(Image: File)

President Obama on Wednesday called on Congress to make it easier for millions of homeowners to refinance their mortgage at the current record-low interest rate, even if they owe more than their homes are worth. The average homeowner with a privately held mortgage could save nearly $3,000 per year.

“There are more than 10 million homeowners across the country right now who, because of an unprecedented decline in home prices that is no fault of their own, owe more on their mortgages than their homes are worth,” Obama said in remarks delivered in Falls Church, Va. “Here in Falls Church, home values have fallen by about a quarter from their peak. In places like Las Vegas, more than half of all homeowners are underwater.”

The president also detailed a “Homeowner Bill of Rights,” which would ensure borrowers and lenders play by the same rules. It would require borrowers have access to a simple mortgage disclosure form to better understand the loans they are taking, as well as full disclosure of all fees, penalties and guidelines to prevent harmful conflicts of interest for homeowners. In addition, support provided to keep responsible families in their homes and out of foreclosure, and protection against inappropriate foreclosure, including right of appeal.

Homeowners could keep the savings or turn their 30-year mortgage into a 20-year plan at an even lower interest rate. It would enable them to build equity or get back above water quicker. The proposal’s fee requirement for large banks is a potential roadblock; a stipulation Congress has rejected in the past.

The plan, which the president referenced in his recent State of the Union address, would require congressional action.

“We need them to act,” Obama said, adding that he would not wait for Congress.

He also acknowledged that previous efforts initiated in 2009 didn’t work out the way the administration had hoped.

“The housing plan we launched a couple of years ago has helped nearly one million responsible homeowners refinance their mortgages and save an average of $300 on their payments every month,” Obama said. “I’ll be honest—it didn’t work at the scale we’d hoped. Mortgage rates are as low as they’ve been in half a century, and when that happens, homeowners usually flock to refinance their mortgages. But this time, too many families haven’t been able to take advantage of the low rates. Falling prices locked them out of the market.”

Texas Rep. Jeb Hensarling left no doubt about how GOP lawmakers will respond.

“Even President Obama himself has acknowledged that his multiple housing programs have been failures,” said Hensarling. “Forget doubling down – he’s now quintupling down on his failed housing initiatives with yet another pricey program that could cost up to $10 billion.”

In the wake of the recession, millions of Americans have had to give up the American dream of living in their own house and have been forced into foreclosure or bankruptcy.

Others have voluntarily left their residences – often due to underwater homes, or properties where the borrower owes more on the mortgage than the home is worth.

Walking away from a mortgage can be an attractive option for those who simply can’t keep up with their payments. If you can afford payments but choose not to, it’s known as a “strategic default”. Results of Fannie Mae’s National Housing Survey reveal that 27 percent of underwater homeowners say it’s okay to walk away from a mortgage if they were facing financial distress.

Is it the right strategy for you? Here are a few reasons you should consider strategic default, along with several reasons you shouldn’t’:

Reasons You Should:

• Free up extra cash. Walking away from your mortgage means you simply don’t have to keep making your monthly mortgage payment any longer. And since foreclosures in many states are taking a year or longer, you’ll have what’s known as “squatter’s rent.” That extra cash available each month to cover other expenses or even to pay down debt. In fact, there are seven things strategic defaulters do with the money they save.

• No more maintenance expenses. If you are walking away from a mortgage on a second home or vacation rental, you won’t have to worry about paying utilities, homeowner’s association dues or even maintenance costs. You are basically freeing yourself of the responsibility of maintaining the property. This doesn’t mean your actions might not be without consequence. A vacation company or homeowner’s association may still try to get you to pay. Nevertheless, by abandoning a property, you are effectively relieving yourself of this financial burden.

• Prevent bankruptcy. If paying an expensive mortgage means you’ve been defaulting on other loans and can’t keep up with household expenses and other payments because of a lack of income, getting rid of the mortgage payment may be your only option for preventing bankruptcy. Having more cash available means you could catch up on other payments and still stay in good standing with other creditors.

Reasons You Shouldn’t:

• A drop in your credit score – your credit score can take a big hit from those missed payments. But the extent to which your credit will be impacted is a matter of some dispute. According to the American Bankers Association, a strategic default/foreclosure can cost you between 100 to 400 points on your credit score. Foreclosures will stay on your credit report for seven years.Meanwhile, Fair Isaac, the company that created the FICO score, says that a strategic default/foreclosure typically shaves roughly 150 points off a person’s FICO score. (FICO scores range from 300 to 850 points). And experts from YouWalkAway.com, which helps people who are going through strategic default, say that it’s more common for clients to have a 100 point drop in their credit score, with the score often rebounding in less than two years.

• Tax liability – even though you’ll be protected under the Mortgage Forgiveness Debt Relief Act of 2007 (which extends through 2012) from paying federal taxes after a foreclosure, you might still be responsible for paying state taxes. These are imposed on unpaid debts and can cost you more than you had planned.

• You want to get a new mortgage within three years – if you want to get another mortgage within the next three years, you could be out of luck. Some lenders will be unlikely to sign off on that loan when they see a foreclosure or strategic default in your credit history.

“Ask The Money Coach” is a syndicated column written by personal finance expert Lynnette Khalfani-Cox , co-founder of the free financial advice blog, AskTheMoneyCoach.com. Follow Lynnette on Twitter at @themoneycoach.

If low rates alone haven’t enticed you to purchase a home or refinance an existing mortgage, you might be tempted by the thought of doing a “no cost” mortgage.

But beware: Even if a bank says you’re getting a “no cost” mortgage—perhaps because they are not charging points on the loan—that doesn’t mean the loan itself is truly “free” or is really being offered at zero cost to you.

Banks aren’t in the business of loaning money, and doing all the work required to close a mortgage loan, free of charge. So the truth is that you will be paying in one way or another for the bank’s services, in addition to paying interest on your mortgage.

In general, when you obtain a mortgage, you will actually pay four sets of fees: Lender Fees, Title and Third Party Fees, Escrow and Interest Fees, and Government Fees.

Each set of fees will be outlined in your Good Faith Estimate.

Here are examples of the common fees you might see when you obtain a mortgage – along with estimated costs. These costs can apply to both initial home purchases and refinanced home loans.

Obviously, prices for different products and services can vary based on where you live and other factors. Nevertheless, the numbers presented below will give you an estimate—or in some cases a range—of what you can typically expect to pay for your mortgage.

Typical Closing Costs on a New Mortgage:

Description of Fee Cost

Application Fee                         $150-$400

Appraisal                                      $200-$400

Closing Fee                                  $250-$350

Credit Report                             $15-$50

Document Prep Fee                 $150-$300

Flood Certification                   $10-30

Legal Fees                                     $250-$750

Loan Origination Fee              Usually 1% of the loan

Points                                             Each point is 1% of the loan

Recording Fee                           $25-$50

Survey                                           $150-$300

Taxes                                             Varies (See more info below)

Termite Inspection                 $50-$100

Title Insurance                         Varies (See more info below)

Some loan costs, like interest on your loan and property taxes, must be put in escrow, meaning that you pay for them for a few months, up to a year in advance. The same is true for homeowners’ insurance, which covers the house in case of a fire or another disaster.

Insurance Costs for Your Home Loan

When you get a mortgage, lenders also require you to pay the upfront cost of buying title insurance. Title insurance protects your lender if any problems arise with the title (or ownership) of your property, due to a tax lien, judgment or some kind of encumbrance on the title.

Title insurance costs vary greatly nationwide, partly because the title insurance premium you pay often covers different services, depending on the company you use and where your home is located. For example, in some places your premium simply covers the lender for any title-related losses. In other places, though, the premium covers losses, as well as the cost of a title search, title examination, and closing services. Title insurance also varies based on the size of the mortgage.

Watch Out for “Junk” Fees Charged By Some Lenders

If a lender touts its loans as having “no points” or origination fees, they’re typically making up for it by offering you a higher-rate loan. Also, even with a “no point” loan, don’t be fooled into thinking you won’t be hit with other miscellaneous charges.

Junk fees are those charges imposed solely to add to a lender’s profit margins. In many cases, these fees have legitimate or official sounding names, like “document preparation fee.” In truth, however, they’re really just creative ways for lenders to pad their bottom line at your expense.

Many lender charges that have the word “fee” attached them are a dead giveaway that you’re being charged for services that lenders are supposed to provide anyway in the normal course of business.

If you get charged for an “underwriting fee,” a “loan review fee,” a “warehousing fee,” or other such nonsense, do not hesitate to ask the lender to waive those fees – or at least substantially reduce them. Even things like the “application fee” or the “loan processing fee” can be eliminated or cut, if you are savvy enough to ask.

“Ask The Money Coach” is a syndicated column written by personal finance expert Lynnette Khalfani-Cox, co-founder of the free financial advice blog, AskTheMoneyCoach.com. Follow Lynnette on Twitter at @themoneycoach.

The ongoing foreclosure problem facing U.S. homeowners is about to get worse now that Congress has eliminated the entire mortgage-counseling budget for HUD, the Department of Housing and Urban Development. The 2011 federal budget completely eliminates all $88 million in HUD funds for housing counseling. It’s yet another blow to those struggling to stay in their homes, especially African-Americans, who have borne the brunt of the mortgage meltdown and the U.S. housing crisis. There were a record 3.8 million foreclosure filings in 2010. And since even more foreclosures are expected in 2011, housing advocates are shocked at the magnitude and timing of the HUD mortgage counseling cuts. After all, it was the housing mess that tipped America into the Great Recession.

George Roe, Chief Operating Officer of the National Foundation for Debt Management, a HUD-certified credit counseling agency that helps struggling homeowners called the funding cuts “devastating,” and said “the timing of these cuts could not have come at a worse time.”

“It seems that most of our counseling sessions are growing more complex, requiring additional time to complete as well as an enhanced skill/knowledge ability for our counselors,” Roe said. “This does not come without additional costs to provide these services.”

“The end result is that our agency will be forced to reduce our staff and some of our much needed services that we provide,” he added. “I believe that this will be the case for most HUD approved agencies throughout the country.”

Russell Graves, Executive Director of Consumer Credit and Budget Counseling, another HUD-certified agency, echoed Roe’s sentiment. “The housing counseling industry is reeling from this blow,” Graves said. “We all understand the need for government support cuts to balance the budget, but this was unexpected.”

“Taking away funding for housing counseling is selling the American homeowner short,” Graves added.

Housing counseling is designed to educate and empower consumers, giving them the knowledge and information they need to make good choices when it comes to buying – and keeping – a home. In decades past, getting a mortgage and buying a home was a relatively simple process. Most people bought reasonably-priced homes, obtained a 30-year-mortgage, and could count on their homes appreciating in value. Today, however, despite the recent drop in values, housing prices remain out of the reach of many would-be buyers. What’s more, the mortgage process is far more complicated, as is the range of mortgage products being offered to consumers. And unfortunately, most U.S. home buyers are ill prepared to take out a mortgage, with nearly half of them failing to understand the basics about mortgages, according to a May 2011 Zillow Mortgage Marketplace survey. For instance, 57% of prospective homebuyers polled did not understand how adjustable rate mortgages (ARMs) work.

That’s why housing counseling is so vital.

So if you’re having trouble paying your mortgage, where should you turn for help? Here click to the next page for 5 tips to keep in mind:

• 1) Start by contacting your lender or loan servicer.

Unfortunately, many people on the brink of missing a payment say that banks won’t do anything for them until the homeowner misses a payment. As frustrating as this scenario can be to deal with, it’s still wise to advise your lender of problems you may be facing in order to inquire about any special programs, loan modification initiatives or other options they may offer.

• 2) Seek reputable housing counseling.

Even after the HUD funding cuts to mortgage counseling agencies, some agencies may still opt to provide this service free of charge to consumers. Others housing counseling agencies simply won’t be able to afford to provide this service at no cost, and will thus begin to charge consumers. You’ll only know if an agency’s mortgage counseling help is free or not by contacting the entity in question.

So be prepared to call a few agencies to track down free assistance. If you can’t find any free agencies, you’ll have to pay for mortgage counseling. Such help can be well worth it if the advice and information you get from a HUD-certified credit counseling agency helps you remain in your home. To locate HUD-approved housing counselors, call 888-995-4673 or visit http://makinghomeaffordable.gov.

• 3) Never sign over your deed.

Be wary of people who approach you claiming they can help you “save” your home. Some of these are foreclosure rescue scams. Also, never sign over the deed, or agree to transfer title to your home—even if someone promises to let you stay in the house or rent it. Doing so could put your ownership of the property in jeopardy.

• 4) Only make payments to your lender or mortgage servicer.

Even if a third party helps you, perhaps by serving as a “middleman” to negotiate with your lender or loan servicer, don’t make any mortgage payments to this third party. Don’t even agree to turn over your housing payment to a third party under the notion that they will make mortgage payments on your behalf. If the third party doesn’t make payments as agreed, you will have very little recourse to recoup your funds and get caught up with your lender.

Here are six things you should know before you close.

Together, African-Americans and Hispanics were able to borrow 62 percent less to buy or refinance homes in 2009 than in 2004, before the market crashed, the computerized analysis finds. With lenders imposing tighter credit standards, mortgage dollars going to non-Hispanic white borrowers also declined, though by considerably less, 17 percent. Asians fared best, obtaining nearly an equal amount in mortgages.

The study, to be released this week, was conducted by Maurice Jourdain-Earl, founder and managing director of ComplianceTech in Arlington, Va., which advises financial institutions on fair lending practices. The study also found wide racial-ethnic disparities in how often financial institutions approved mortgage applications and made mortgage loans during the six-year period.

Whites were about twice as likely as African-Americans and Hispanics to be approved for prime mortgages with the lowest interest rates, while members of the two largest minority groups were two to four times more likely to receive subprime loans, which have higher rates. By contrast, the disparities were much narrower for loans insured by the government’s Federal Housing Administration, which has attracted a growing number of borrowers during the credit crunch.

The study concluded that a “dual mortgage market” has emerged, with white and Asian borrowers having better access to lower-cost mortgages than African-Americans and Hispanics, who on average pay more to own or refinance a home—if they can obtain a mortgage.

“The higher cost for mortgage credit translates into less money for basic necessities,” Jourdain-Earl writes. “The higher cost for mortgage credit also translates into African Americans and Latinos having lower homeownership rates and lower opportunities to build wealth, lower educational achievement and higher unemployment.”

Reasons for the lending disparities are not directly reflected in the national data, which do not include credit scores of borrowers or ratios of loan amounts to values of homes. Nor does the Federal Reserve Bank collect information on foreclosures by race and ethnicity.

Jourdain-Earl blames a cycle of higher cost loans being made to minorities for leading to higher levels of defaults and foreclosures, ultimately causing “greater disparities in access to credit.” He raises the possibility of an unknown degree of discrimination, noting an “erroneous notion” that minorities caused the housing market’s collapse, despite the relatively low amount in mortgages they received, compared with those for white borrowers.

The Mortgage Bankers Association declined to comment on the report because, spokeswoman Melissa Key says in an e-mail, “The author does not control for any of the factors that could lead to rate or approval differences across borrowers.”

Barry Zigas, director of housing policy for the Consumer Federation of American, agrees with Jourdain-Earl that a dual market exists. Zigas says it is unclear whether the causes have to do with lower credit scores of African-Americans and Latinos, private investors being reluctant to buy mortgages made in minority communities or the disproportionate subprime loans representing an “unsustainable volume” of borrowing.

“Since the meltdown, there is no question that credit has constricted across the board,” Zigas says. “It’s even more difficult for minorities and low-income people.”

The report, entitled “The Foreclosure Crisis and Racial Disparities in Access to Mortgage Credit 2004-2009,” illustrates disparities by race and ethnicity. The study uses data banks submitted to the Federal Reserve under the Home Mortgage Disclosure Act and analyzes racial-ethnic patterns in prime, subprime and FHA loans, which together constitute the vast majority of the market.

Mortgages made to Hispanics have decreased the most, by 63 percent, to $78 million in 2009 from $214 million in 2004. Lending to African Americans has dropped to $49 million from $122 million, or 60 percent.

Whites have been affected much less and Asians barely. New mortgages to white borrowers declined to $1.1 billion from $1.3 billion, or 17 percent. Lending to Asians stayed almost the same at about $128 million, with the difference being equivalent to one modest mortgage.

“Analyzing the issue of access to mortgage credit by race is significant because of the central role homeownership plays in building personal wealth,” Rep. Maxine Waters (Calif.), ranking Democrat on the House subcommittee on capital markets and government sponsored enterprises, says of the report in an e-mail. “As a 2010 study from Brandeis University illustrates, for example, the wealth gap between African-Americans and whites is only growing larger, having quadrupled over the course of the last 23 years.”

The financial stresses that accompanied the recession meant many Americans from all racial-ethnic groups did not apply for mortgages. When they did, applications by African-Americans and Hispanics for the best loans were approved or, in bankers’ language, “originated” much less often. On average, whites were twice as likely as blacks to obtain prime loans, and one-and-a-half times more likely as Hispanics. Almost no disparity existed between whites and Asians.

The disparities extended even to subprime loans which, despite concentrations in minority neighborhoods, went mostly to white borrowers. During the six-year period, whites received more than 60 percent of these high-cost loans, which are most likely to lead to defaults and foreclosures.

But disproportionate numbers of subprime loans did go to minorities. African-Americans were three-and-a-half times more likely to have one as whites, and Hispanics about twice as likely. By 2009, even the subprime market had dried up for the two minority groups, with lending to African-Americans since 2004 down by 95 percent and to Hispanics by 92 percent, compared with 87 percent for Asians and 81 percent for whites.

Jourdain-Earl concedes that the big drops in subprime loans to the largest minorities could be interpreted as a positive development, but he adds: “At this point, African-Americans and Latinos are not even able to get high-cost subprime loans.”

The lending field was more level for mortgage loans backed by the Federal Housing Administration, which spokesman Brian Sullivan says has seen its share of the mortgage market jump from 3 percent to 30 percent since 2006. Compared with those for whites, loan approval rates were 19 percent lower for African-Americans, 13 percent for Hispanics and 9 percent for Asians.

On the other hand, the report found that the rapid growth has changed the racial composition of FHA-backed borrowers, with the higher percentages going to whites and Asians, and lower percentages to African-Americans and Hispanics. Jourdain-Earl questions whether FHA was acting in accord with its affordable housing goals.

Sullivan says the shifting racial balance of FHA borrowers merely reflected that whites predominate in the mortgage market and have turned to the agency in increasing numbers.

“That’s not because of any application of unfair lending practices, he says, speaking generally. “It was a consequence of what was happening in the marketplace.”

Sullivan notes, though, that the U.S. Department of Housing and Urban Development is investigating 22 lenders to determine whether their imposition of higher credit standards than FHA’s minimums has had a discriminatory impact on African-Americans and Hispanics.

Chris Herbert, research director of the Joint Center for Housing Studies at Harvard University, says the report has limitations in explaining why minorities fare less well in the housing market, a trend he acknowledges.

For instance, he says focusing only on first mortgages and comparing borrowers in the same income levels would provide a sharper picture of home-buying trends in particular, since African-Americans and Hispanics, on average, earn less than whites.

Academics at Harvard’s housing center and elsewhere are examining whether current credit standards are unduly restrictive and not justified by the economic situation.

In response to criticism from Herbert and the Mortgage Bankers Association, Jourdain-Earl says his focus was the flow of credit to different racial-ethnic groups, not the reasons behind the disparities.

“I wasn’t trying to ascertain the why but to shine a bright light on the outcome and the effects on wealth and homeownership rates,” he says.

In the study, Jourdain-Earl urges the FHA to study “the potential of adverse effects” from its credit standards and proposed that federal laws should require lenders to report on foreclosures, defaults, short sales and loan modifications, including the race and other demographics of those borrowers.

He also calls for implementing financial reform legislation enacted last year “in a way that promotes sustainable diverse lending.”

Reported by America’s Wire

For more on credit, lending and money management, read:

• 10 Power Moves to Better Manage Your Money
• How to navigate stricter homebuying guidelines
• 4 Things You Might Not Know about Your Credit
• You Get-Out-of-Debt Checklist

Too many responsible African American families have paid the price for an outdated regulatory system that left our financial system vulnerable to collapse and left families without adequate protections. The Obama Administration’s plan will promote financial stability and protect African American families from the unfair practices that contributed to this crisis. The plan will establish a new consumer financial protection agency, which will have the power to set clear rules of the road and ensure that financial firms are held to high standards.

African American Families and the Financial Crisis

In 2005 and 2006, the height of the subprime lending boom, more than 53% of loans sold to African American borrowers to purchase homes and more than 49% of refinancings by African Americans were higher priced loans. [Federal Reserve, “Higher Priced Lending and the 2005 HMDA Data” (September 2006); Federal Reserve, “The 2006 HMDA Data” (December 2007)]

African American borrowers were over 3 times more likely to receive higher priced loans to purchase homes and over 2 times more likely to receive higher priced refinancing loans than non‐Hispanic whites in 2005 and 2006. [Federal Reserve, “Higher Priced Lending and the 2005 HMDA Data” (September 2006); Federal Reserve, “The 2006 HMDA Data” (December 2007)]

Borrowers who were sold subprime loans, including African Americans, have come under severe stress during the recent financial crisis and are at high risk of foreclosure. 48.5% of outstanding subprime loans sold in 2005 and 57.2% of such loans sold in 2006 are in foreclosure or no payment has been received for 60 days or more. [McDash Online Core Database data (February 2010); Treasury analysis.]

Growth in African American homeownership is reported to have reversed. Based on an analysis of Census data, the Pew Hispanic Center reported that “[b]lack householders raised their homeownership rate from 41.9% in 1995 to 49.4% in 2004. By 2008, the black homeownership rate had decreased to 47.5%”—still significantly short of the 74.9% homeownership rate for whites in 2008. [Pew Hispanic Center, “Through Boom and Bust: Minorities, Immigrants and Homeownership,” (May 12, 2009)]

African American Families Deserve Clear Rules and Strong Enforcement

About half (48%) of African American and other minority households carry a credit card balance, with a median balance of approximately $2,000. [Federal Reserve, “Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances,” (February 2009) (“SCF”)]

40% of African American and other minority households have mortgages and other debt secured by residential property, such as home equity lines of credit. The median amount owed is approximately $113,000. [SCF]

49% of African American and other minority households have installment loans, such as student loans and auto loans.

The median total balance on such loans is approximately $12,000. 36% have student and other education loans and 51% have auto and other vehicle loans. [SCF]

African American and other minority households invest in the financial markets, including for retirement. 39% of African American and other minority households have retirement accounts with a median amount of approximately $25,000. [SCF]

Too many responsible African American families have paid the price for an outdated regulatory system that left our financial system vulnerable to collapse and left families without adequate protections. The Obama Administration’s plan will promote financial stability and protect African American families from the unfair practices that contributed to this crisis. The plan will establish a new consumer financial protection agency, which will have the power to set clear rules of the road and ensure that financial firms are held to high standards.

16% of African American and other minority households do not have bank accounts, compared with only 4% of non-Hispanic white households. Families without bank accounts are often forced to turn to costly alternative financial services, such as check cashing, where there has been no federal supervisor to enforce fair rules of the road for consumers. [SCF]

African Americans, among other minorities, are more likely to use payday lending services. Based on analysis of the 2007 Survey of Consumer Finances, the Center for American Progress reported that “[t]hirty-eight percent of families who had borrowed a payday loan within the last year were nonwhite while just 22 percent of families who did not take out such a loan were nonwhite.” [Center for American Progress, “Who Borrows from Payday Lenders,” (March 2009)]

Reform Will Benefit African Americans Transparent and Fair Access to Financial Services

Fair markets for African Americans: One pillar of the new consumer financial protection agency’s mission will be to ensure that markets for consumer financial products and services operate transparently and efficiently to facilitate access for all families, including African American families. The agency will enforce fair lending laws that protect African Americans from discriminatory lending practices. The agency will also be empowered to focus on improving disclosures and cracking down on abusive practices to make it easier for families to identify and avoid high cost, high risk products that don’t meet their needs.

Mortgages

For African Americans who want to buy a home: The piles of forms needed for a regular mortgage can be overwhelming, and many brokers have taken advantage of that confusion to give borrowers loans they didn’t need or couldn’t afford. The new consumer financial protection agency will take steps to consolidate and simplify with plain language two overlapping and sometimes inconsistent federal mortgage forms. The agency will, for the first time, provide ongoing federal oversight of both nonbank companies and banks in the mortgage market and protect borrowers from unfair, deceptive or other illegal mortgage lending practices.

Check Cashing, Payday Lending, and Other Alternative Financial Services

For African American families using alternative financial services: The new consumer financial protection agency will be able to establish, for the first time, robust federal supervision and oversight over larger alternative financial service companies such as check cashers and payday lenders. The agency will be able to combat abusive and predatory practices that harm consumers, helping families avoid hidden fees and keep more money in their pocketbooks.

Bank Accounts

For African Americans without bank accounts: In a survey conducted by the Federal Reserve, a significant fraction of households without bank accounts said that they did not have a checking account because they did not like dealing with banks (25%) or because the service charges were too high (12%). The new consumer financial protection agency will be able to rein in practices that may drive some African Americans away from banks—including by enforcing the rule that will stop banks from enrolling customers in expensive overdraft programs without their consent. [SCF]

Credit Cards

For African Americans with credit cards: The new consumer financial protection agency will enforce the new credit card law signed by President Obama that bans rate hikes on existing balances and other unfair practices. For African Americans who have used credit cards to get by when times are tight, the law will give them clarity on the interest rates they are charged.

Overdraft

For African Americans caught by unexpected overdraft fees: Many households have been automatically enrolled in expensive overdraft programs. These programs can hit consumers with costly overdraft fees for even the smallest purchases. For example, the FDIC found that the average overdraft charge for a single purchased item—like a $2 cup of coffee—is $30 at banks with assets over $1 billion. The new consumer financial protection agency will enforce new rules that give consumers a real choice as to whether to join expensive overdraft programs so that they are not unknowingly charged unnecessary fees. [FDIC, “FDIC Study of Bank Overdraft Programs” (November 2008) at Table IV-3]

Student Loans

For African Americans who must take out loans to go to school: For students who need to take out loans to cover the costs of higher education, the new consumer financial protection agency will be able to fight unfair practices, require lenders to follow fair rules of the road and give students the information they need to make smart choices.

Financial Literacy

Empowering African Americans to make smart financial choices by promoting financial education and financial literacy: The new consumer financial protection agency will promote consumer financial education and financial literacy, with a dedicated office focused on ensuring that the agency’s expertise and research are used to help raise awareness, educate and empower consumers to avoid unfair practices and make smart financial choices.

Saving and Investments

During the height of the financial crisis, over the last three months of 2008, Americans lost five trillion dollars in household wealth. [Federal Reserve, “Flow of Funds Accounts of the United States: Flows and Outstandings Second Quarter 2009” (September 17, 2009), Table B.100]

Protecting African Americans’ retirement security, savings and investments: In the wake of the Madoff scandal, it is clear that all investors need better protection from fraud and unscrupulous actors. The Administration’s proposed legislation strengthens investor protection through the Securities and Exchange Commission (SEC) by:

• Raising the standards for brokers and investment professionals when giving advice so that they have a fiduciary duty and are required to act in the interests of investors, rather than their own;

• Requiring mutual funds to disclose costs and risk factors to investors prior to selling a product, instead of after it is purchased;

• Creating a permanent Investor Advisory Council to the SEC—so the government will hear about the needs and interests of real investors; and

• Increasing protections for those who uncover financial frauds.

(Source: White House)

Wells Fargo and the NAACP have agreed to work together on ways to improve fair credit access, homeownership, and financial literacy for communities of color and other historically disadvantaged communities, the two said in a joint statement.

Over the past three years, the civil rights organization has filed lawsuits against more than 12 large financial institutions, — including HSBC Bank USA, Bear Stearns Residential Mortgage Corp., Chase Bank USA, Citimortgage, and GMAC Mortgage Group L.L.C. — alleging violations of the Fair Housing and Equal Credit Opportunity Acts and racial discrimination.

“We brought these lawsuits against lenders to change and stop patterns of racial discrimination and other mortgage lending behaviors that have shattered American lives, families, and neighborhoods,” said NAACP President and CEO Benjamin Todd Jealous.

The lawsuit, which was filed in March 2009 and also included HSBC Bank USA, had claimed that black borrowers at Wells Fargo were more than 30% more likely to be issued a higher rate mortgage than white applicants with the same qualifications.

At the time, Wells Fargo said the “allegations are totally unfounded and reckless.”

The NAACP will now be able to review Wells Fargo’s data on lending practices and to make recommendations to improve credit availability to African Americans, businesses, and consumers.

Wells Fargo has now endorsed the NAACP’s banking and lending principles, “which advance practices that ensure all borrowers get the highest quality credit vehicle appropriate for their circumstances and that guard against racial discrimination in lending,” according to their joint press release.

The bank, which is the fourth-largest in the U.S. in terms of deposits, said the agreement is “the next constructive step forward in realizing our vision of helping all of our customers to further business ownership and promote financial empowerment.”

However, the bank still faces criticism from the National People’s Action, which claims that Wells Fargo contributed to the current economic and foreclosure crisis because it issued $27 billion in subprime loans in 2006 alone.