 95% of would-be borrowers choose not to use payday loans at all.

The graph below shows payday loan usage in 31 states (sample size was not large enough in the other 19 states). The graph also indicates which states have restrictive (red), somewhat restrictive (orange) and permissive laws (green). As would be expected, there are far fewer borrowers in states where storefront lending is banned than in states where it’s allowed. The takeaway is that borrowers are not flocking to online payday loans when storefront loans are unavailable.

Pew’s research comes at a key moment when payday lenders are pushing for a federal bill that would exempt them from state payday lending oversight. If passed, this bill would undermine all current state legislation regulate lenders, and would undo years of work by consumer advocates. It’s unclear whether this bill will gain any traction.

ALC Participants: Sign Up to Visit Your Legislators!

By Katherine Lucas McKay and Inemesit Imoh on 07/26/2012 @ 09:45 AM

Tags: ALC 2012, Federal Policy

Registration for Capitol Hill Visits is now open!

The theme of the 2012 Assets Learning Conference is “Ideas into Action.” One of the best ways to take action during the conference is to participate in Capitol Hill visits. These meetings give participants the opportunity to speak with their lawmakers about the asset-building policies that matter most to them.

This year, assets advocates will be able to participate in Capitol Hill visits without missing a single plenary or concurrent session! Buses will take you from the hotel to the Hill directly following the final plenary on Friday, September 21. For those of you attending the 2012 Poverty Summit, which CFED is hosting in partnership with Catholic Charities, you can attend Hill visits and then go straight to the Poverty Summit opening reception.

To participate in Capitol Hill Visits please fill out this short registration form. CFED staff will make appointments for you and provide talking points and other materials for you to use. The deadline to sign up is August 31.

Your role as an assets advocate on Capitol Hill visits is more valuable than you may think! Asset-building is one way to ensure that American families have the opportunity to invest in themselves and their children by saving for home ownership, education, retirement and entrepreneurship. As asset-building practitioners and advocates working in local communities, you are a powerful voice on Capitol Hill and can effectively persuade legislators to support key asset-building policies and programs.

CFED’s policy team will host two trainings for those who sign up for Hill visits: a webinar a week before the Assets Learning Conference and a training session during the conference. These trainings will prepare advocates to meet with legislative staff and ensure that participants have the tools they need for successful advocacy. The session will include the Dos and Don’ts of Advocacy, what to expect from congressional staff during meetings, and an overview of your Capitol Hill Visit packet materials. There will be Q&A periods as well as the opportunity to meet with other conference attendees from your state who will be attending meetings with you.

Potential topics for discussion include tax incentives for work and saving, matched savings accounts, children’s savings accounts, homeownership opportunities and entrepreneurship.

For more information on Capitol Hill Visits during the Assets Learning Conference, please contact Inemesit Imoh, Federal Policy Associate.

Will Student Loans be the Next Mortgage Crisis?

By Bob Hildreth, Guest Contributor on 07/23/2012 @ 01:30 PM

Tags: Education

One trillion dollars in student debt is creating a crushing burden on millions of young Americans. But colleges are equally at-risk; deprived of the loans on which they’ve become dependent, they would face a severe financial crisis.

Colleges have dramatically increased their reliance on student loans, with government loans approaching the equivalent of 90 percent of total tuition and fees, according to The National Center for Education Statistics. Private student loans create additional dependency.

College administrators are adamant that student loans are not their problem, that they are merely bystanders to student loan default. After all, they have already received and spent the money; repayment, they say, is the problem of the government and private lenders.

If only a small number of students defaulted, these administrators would be right. But if millions start missing payments — and it’s already close to one million today, according to the NCES — the losses could compromise the government’s ability to lend. Then, colleges would have a serious problem. Already, student defaults have reached close to 9 percent, the same rate at which the recent mortgage meltdown began. If all student “problem” debts, including those forgiven and in forbearance, were considered, the real distressed rate on student loans would be an alarming 20-plus percent.

Contrary to economic theory, student debt grows in good times and bad. Mortgage, credit card, and car loan debt levels all fell during the 2008 financial crisis. Why didn’t student loan debt? Because colleges needed the money. Financial aid officers added more and more borrowing into their student awards to fill the gap between rising college costs and declining family income. The government aided in this process by offering loans, in efforts to increase college attendance.

A student loan reckoning is approaching, just when the financial positions of the government and many colleges are deteriorating. Post-election deficit plans will probably include sharp cuts in student aid, which has grown to almost half of the US Department of Education’s entire budget. Fewer Pell Grants will increase the need for loans, just when many states, most notably California, reduce spending on higher education.

Colleges are also suffering. Moody’s Investors Service has warned that college and university revenue growth will slow significantly in coming years, posting a negative outlook for a majority of these institutions, excepting those with large endowments.

The landscape after millions of students default on loans would be bleak. Public schools would be forced to seek more funding from states, while traditional private schools would fall back on their endowments. The richest colleges would gain market share of the brightest students. And for-profit schools, the most dependent on federal student loans, would suffer most.

California offers a sobering example. State budget cuts have ravished its prestigious higher education system, requiring students to wait years to enroll in foundational classes.. Business and other schools with independently strong endowments are attempting to break away from their harder-hit university systems. The governor is threatening to do away with entire campuses, if Californians fail to raise taxes.

Massachusetts may fare worse than California. Higher education is a mainstay of our economy, accounting for almost half a million jobs; some communities rely on a nearby college as the biggest local employer. What the petroleum price is to Houston, the price of tuition is to our state. If tuition rates suffered a sharp decline, our workforce would, as well.

To avoid a student loan crisis, colleges must find ways to close their financial gaps without relying so heavily on student loans. The government should determine whether colleges are capable of using other resources, such as endowments, to withstand lending cutbacks.

College is a critical investment, but we have made it an extremely risky one. The student loan bubble will burst once it reaches $1 trillion to $2 trillion, bringing down students and colleges with it. Let’s act now to stop another financial disaster.

Bob Hildreth is Founder of Families United in Educational Leadership, a nonprofit that helps low-income families save and plan for their children's educational futures. This op-ed originally appeared in the Boston Globe.

American Dream Photo Challenge Contest Entries

By Veronica Weis on 07/20/2012 @ 03:30 PM

Tags: ALC 2012, Just For Fun

We've really enjoyed all of your savings stories and photos submitted these past two weeks. So, we figured we'd share a few so you could too.

We are Lakota Solar Enterprises, a Tribal Renewable Energy company! Our van’s transmission is in need of repairs. We rely on our van to carry out our projects, bringing solar air heaters to Native American families in need. The functionality of our van is vital to our work. $500 will be a huge help for us to safely transport systems to homes! Our solar heaters provide affordable heat sources to families living at life-or-death poverty rates, and help to reduce the dependency on polluting and destructive sources of energy. Make a difference; choose Lakota Solar Enterprises!

This picture is taken with my best friend/roommate, Heather, at her college graduation. I am saving up for my education because I believe it will be my greatest asset in life. My education will allow me to do everything I want to do and all the things that I thought I could not. Every time I look at the photo, it inspires me to keep on pushing forward and roll with punches even when tough gets tougher. - Shirley Trieu

I’m saving to attend the LBJ School of Public Affairs at the University of Texas at Austin this fall. I plan on specializing in economic development and pursuing a career in public service after graduating. This picture, taken at the LBJ School, hopefully inspires you to think about how you can invest in yourself and your community. - Lance McNeill

Have something big you're saving for? Show off your photography skills by snapping a picture and emailing it to photocontest@cfed.org with a 100 word description before 5pm on August 1 for your chance to win $500. For more contest info, click here.

Manufactured Housing Meets Music City

By Lauren Williams on 07/19/2012 @ 10:00 AM

Tags: Housing and Homeownership

The Uniform Manufactured Housing Act Passes with Overwhelming Support

On a steamy Saturday afternoon in July, more than 300 lawyers—including state legislators, practitioners, judges and law professors—descended on Nashville, Tennessee for their Annual Meeting, a week-long exercise in crafting model state laws to improve uniformity and consistency. For two days, these members of the Uniform Law Commission (ULC) debated the intricacies of real property law, the procedural details of converting manufactured home titles from personal to real property, the implications of improving that process for homeowners, state governments and industry, and the painstakingly elaborate stylistic details of legal writing. While the Act was under consideration on the floor, commissioners from every state were able to ask questions, recommend amendments and register their support.

The Act’s Drafting Committee spent several hours after their presentation of the Act carefully considering the input received from the floor and making adjustments where they saw fit. At the final vote of the states on Wednesday, July 18, the Uniform Manufactured Housing Act passed with resounding support from 48 states and opposition from none.

What does it all mean? As Vermont Commissioner and Drafting Committee Chair, Carl Lisman, said in his opening address—there are four main constituencies with a vital stake in this Act: manufacturers, lenders, homeowners and the Uniform Law Commission. This Manufactured Housing Act—a simpler, clearer, more uniform system for converting manufactured homes from personal to real property—serves the best interests of all those stakeholders. A better titling process guarantees homeowners and buyers a better shot at accessing fair, safe and affordable mortgage financing and affords them with a set of consumer protections parallel to those that site-built homeowners receive. Additionally, more consistent titling legislation across different states should make it easier for major national lenders offering manufactured home mortgage financing to operate across state lines. Among other things, the Act offers the following key components:

• Provides an easy method to convert manufactured homes to real property—a new home can be considered real property as soon as the homeowner (1) locates the home on land controlled by the homeowner and connects the home to electricity and (2) files a certificate of location for recording in the land records
• Requires that dealers provide information to purchasers of manufactured homes about their rights to convert the home to real property
• Does not include onerous requirements that manufactured homes be placed on so-called “permanent foundations” or satisfy certain lease terms in land-lease communities in order to become real property
• Prohibits steering by the seller or manufactured home dealer into a certain type of titling
• Addresses the possibility that the home is later moved

The ULC is a 120 year old organization that “provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state law.” The Act’s passage represents a significant milestone and a serious victory for advocates serving owners of manufactured homes and industry players who recognize the value proposition created when it becomes easier to title manufactured homes as real property. Because of the ULC’s reputation and uniquely open drafting process that draws expertise from commissioners and outside advisors, their approval of the Act lends legitimacy and clout to advocates’ efforts to enact it at the state level.

What’s next? Getting the Uniform Act drafted and passed was a collaborative two-year effort on the part of the Drafting Committee and the many supporters from the field. I’M HOME Network members—including the National Consumer Law Center, Self-Help Credit Union, the Fair Mortgage Collaborative and the Manufactured Home Owners Association of America, along with CFED—played a particularly active role in contributing content expertise and perspective to the drafting process. Others in the I’M HOME Network played a critical role as advisors and supporters—informing both the drafting process and the final vote—by providing insight to I’M HOME staff and contacting their state commissioners to share their personal or organizational experiences.

The passage of the Act is just one step in a much larger (and longer) process to improve, simplify and streamline manufactured home titling statutes across the country. Achieving that goal will require state level advocacy efforts to introduce, support and enact new titling legislation in states where this Act would be an improvement on current statutes. It will also require even greater commitment and resolve from the I’M HOME Network—and hopefully, the broader affordable housing field—of lenders, homeowners, community organizers, advocates and developers. Though it will likely be several years before a real transformation in the market for manufactured home mortgage finance can be realized, the passage of the Uniform Manufactured Housing Act is a major step forward in the right direction.

A Healthier Gambling Alternative to the Lottery and Sweepstakes Games

By Carl Rist on 07/18/2012 @ 10:00 AM

Tags: Recommended Reading

EDITOR'S NOTE: This article originally appeared on the NC Policy Watch website, whose work sounds the progressive voice in North Carolina public policy. To read the original article, click here.

Governor Perdue’s veto of the $20.2 billion state budget proposed by the Republican-led legislature and the subsequent override of the veto represent just the latest skirmish over our state’s uncertain finances. And, with an economy still struggling to rebound and a state revenue-raising structure that’s increasingly not up to the challenges of a 21st century economy, these battles are likely to continue into the foreseeable future.

So, it probably should come as no surprise that, in a desperate effort to fund state government, Governor Perdue made an unorthodox revenue-raising proposal at an impromptu press briefing a couple of weeks ago. Gov. Perdue’s bright idea was to legalize and tax North Carolina’s so-called “sweepstakes parlors” – unregulated gambling operations in which people play computer games in hopes of cashing in on a big win.

The Governor should get credit for this reality check on how many of the state residents are spending their hard-earned paychecks. Indeed, behavioral economists teach us that people love games of chance and that, for most of us, a big potential payout is much more tempting than a sure bet on a more modest return. What’s more, evaluating long-term probabilities of winning and losing are not our strong suit – most of us are much more motivated by short-term gains and losses.

But, shouldn’t public policy in North Carolina seek to encourage healthy financial behaviors, not risky ones? Rather than taking advantage of our irrational tendencies in an effort to solve a budget gap that demands permanent solutions, the Governor should use the psychology of financial decision-making to strengthen household balance sheets in our state.

Here’s one possible avenue for pursuing such an end: Follow the lead of the United Kingdom is establishing something known as “Premium Bonds.” Owners of these unique bonds do not earn interest. Rather, their return is simply the chance to win monthly prizes based on their investment. Each month, bondholders in this “savings with a thrill” scheme are entered into prize draws that are awarded from £50 to £1 million. Over £43 billion (about $65 billion) is currently invested in U.K. Premium Bonds, and 36% of British citizens hold at least one of these bonds. In the best-case scenario, bondholders receive a handsome return; in the worst-case scenario, bondholders have net new savings in their name. Bondholders can get their original investment back at any time.

This idea of “prize-linked savings” may seem novel for North Carolina, but there are already innovative efforts in our state to take advantage of this concept. Just last year, with the encouragement of the North Carolina Credit Union League, the legislature passed the “Save to Win” bill, which exempts certain savings promotion raffles from the two raffle per year limit imposed upon credit unions. Gaining the exemption allows participating credit unions to create Save to Win campaigns with monthly prize drawings that help to encourage credit union members to develop a regular habit of saving.

And this doesn’t have to be limited to credit union members. What if the North Carolina Treasurer’s office created Premium Bond-type savings products that any North Carolina residents could purchase at a bank – or even better – where lottery tickets are sold? The state would reap millions and citizens could pursue their gambling impulses without literally throwing all of the money wagered away as is usually the case in traditional lottery and sweepstakes parlor games.

Let’s use state policy, not to take advantage of our frailties, but rather to incent behaviors that strengthen household finances and encourage investment in our state. A North Carolina Premium Bonds program might just be one way to pull that off.

A&O Network Submits Letter to Congress Opposing Asset Tests in SNAP

By Jennifer Brooks on 07/16/2012 @ 03:30 PM

Tags: Assets & Opportunity Initiative, Federal Policy

Last week, the House Agricultural Committee released a farm bill proposal that would cut the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) by more than $16 billion over a decade. Approximately 70% of the savings would come from eliminating Broad Based Categorical Eligibility, which allows states to set their own or waive the assets test. To date, 37 states have eliminated their SNAP asset tests; the proposed farm bill would force all of these states to reinstate the asset tests.

Asset tests are detrimental to long-term financial stability for low-income families. If a family has assets over the state’s limit ($2,000 in most cases), it must “spend down” longer-term savings in order to receive what is often short-term public assistance. Personal savings and assets are precisely the kind of resources that allow families to move off of public benefit programs.

Yesterday, the Assets & Opportunity Network — a national coalition of state and local service providers, advocates, financial institutions, researchers and policymakers working to break the cycle of poverty and create economic opportunity through asset-based strategies — submitted a letter urging the House Agricultural Committee to oppose the proposed Farm Bill. Eighty-one organizations in the A&O Network signed the letter, demonstrating the assets field’s overwhelming opposition to the proposal. Click here to read the letter.

Representative Jim McGovern (D-MA) offered an amendment to maintain Categorical Eligibility and keep SNAP funded at current levels. The Agriculture Committee voted against it with a 15-31 margin. Representative Larry Kissel (D-NC) offered an amendment that would have matched the smaller cuts in the Senate version of the legislation (which maintains Categorical Eligibility), but it was also defeated. After considering more than 90 amendments, the Committee approved the Farm Bill in a 35-11 vote. It will now be considered by the full House of Representatives, likely before Congress adjourns in August.

The following 81 organizations are listed below.

AAA Fair Credit Foundation (UT)
Action for Children North Carolina (NC)
Alabama Asset Building Coalition (AL)
Alachua County Nutrition Alliance (FL)
Alachua County Coalition for the Homeless and Hungry (FL)
Alameda County Community Asset Network (CA)
Arkansas Hunger Relief Alliance (AR)
Atlanta Community Food Bank (GA)
Atlanta Prosperity Campaign (GA)
Baltimore CASH (MD)
California Asset Building Coalition (CA)
Catalyst Miami (FL)
Center for Asset Building Opportunities (CA)
Center for Public Policy Priorities (TX)
Clara White Mission (FL)
Coalition for a Prosperous Mississippi (MS)
Community Action Kentucky (KY)
Community Economic Development Association of Michigan (MI)
Community Empowerment Fund (NC)
Community Financial Resources (CA)
Connecticut Voices for Children (CT)
Corporation for Enterprise Development (DC)
Crittenton Women’s Union (MA)
Delaware Housing Coalition (DE)
DelcoAD (PA)
East Bay Asian Local Development Corporation (CA)
Florida Prosperity Partnership (FL)
Georgia Food Bank Association (GA)
Guilford County Homeownership Center (NC)
Hawaii Alliance for Community Based Economic Development (HI)
Heartland Alliance for Human Needs & Human Rights (IL)
HOPE Projects Community Action Council (NC)
HOPE Enterprise Corporation (MS)
Illinois Asset Building Group (IL)
Indiana Institute for Working Families (IN)
ISED Ventures (IA)
Just Harvest: A Center for Action Against Hunger (PA)
Kalamazoo County Poverty Reduction Initiative (MI)
Kanawha Institute for Social Research & Action, Inc. (WV)
KC Cash Coalition, Inc. (MO)
Kentucky Equal Justice Center (KY)
Kentucky Youth Advocates (KY)
Legal Services Advocacy Project (MN)
Maryland CASH (MD)
Maryland Cash Match Savings Program (MD)
MDC (NC)
Metropolitan Housing & CDC, Inc. (NC)
Michigan Primary Care Association (MI)
Midas Collaborative (MA)
Mission Asset Fund (CA)
Montgomery County Community Action Board (MD)
New York State Community Action Association, Inc. (NY)
Neighborhood Partnerships (OR)
Neighborhood Improvement Association, Inc. (GA)
North Carolina Housing Coalition (NC)
North Carolina Assets Alliance (NC) North Dakota Economic Security & Prosperity Alliance (ND)
Oklahoma Policy Institute (OK)
Opportunity Fund (CA)
Policy Matters Ohio (OH)
Partners for Prosperity: New Beginnings for Eastern Idaho (ID)
RAISE Kentucky (KY)
RAISE Texas (TX)
Reinvestment Partners (NC)
Rural Dynamics, Inc. (MT)
Sacramento|Yolo Mutual Housing Association (CA)
Sargent Shriver National Center on Poverty Law (IL)
Savannah Coastal Empire Asset Development Coalition (GA)
Seattle-King County Asset Building Collaborative (WA)
South Carolina Association of Community Action Partnerships (SC)
Southern Bancorp Community Partners (AR)
Step Up Savannah, Inc. (GA)
The Collaborative (NC)
United Way of Coastal Bend (TX)
United Way of Greater Kansas City (MO)
United Way of Marion County (FL)
United Way of North Central Florida (FL)
United Way of Northeast Florida (FL)
United Way Suncoast (FL)
Voices for Children for Nebraska (NE)
Woodstock Institute (IL)
YWCA Delaware (DE)

Only Eight Hours Left to Save $100!

By Sean Luechtefeld on 07/13/2012 @ 04:00 PM

Tags: ALC 2012

Don't forget that the extended Early Bird Deadline to register for the 2012 Assets Learning Conference is TONIGHT at midnight (EDT)! Be sure to reserve your space by visiting www.assetsconference.org.

This year's Conference offers a series of Institutes, four Plenary Sessions, over 60 Concurrent Sessions and the return of Capitol Hill advocacy visits. Plus, ALC participants get FREE access to the second National Poverty Summit, taking place immediately after the ALC on Friday evening (September 21) and all day Saturday (September 22).

Click here to ensure your $100 discount today!

The Aspiration Gap

By Jennifer Brooks on 07/12/2012 @ 06:00 PM

Tags: Assets & Opportunity Initiative, Education, Recommended Reading

In a recent New York Times op-ed, David Brooks explores the “Opportunity Gap” and the role it will play in the coming decades as today’s children come of age.

In addition to the “attention gap” and the “enrichment gap” that David Brooks describes, we at CFED also see an “aspiration gap.”

Data from the 2012 Assets & Opportunity Scorecard show that those in the richest income quintile are five times more likely to have college degrees than those in the poorest income quintile.

Why is this so? For starters, aspiring to go to college—and the academic preparation and financial planning that go along with that aspiration—is an integral part of the answer. Brooks writes that poorer kids have become more pessimistic and detached. Given the perception that the cost of college puts higher education out of reach, it’s not surprising that many low-income kids are a little pessimistic about their chances of making it to college.

The good news is that there’s a pretty simple way to change aspirations and college attainment: start saving now. People who have assets – such as a savings account or a home – are more likely to have higher expectations for their futures and the futures of their children.* Data from the Center for Social Development at Washington University in St. Louis show that children with a dedicated college savings account are four times more likely to attend college than those without. Among youth who already plan to go to college, those with a savings account are about seven times more likely to actually attend.** 

The only remaining question, then, is how we make saving for college the norm for more low-income families, rather than the exception. The key is financial incentives. Currently, 12 states provide incentives for college saving for at least some of their residents. More states should follow their lead.

In addition, the federal government, which today devotes more than half a trillion dollars annually to encourage the wealthiest to save—and more than half of which accrues to the richest 5% of taxpayers, should provide a $500-savings match to the asset- and aspiration-poor majority.

Thirty years of research has proven that, given a reasonable opportunity, even the lowest-income people will save, go to college, start businesses, buy and keep homes, and create a prosperous future for themselves and their families.

These moveable and manageable policies would go a long way in helping to close the gaps that currently keep too many people from securing their financial futures.

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* Min Zhan and Michael Sherraden, “Assets, Expectations and Educational Achievement,” Social Science Review 77 (2003): 191-211.

** William Elliot and Sandra Beverly, The Role of Savings and Wealth in Reducing ‘Wilt’ Between Expectations and College Attendance (St. Louis: Center for Social Development, 2010).

From Rags to Tatters: The State of the American Dream

By Ethan Geiling on 07/10/2012 @ 07:30 PM

Tags: Assets & Opportunity Initiative, Financial Empowerment

The vast majority of Americans make more than their parents, but that doesn’t mean they’re climbing the economic ladder.

New research from the Pew Economic Mobility Project shows that 84% of Americans have higher incomes than their parents did at the same age, adjusting for inflation. Similarly, 50% of Americans have greater wealth than their parents did. This is known as absolute mobility, and by this measure the American Dream appears fully intact. However, even though many Americans are earning more than the previous generation, the extent of this extra income often isn’t enough to move them into a new income bracket.

Relative mobility measures an individual’s rank in the income distribution compared to his or her parents. Forty-three percent of Americans raised in the bottom fifth of the income distribution remain there as adults, and only 4% make it to the top income quintile. The classic “rags to riches” story is more of a Hollywood fairytale than an actual reality.

One of the central tenants of the American Dream is that anyone – regardless of family wealth, economic background, and race – has the same opportunity to build a better life. Pew’s research suggests otherwise; Americans raised at the bottom of the income distribution are likely to remain there as adults. Likewise, individuals born into wealthy households are more likely to remain at the top of the income distribution. This phenomenon is known as “stickiness at the ends.”

For certain groups – like blacks and adults without a college degree – economic mobility is even more elusive.

Among the middle class, only 23% of blacks accumulate more wealth than their parents, compared to 56% of whites. And blacks are more likely to fall out of the middle class than whites. Sixty-eight percent of blacks raised in the middle of the income distribution fall to the bottom as adults, compared to just 30% of whites. Pew’s study does not include Latino families or other households of color because the sample size is too small in the Panel Study of Income Dynamics, Pew's data source for the project.

Receiving a college degree makes a person three times more likely to rise from the bottom of the family income ladder all the way to the top. Almost half of people without a college degree raised in the bottom fifth of the income ladder will remain there as adults. But only 10% of people with a college degree will remain at the bottom of the ladder.

Read the full report: Pursuing the American Dream: Economic Mobility Across Generations

The Assets & Education Initiative

By Jimmy Crowell and Anita Drever on 07/10/2012 @ 01:00 PM

Tags: Education

The Assets and Education Initiative (AEDI) at the University of Kansas' School of Social Welfare recently launched a website dedicated to research on assets and education. This exciting new tool will further connect practitioners, policy makers and academics with leading research and data on assets and education.

The easy-to-navigate and well-organized website includes subject bibliographies, working paper series, briefs, reports and news articles related to asset accumulation and education with a focus on low-income and minority groups. The website also contains video recordings of various presentations from the Assets and Education Research Symposium including the keynote speeches delivered by Drs. Michael Sherraden, Mark Rank and Michael Lomax.

In an effort to connect researchers in the field, AEDI also administers a listserv where research endeavors and obstacles can be shared and discussed. AEDI welcomes active involvement from the field to build website content.

CFED is very enthusiastic about the launch of this new and useful research tool. We hope that the release of AEDI’s website will increase awareness of the close relationship between asset accumulation and educational attainment and help to boost interest in the asset-building field.

Don’t forget to check out AEDI’s Facebook page and follow them on Twitter for updates and exciting news!

Take Action! House of Representatives to Vote on SNAP Cuts, Asset Tests

By Katherine Lucas McKay on 07/09/2012 @ 10:15 AM

Tags: Federal Policy, Policy Alerts

On July 5, the House Agriculture Committee unveiled its draft Farm Bill legislation with some very bad news for assets advocates: the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) is targeted for a $16 billion cut. Most of the savings will come from eliminating Broad Based Categorical Eligibility, which allows states to set their own or waive the assets test. Unfortunately, that provision has support not only from Committee Chairman Frank Lucas (R-OK) but also from Ranking Member Collin Peterson (D-MN).

On July 11, the Agriculture Committee will consider amendments to the bill and vote to advance it to the full House of Representatives. Once the bill clears the Committee, its next stop is the House floor.

Advocates should contact their Representatives now to prevent these cuts. More than 40 states use Categorical Eligibility to waive the SNAP asset test for all applicants, allowing millions of low-income families to build the savings they need to successfully lift themselves out of poverty. If the House Agriculture Committee's proposal becomes law:

• Every state that currently uses Categorical Eligibility will have to reinstate its SNAP asset test.
• States will incur a significant administrative burden because they will have to verify the assets of all SNAP applicants.
• Some two million individuals will lose their SNAP benefits entirely.
• The decade of progress that the assets field has made to enable low-income benefits recipients to save will be undone.

Your support can make a difference! You can learn more and send a message to your Representative, through CFED’s Advocacy Center.

Giving Context to Unbanked Data

By Sean Luechtefeld on 07/06/2012 @ 10:30 AM

Tags: Bank On, Economic Inclusion

It’s no surprise that CFED cares about financial access, and our work to promote Bank On is premised on the idea that building assets is infinitely easier with a bank account. The reason why is simple: having free or low-cost access to one’s own money is better than paying to use one’s own money.

Though the concept is simple, it’s sometimes hard to conceptualize just how dramatic the difference between having a bank account and not having a bank account can be. This is why I was so excited to find that my friends at The Sociological Cinema had posted a helpful infographic the other day providing some context about the difficulties of being unbanked. The infographic does an excellent job of visually representing the data, so I’m sharing it with readers here.

I hope you find this infographic helpful. There’s a ton more at The Sociological Cinema, so be sure to follow them on Facebook and check out their photo album on poverty issues.

Treasury Launches MyMoneyAppUp Challenge

By Sean Luechtefeld on 07/05/2012 @ 01:30 PM

Tags: Financial Empowerment, Just for Fun

EDITOR'S NOTE: Below is the press release sent out by the U.S. Department of the Treasury last week publicizing this exciting collaboration between Treasury and CFED partner organizations CFSI and D2D Fund. We hope you'll consider submitting your ideas to the MyMoneyAppUp Challenge!

The U.S. Department of the Treasury today launched the MyMoneyAppUp Challenge to help Americans gain the tools and information they need to be smarter financial consumers. The Challenge, launched in partnership with the D2D Fund and Center for Financial Services (CFSI), seeks new ideas from the public for mobile applications to empower Americans to shape their financial futures everyday – even while on the move.

The Challenge features two components – an IdeaBank to generate ideas for mobile applications, and an App Design Challenge that solicits more comprehensive mobile application designs for development. The public may begin submitting ideas today for both parts of the Challenge at MyMoneyAppUp.challenge.gov.

“Mobile technology has become an increasingly important part of many Americans’ lives, creating new opportunities to help consumers make smart financial decisions in user-friendly ways,” said Deputy Secretary Neal Wolin. “The MyMoneyAppUp Challenge is designed to tap into the ingenuity and creativity of the American public to generate ideas for mobile applications that can help families be smarter financial consumers.”

The IdeaBank: The IdeaBank is a call for ideas, in 140 characters or less, for app-based solutions from the general public. Ideas may be submitted on the Challenge website where they will searchable to the general public. Visitors to the site will be able to vote on their favorite IdeaBank submissions and a panel of judges will select the final winners from the top 10 that receive the most votes from the public. Winners are eligible to receive cash prizes ranging from $250 to $1,000.

App Design Challenge: The App Design Challenge is a call for comprehensive design proposals for mobile apps from companies, individuals, and teams of individuals. Contestants must complete an online submission form detailing their design and how it will improve financial capability and/or access. Contestants are encouraged, but not required, to use ideas from the IdeaBank as the inspiration for their proposals. A panel of judges will review and score the proposals with the winners being announced at an awards event and eligible for cash prizes ranging from $2,500 to $10,000.

Support for prizes and the administration of the Challenge by D2D and CFSI comes from the Ford Foundation, Omidyar Network, and the Citi Foundation. No government funds were used as part of the MyMoneyAppUp Challenge.

The MyMoneyAppUp Challenge is open to all U.S. citizens and permanent residents who are 18 years or older. For complete details on Challenge eligibility requirements and rules, visit MyMoneyAppUp.challenge.gov.

About the MyMoneyAppUp Challenge
The MyMoneyAppUp Challenge, launched by the U.S. Treasury Department in partnership with the D2D Fund and Center for Financial Services Innovation, is a contest offering cash prizes for the best mobile app ideas and designs to help Americans make smart financial choices, access high quality financial products and services, and control and shape their financial futures.

The Challenge is part of Treasury’s efforts to promote Smart Disclosure, a new initiative by the Obama Administration to expand access to data that can fuel the creation of new products and services to benefit financial consumers. Contestants will be encouraged to create ideas and designs for apps that incorporate data to promote financial capability and access.

To learn more about the Challenge or to submit your idea, visit MyMoneyAppUp.challenge.gov.